chapter 10 notes.docx

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Accounting & Financial Management
AFM 291
Robert Ducharme

Chapter 10 RECOGNITION AND ELEMENTS Property, Plant and Equipment Assets  PPE can be referred to as tangible capital assets, plant assets or fixed assets include long term resources such as office, factory and warehouse buildings, investment property  Depreciation is used for the amortization of PPE while depletion is used for the amortization of mineral resource properties and amortization is used for intangibles  PPE are held for use in the production of goods and services, for rental to others or for administrative purposes, they are used over more than one accounting period and they are tangible  Any items that have multiple uses and are regularly used and replaced within the accounting period is inventory  Spare parts and standby for servicing used with a specific capital asset and useful for more than one period are PPE Recognition Principle  It is probable that the item's associated future economic benefits will flow to the entity  Its cost can be measured reliably  Government imposed pollution reduction equipment may not appear to generate net future cash inflows but still recognized as PPE  If both not met, it is an expense Asset Components  Unit of measure is the level of asset that should be recognized  Degree of componentization is professional judgment  Consideration of the significance of the individual parts to the whole  Differing useful lives or different patterns of delivering economic benefits Cost Element  Cost includes all expenditures needed to acquire the asset and bring it to its location and ready it for use  Includes (a) purchase price net of trade discount and rebates plus non refundable purchases taxes  (b) expenditure is necessary to bring the asset to its required location and condition to operate as management intended  (c*) estimate of the costs of obligations associated with the asset's eventual disposal which includes costs of the asset's decommissioning and site restoration IFRS Private Entity GAAP  Capitalization of cost stops when the asset is in place ad Capitalization of costs stops when an asset is ready to be used as management inte
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