Ch 11 Amortization, Impairment, and Disposition

Ch 11 Amortization, Impairment, and Disposition -...

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Unformatted text preview: Depreciation, Impairment and Disposition Chapter 11 2 Depreciation, Impairment and Disposition Depreciation A Method of Allocation Factors considered Methods of allocation Other depreciation issues Held for Sale and Derecognition Long-lived assets to be disposed of by sale Derecognition Impairment Indicators of impairment Impairment recognition and measurement models Asset groups and cash- generating units Presentation, Disclosure, and Analysis Presentation and disclosure Analysis IFRS/Private Entity GAAP Comparison Comparison of IFRS and private entity GAAP Looking ahead 3 Depreciation, Impairment and Disposition Depreciation A Method of Allocation Factors considered Methods of allocation Other depreciation issues Held for Sale and Derecognition Long-lived assets to be disposed of by sale Derecognition Impairment Indicators of impairment Impairment recognition and measurement models Asset groups and cash- generating units Presentation, Disclosure, and Analysis Presentation and disclosure Analysis IFRS/Private Entity GAAP Comparison Comparison of IFRS and private entity GAAP Looking ahead 4 Depreciation Concept Depreciation (also known as amortization) is a means of cost allocation It is not a method of valuation Depreciation involves: allocating the depreciable amount of property, plant, and equipment over the periods expected to benefit from the use of the assets This allocation is generally recognized as Depreciation Expense 5 Factors in the Depreciation Process Questions to be answered to determine the amount of depreciation expense: 1. What asset components are depreciated separately? 2. What is the assets depreciable amount? 3. Over what period is the asset depreciated? 4. What pattern best reflects how the assets economic benefits are used up? 6 Components Depreciated Separately Each significant part of a PP&E asset should be identified and depreciated as a separate component Multiple components may be grouped for calculating depreciation if they have same useful lives and depreciation methods Parts of each PP&E asset that are not individually significant can be grouped and depreciated as a single component Application of components for the purpose of depreciation is required by both private entity GAAP and IFRS . However, IFRS is more detailed and strict. 7 Depreciable Amount Depreciable amount is initially calculated as: Original cost of the asset less estimated residual value (or salvage value) IFRS does not permit the use of salvage value Residual value is the net amount expected to be received for the asset today if it were of the age and in the condition expected at the end of its useful life Salvage value is the assets estimated net realizable value at the end of the assets life Residual value should be reviewed regularly (at least...
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This note was uploaded on 01/05/2012 for the course BACK 1ALL taught by Professor Mach during the Spring '11 term at Folsom Lake College.

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Ch 11 Amortization, Impairment, and Disposition -...

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