lec12 - Long-lived Assets 15.511 Corporate Accounting...

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1 Long-lived Assets 15.511 Corporate Accounting Summer 2004 Professor SP Kothari Sloan School of Management Massachusetts Institute of Technology June 25, 2004
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2 Agenda ± Understand how the matching principle influences ± the capitalization of long-lived assets ± the expensing of capitalized costs to match revenues generated in the use of long-lived assets ± Understand how differences in “book” vs. tax accounting for depreciation lead to deferred taxes
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3 Review of Matching Principle ± Capitalize versus Expense ± Capitalized Costs means show it as an Asset on the Balance Sheet ± Assets have future benefits ± Expense (i.e., not capitalize) when ± benefits are immediate ± ± Assets are consumed (in future) to generate future revenues ± Current Assets like Inventory, Prepaid Rent, and Insurance ± Non-current assets like Plant, buildings, machinery ± NC Intangible assets like Patents, acquired goodwill
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4 The case of non-current ± Accounting for Non-Current assets: ± What is the acquisition cost? ± What is the expected useful service life? ± What is the salvage value? ± What pattern of depreciation should be used to allocate expense over the useful life? ± Note: Land is the only non-current asset that is never depreciated / amortized
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5 Determining Acquisition Cost ± What is given up to obtain the asset? ± Include all costs required to bring the asset into
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This note was uploaded on 04/05/2010 for the course FINANCE AN FRE6003 taught by Professor Marshall,ingridm during the Spring '09 term at NYU Poly.

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lec12 - Long-lived Assets 15.511 Corporate Accounting...

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