BUSI 2160U Lecture Notes - Lecture 2: Capital Cost Allowance, Net Income, Financial Statement
Document Summary
Capital assets: property, plant and equipment, intangibles, and goodwill. Includes all costs associated with asset being acquired and ready for use: purchase price, engineering fees, delivery costs, duties, installation, legal costs, employee wages to ready asset for use, capitalize interest until asset is ready for use. Determining if certain costs should be capitalized requires judgement. Betterments makes existing asset better and should be capitalized: may increase useful life, may increase efficiency, may increase effectiveness. Repairs allow assets to operate as intended and should be expensed when incurred. If a basket of assets is acquired at a single price: must allocate costs among assets acquired, flexibility in allocation if uncertainty exists, self-interest of preparer can have influence. Straight line depreciation: amortize in equal increments, amortize over useful life to residual value. Accelerated depreciation: amortize more in early years, amortize over useful life to residual value, declining balance method is typical.
