320 Lesson 9a

320 Lesson 9a - Week 10 Property, Plant and Equipment 1...

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Unformatted text preview: Week 10 Property, Plant and Equipment 1 Tangible Capital Assets Long-lived assets acquired for use in the revenue producing activities of the company held for use in sale of goods, rendering of service or rental of others- also can be for administrative purposes separately identifiable acquired to use on a continued basis not intended for sale in the ordinary course of business 2 Tangible Capital Assets Birth Life Death acquisition cost method of payment donations self-constructed expenditures cost allocation problems permanent impairment maintaining at FMV sale involuntary conversion 3 Acquisition cost Cash or cash equivalent price of obtaining the asset and getting it ready to use Land Purchase cost Real estate costs Legal fees Preparation costs (clearing, draining, filling, etc.) Property taxes Permanent property enhancements PV of asset retirement obligations 4 Building (purchase) Purchase cost Cost of renouvations Legal fees Real estate costs Building (constructed) Architectural costs Excavation costs Contractor payments Cost of permits Legal fees, closing costs Building (self-constructed) Direct construction costs Interest on specific construction loans- capitalize until asset is ready to use Excavation costs Legal fees Cost of permits 5 Machinery and equipment Invoice cost, less discounts Taxes, freight, and duty Special platforms, foundations, or other required installation costs Any building modifications necessary for installation Cost of preparing asset for use Cost of test runs 6 Land improvements Non-permanent changes to the land Cost of driveways, parking lots, fences Cost of landscaping Cost of sidewalks Cost of other structures (benches, etc.) 7 Investment property Property held to generate revenues through rental and/or increase in value Cost determined similar to PP&E Rent is revenue Depreciate as you would other PP&E Can be held at cost or FV 8 Natural resources Wasting assets oil and gas, forests, mines Consumed physically Depletion term used for depreciation 9 Biological assets Agricultural products special IFRS standards Fruit trees, livestock Measure at cost then revalue each reporting period at fair value less cost to sell change in value to income statement 10 Self-constructed assets Sum of expenditures relating to its construction- as costs are incurred, they are capitalized in the asset account- may not reflect fair value of the asset- constructed assets are often unique - total costs may not exceed fair value Material and labour straightforward Overhead more complex Overhead directly attributable to construction project What about general overhead? same proportion as other activities?...
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This note was uploaded on 03/15/2012 for the course BUS 320 taught by Professor Maureenfizzell during the Spring '12 term at Simon Fraser.

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320 Lesson 9a - Week 10 Property, Plant and Equipment 1...

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