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Chapter 9 - Solution Manual

In some cases specific price indexes may be used but

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In some cases specific price indexes may be used, but these measures provide reasonably approximations only when the price of the asset being measured moves in the same way as the movement of the price index. Moreover, relevance of replacement cost may be questionable. It can be argued that entry values are relevant only when purchase is contemplated. For owned assets replacement cost may be irrelevant because these assets will either be used or sold. Hence, a better measure of current value may be net realizable value. FASB ASC 9-1 Depreciation
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179 FASB ASC 360-10-35 Found by searching “depreciation and property, plant and equipment” or by accessing the Assets link and selecting Property, plant and equipment, overall. Specifically, the definition of depreciation is contained in FASB ASC 350-10-35-4. 35-1 This Subsection addresses depreciation of property, plant, and equipment and the post acquisition accounting for an interest in the residual value of a leased asset. > Depreciation 35-2 This guidance addresses the concept of depreciation accounting and the various factors to consider in selecting the related periods and methods to be used in such accounting. 35-3 Depreciation expense in financial statements for an asset shall be determined based on the asset's useful life. 35-4 The cost of a productive facility is one of the costs of the services it renders during its useful economic life. Generally accepted accounting principles (GAAP) require that this cost be spread over the expected useful life of the facility in such a way as to allocate it as equitably as possible to the periods during which services are obtained from the use of the facility. This procedure is known as depreciation accounting, a system of accounting which aims to distribute the cost or other basic value of tangible capital assets, less salvage (if any), over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational manner. It is a process of allocation, not of valuation. 35-5 See paragraph 360-10-35-20 for a discussion of depreciation of a new cost basis after recognition of an impairment loss. 35-6 See paragraph 360-10-35-43 for a discussion of cessation of depreciation on long-lived assets classified as held for sale. > > Declining Balance Method 35-7 The declining-balance method is an example of one of the methods that meet the requirements of being systematic and rational. If the expected productivity or revenue-earning power of the asset is relatively greater during the earlier years of its life, or maintenance charges tend to increase during later years, the declining-balance method may provide the most satisfactory allocation of cost. That conclusion also applies to other methods, including the sum-of-the-years'-digits method, that produce substantially similar results. > > Loss or Damage Experience as a Factor in Estimating Depreciable Lives
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In some cases specific price indexes may be used but these...

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