Presentation is loading. Please wait.

Presentation is loading. Please wait.

Operational Assets: Utilization and Impairment

Published byDana Loreen Gardner Modified over 6 years ago

Similar presentations

Presentation on theme: "Operational Assets: Utilization and Impairment"— Presentation transcript:

1 Operational Assets: Utilization and Impairment
Sid Glandon, DBA, CPA Assistant Professor of Accounting

2 Depreciation, Depletion and Amortization
Means of cost allocation Not a method of valuation Matching Principle Allocation of cost in systematic and rational manner to the accounting periods expected to benefit from use of the asset

3 Measuring Cost Allocation
Estimated service life Depreciable base Original cost less salvage value Allocation method Time-based methods Activity-based methods

4 Time-Based: Straight-Line Method
Calculate depreciable base Original cost Less: salvage or disposal value Determine estimated service life Divide depreciable base by number of years in estimated service life Equals annual depreciation expense

5 Time-Based: Declining Balance
Multiply the straight-line rate by factor (2 Xs = double declining) Current year depreciation Multiply the result times the beginning book value of the asset Reduce book value by current year depreciation Repeat the process

6 Time-Based: Sum of the Years Digits
Sum the years Create fraction Numerator-declining number with first year as the largest number Denominator-the sum of the years Multiply the declining fraction by the depreciable base

7 Example: Fact Pattern

8 Straight Line Depreciation

9 Double Declining Balance

10 Sum of the Years Digits

11 Activity-Based Output based Input based Units of production
Number of hours of service Number of miles of service

12 Activity-Based Methods
Determine depreciable base Determine units of measurement Divide depreciable base by units of measurement Equals depreciation per unit Determine number of units in year Multiply number of units in year by depreciation per unit

13 Activity Based Depreciation

14 Depletion of Natural Resources
Cost basis expensing of natural resources Natural resources Complete removal of asset Replacement only by an act of nature

15 Depletion Activity-based method
Divide depletion base by estimated number of units to be extracted Equals, depletion per unit

16 Amortization of Intangible Assets
Finite useful life intangible assets Useful life Legal, regulatory, or contractual Residual value Usually zero Allocation method Usually straight line Exception-software development costs

17 Intangible Assets Not Subject to Amortization
Indefinite life intangible assets Goodwill

18 Partial Year Depreciation
If asset is placed in service during year Calculate depreciation for full year Allocate between years Half-year convention

19 Revision of Depreciation Estimates
Initial estimates change Life Salvage value Apply prospectively Recompute current year depreciation Changes do not affect prior periods

20 Change in Depreciation Method
Change in accounting principle resulting in a change in estimate Apply prospectively Recompute current year depreciation Changes do not affect prior periods

21 Correction of an Error Restate all prior periods presented in the financial statements Prior period adjustment to retained earnings for the earliest period reported

22 Impairment of Value Carrying value of asset is not recoverable
Operational assets held and used in operations Operational assets held for sale Intangibles with finite life

23 Tangible Operational Assets Finite Life Intangible Assets
Recovery Test If undiscounted sum of future cash flows is less than book value an impairment loss is indicated Fair Value Test The measurement of the impairment loss is the book value less the fair value

24 Fair Value Market value if there is a market
Fair value estimate if there is no market Present value of the estimated future cash flows

25 Indefinite Life Intangible Assets
Should be tested for impairment at least annually Impairment loss Book value exceeds fair value

26 Goodwill Should be tested for impairment at least annually
Impairment loss Book value of the reporting unit exceeds its implied fair value

27 Operational Assets Held for Sale
Impairment when classified as held for sale Impairment loss Book value exceeds fair value less cost of disposal

28 Expenditures Subsequent to Acquisition
Repairs and Maintenance Expensed as incurred Additions Capitalized and depreciated over remaining service life Improvements Rearrangements Capitalized if they increase future benefits

29 Cost of Defending Intangible Rights
Successful defense is capitalized and amortized over remaining service life Unsuccessful defense is expensed

Download ppt "Operational Assets: Utilization and Impairment"

Similar presentations

Depreciation, Impairments, and Depletion

Depreciation, Impairments, and Depletion
Long-Term Assets 11. Management Issues Related to Long-Term Assets OBJECTIVE 1: Define long-term assets, and explain the management issues related to.

Long-Term Assets 11. Management Issues Related to Long-Term Assets OBJECTIVE 1: Define long-term assets, and explain the management issues related to.
© 2004 The McGraw-Hill Companies, Inc. McGraw-Hill/Irwin Chapter 11 Operational Assets: Utilization and Impairment.

© 2004 The McGraw-Hill Companies, Inc. McGraw-Hill/Irwin Chapter 11 Operational Assets: Utilization and Impairment.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Operational Assets: Utilization and Impairment 11 Insert Book Cover Picture.

Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Operational Assets: Utilization and Impairment 11 Insert Book Cover Picture.
Accounting Changes and Error Corrections Sid Glandon, DBA, CPA Associate Professor of Accounting The University of Texas at El Paso.

Accounting Changes and Error Corrections Sid Glandon, DBA, CPA Associate Professor of Accounting The University of Texas at El Paso.
Chapter 10  Measures of Operating Capacity. Chapter 10Mugan-Akman 20072.

Chapter 10  Measures of Operating Capacity. Chapter 10Mugan-Akman
Overview of Long-Lived Assets Long-lived assets - resources that are held for an extended time, such as land, buildings, equipment, natural resources,

Overview of Long-Lived Assets Long-lived assets - resources that are held for an extended time, such as land, buildings, equipment, natural resources,
1 Chapter 8 Operating Assets: Property, Plant, and Equipment, Natural Resources, and Intangibles Financial Accounting, Alternate 4e by Porter and Norton.

1 Chapter 8 Operating Assets: Property, Plant, and Equipment, Natural Resources, and Intangibles Financial Accounting, Alternate 4e by Porter and Norton.
Long-term Assets. Types of Long-Term Assets n Property, plant, and equipment –Long-term assets acquired for use in operations n Natural resources –Long-term.

Long-term Assets. Types of Long-Term Assets n Property, plant, and equipment –Long-term assets acquired for use in operations n Natural resources –Long-term.
CHAPTER 11 Depreciation, Impairments, and Depletion ……..…………………………………………………………... “allocating the cost of tangible assets to those periods expected to.

CHAPTER 11 Depreciation, Impairments, and Depletion ……..…………………………………………………………... “allocating the cost of tangible assets to those periods expected to.
Chapter 11: Depreciation, Impairments and Depletion

Chapter 11: Depreciation, Impairments and Depletion
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Slide 11-1 Chapter Eleven Operational Assets: Utilization and.

Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Slide 11-1 Chapter Eleven Operational Assets: Utilization and.
Chapter 10 Review. REVIEW QUESTION 1 Which of the depreciation methods writes off more depreciation near the start of an asset’s than in later years?

Chapter 10 Review. REVIEW QUESTION 1 Which of the depreciation methods writes off more depreciation near the start of an asset’s than in later years?
Intermediate Accounting

Intermediate Accounting
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Property,

PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Property,
Valuation and Reporting of Fixed and Intangible Assets Chapter 7.

Valuation and Reporting of Fixed and Intangible Assets Chapter 7.
1 Depreciation and Depletion C hapter 10. 2 1.Identify the factors involved in depreciation. 2. Explain the alternative methods of cost allocation, including.

1 Depreciation and Depletion C hapter Identify the factors involved in depreciation. 2. Explain the alternative methods of cost allocation, including.
McGraw-Hill /Irwin© 2009 The McGraw-Hill Companies, Inc. OPERATIONAL ASSETS: UTILIZATION AND IMPAIRMENT Chapter 11.

McGraw-Hill /Irwin© 2009 The McGraw-Hill Companies, Inc. OPERATIONAL ASSETS: UTILIZATION AND IMPAIRMENT Chapter 11.
ACTG 3110 Chapter 11 – Depreciation, Impairments, and Depletion.

ACTG 3110 Chapter 11 – Depreciation, Impairments, and Depletion.
1 Chapter 10 Long-term Assets: Property, Plant, and Equipment, Natural Resources, and Intangibles Adapted from Financial Accounting 4e by Porter and Norton.

1 Chapter 10 Long-term Assets: Property, Plant, and Equipment, Natural Resources, and Intangibles Adapted from Financial Accounting 4e by Porter and Norton.

Similar presentations

Ads by Google