Donation Self construction Exchange non monetary Should firms treat

Donation self construction exchange non monetary

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Donation Self-construction Exchange (non-monetary) Should firms treat expenditures as expenses in the income statement, or assets in the balance sheet?
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Acquisition of PP&E General Rule An item of property, plant, and equipment shall be recognized as an asset if and only if: It is probable that future economic benefits will flow to the entity; and The cost of the item can be measured reliably. PP&E that qualifies for recognition as an asset should be measured initially at historical cost Historical cost is most reliable Historical cost reflects fair value at acquisition
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Acquisition of PP&E Cost is the amount of cash or cash equivalents paid or the fair value of other consideration in acquiring an asset at the time of its acquisition, or the amount attributed to the asset when initially recognized. What costs associated with the acquisition are included in its historical cost and “capitalized” with the asset? The general rule is that all reasonable and necessary expenditures made in acquiring and preparing an asset ready for its intended use should be capitalized.
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Expenditures Capitalized as PP&E Capitalized as PP&E Purchase Price Improvements Sales Taxes Legal Fees Transportation fees Installation costs Demolition Costs Construction Costs
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Expenditures Capitalized as PP&E Some Examples Purchase price , including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, to the extent that the entity has an obligation to do.
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Expenditures Capitalized as PP&E Purchase price can be: Cash Price Cash price equivalent if the terms of purchase allow for a cash discount Present value of the cash payments Fair value of the fixed assets or the fair value of the securities issued for acquisition, whichever is more clearly evident.
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Expenditures Capitalized as PP&E Examples of directly attributable costs: Costs of employee benefits arising directly from the construction or acquisition of the PP&E; Costs of site preparation; Initial delivery and handling costs; Installation and assembly costs; Costs of testing whether the asset is functioning properly, and Professional fees
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Expenditures Capitalized as PP&E Cost of Land Cost of Buildings Cost of Equipment Includes all costs to acquire land and ready it for use, such as The purchase price Closing costs, such as title to the land, attorney’s fees, and recording fees; Costs of grading, filling, draining, and clearing; Assumption of any liens, mortgages, or encumbrances on the property; and Additional land improvements that have an indefinite life Includes all costs incurred in acquiring the equipment and preparing it for use.
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  • Winter '18
  • jane smith

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