AFA 717 Study Guide - Comprehensive Final Exam Guide - Depreciation, Amortization, Intangible Asset
Document Summary
Starts when asset is in its intended condition, location and is available for use: with straight-line and accelerated methods, depreciation continues when the asset is idle. Stops when asset derecognized (sold) or classified as held-for-sale: asset is not depreciated below its residual value, major spare parts are a separate component and depreciated separately. Standby equipment depreciated when ready for use. Depreciation linked to the equipment it is acting as back up for. Assumes asset provides equivalent service each year of its life. Relates depreciation/amortization directly to the passage of time. Results in a constant amount recognized per time period. The straight-line method is: logically appealing; rational and systematic; and the most popular method in use easy to use. Use either: service-hours method or productive output method (also called the units-of- production method) It logically matches expenses to revenue and is only used for tangible assets.
