1. Analyzing Investment Activities
Week 4 – Part 1
Lecture date: 08/10/2016
FINA321 – Fall 2016
Abdullah Al Shukaili

2. Topics covered Explain the concept of long-term assets
The processes of estimating the depreciation rate
How to read the Audit Notes in the financial statement

3. Long term asset
Long-term assets (LTA) are resources that are used to generate operating revenues (or reduce operating costs) for more than one period
Two types of LTA:
tangible fixed assets : such as property, plant, and equipment
intangible assets such as patents, trademarks, copyrights, and goodwill.

4. Tangible assets
Property, plant, and equipment (or plant assets) are noncurrent tangible assets used in the manufacturing, merchandising, or service processes to generate revenues and cash flows for more than one period
these assets have expected useful lives extending over more than one period

5. Depreciation
Depreciation is the allocation of the costs of plant and equipment (land is not depreciated) over their useful lives.
Rate of Depreciation depends on:-
useful life: Assumptions regarding useful lives of assets are based on economic conditions, engineering studies, experience, and information about an asset’s physical and productive properties
Allocation Method: method used to estimate the depreciation rate

6. Depreciation methods Straight-line: allocates the cost of an
asset to its useful life on the basis of equal periodic charges
Accelerated: allocate the cost of an asset to its useful life in a decreasing manner

8. Exercise
Please look to any audited financial statements, founded for instance in the MSM website and identify the following from the Auditor Notes:-
Accounting standards used or accounting policies
Expected life of assets
Depreciation allocation method
Notes to intangible asset