ECON 25000 Lecture Notes - Lecture 7: Accelerated Depreciation
27 Sep 2016
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Document Summary
Treatment of expenditures as assets versus as expenses. Goodwill: fair value of assets that companies cannot separately identify. Firms recognize expenditures to self-construct tangible assets as assets because they will provide future benefit. Expenditures on internally developed intangible assets are expenses (no market validation) Expenditures to acquire intangible assets from third parties are assets. Firms recognize the labor, material and overhead costs incurred as an asset. Treatment of acquisition cost over the life of a long lived asset. A portion of the cost of a long-lived asset with a finite life is recognized as an expense each period that the firm consumes the assets services. The cost of an asset with an indefinite life is not recognized as an expense each period; it remains on the balance sheet at its acquisition cost. Depreciation refers to the periodic charge to income of the acquisition cost of an tangible long-lived asset with a finite service life.
