CH 11 - Chapter 11 Depreciation, Impairments &...

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Unformatted text preview: Chapter 11 Depreciation, Impairments & Depletion Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield Copyright Protected Chapter 11-2 1. Explain the concept of depreciation . 2. Identify the factors involved in the depreciation process. 3. Compare activity, straight-line , and decreasing-charge methods of depreciation. 4. Explain special depreciation methods . 5. Explain the accounting issues related to asset impairment . 6. Explain the accounting procedures for depletion of natural resources . 7. Explain how to report and analyze property, plant, equipment, and natural resources. Learning Objectives Chapter 11-3 Depreciation Factors involved Methods of depreciation Special methods Special issues Impairments Depletion Presentation and Analysis Recognizing impairments Measuring Impairments Restoration of loss Assets to be disposed of Presentation Analysis Establishing a base Write-off of resource cost Estimating reserves Liquidating dividends Continuing controversy (oil & gas) Depreciation, Impairments, and Depletion Chapter 11-4 Allocating costs of long-term assets: Fixed assets = Depreciation expense Intangibles = Amortization expense Natural resources = Depletion expense Depreciation is the accounting process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset. Depreciation - Method of Cost Allocation LO 1 Explain the concept of depreciation. Chapter 11-5 Depreciation - Method of Cost Allocation LO 2 Identify the factors involved in the depreciation process. Basic questions: Factors Involved in the Depreciation Process (1) What depreciable base (original cost less salvage value) is to be used? Salvage value is NOT used for the declining balance method(s) & depreciable base changes annually (reduced by depreciation). (2) What is the asset s useful life? (3) What method of cost allocation (depreciation) is best? (4) Consider partial periods for depreciation expense (5) Can not depreciate more than the asset cost less salvage value declining balance and sum-of-the-years . Chapter 11-6 Depreciation - Method of Cost Allocation LO 2 Identify the factors involved in the depreciation process. Depreciable Base salvage value not used for declining balance methods Factors Involved in the Depreciation Process Il ustration 11-1 Chapter 11-7 Depreciation - Method of Cost Allocation LO 3 Compare activity, straight-line, and decreasing- charge methods of depreciation. The profession requires the method employed be systematic and rational . Examples include: Methods of Depreciation (1) Straight-line method. (2) Activity method (units of use or production)....
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CH 11 - Chapter 11 Depreciation, Impairments &...

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