ch 10 LN NOA acquisition final version

ch 10 LN NOA acquisition final version - 10-1 Ch 10...

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Unformatted text preview: 10-1 Ch 10 Investments in Noncurrent Operating assets Learning Objectives 1. Properly account for noncurrent operating asset acquisitions using various special arrangements, including deferred payment, self-construction, and acquisition of an entire company. 2. Separate costs into those that should be expensed immediately and those that should be capitalized. 3. Recognize intangible assets acquired separately, as part of a basket purchase, and as part of a business acquisition. 4. Discuss the pros and cons of recording noncurrent operating assets at their fair values. 10-2 Time Line with Long-Term Operating Assets 10-3 Properly account for noncurrent operating assets acquisitions using various special arrangements, including self-construction, and acquisition of an entire company. OBJECTIVE 1 Basket purchase : A number of assets may be acquired in for one lump sum. A lease is a contract whereby one party (the lessee) is granted a right to use property owned by another party (the lessor). A firm can acquire a new asset by exchanging or trading existing nonmonetary assets . A firm can construct a new asset by itself (i.e., Self-Construction ). 10-4 Interest Capitalization When assets are acquired by self-construction for an enterprises own use and for assets that are intended to be sold, interest incurred on funds borrowed to finance construction can be capitalized if the following conditions are met: Projects are discrete Costs are separately accumulated Construction covers an extended period of time Construction costs are substantial Interest should not be capitalized for inventories manufactured or produced on a repetitive basis. 10-5 IAS 23 Original requirements Benchmark treatment: Borrowing cost shall be expensed in the period when incurred....
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This note was uploaded on 11/30/2009 for the course ACCT ACCT203 taught by Professor Kim during the Fall '09 term at HKUST.

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ch 10 LN NOA acquisition final version - 10-1 Ch 10...

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