Accounting For Investments
Investments When we buy the Debt securities or Equity securities of o
1-Investments in Equity Securities = When we buy the Commo
Measurement of an Investment in Equity Securities
If Market Value is Readily If Market Value is Not Re
Available Available
Fair Value Model Measurement Alternativ
Fair Value Model
1- When we buy stock
Dr. Investment (asset) A/C xxx
Cr. Cash A/C xxx
2-Unrealized Gains /losses = due to changes in Fair value
For Gain For Loss
Dr. Investment A/C xxx Dr.Unrealised Loss(I/S)
Cr. Unrealized Gain (I/S) xxx Cr. Investment A/C
3- Dividend received on stock
Dr. Cash/Dividend Receivable xxx
Cr. Dividend income(I/S) xxx
4- When we sell the Investment
Dr. Cash A/C xxx
Dr. Realized Loss (I/S) (Difference) xxx
Cr. Investment A/C xxx
Cr. Realized Gain (I/S) (Difference) xxx
In B/S = Record the investment at current Market Value
Current Investment Value = (No.of stock x Market Value pe
In I/S= All Gains /losses = due to changes in Fair value
Dividend Income
Question #1
Measurement Alternative
Impairment Loss
Equity Method
Note An Equity investment is initially recognized at cost.
1- When we buy the stock of other co.(30% of stock)
Dr. Investment in X Co A/C (at cost) xxx
Cr. Cash A/C at (at cost)
2- At the end of year investee will either have profit or loss, Calculate o
Share of Profit or Loss = Profit/Loss $ x holding %
$30000 = Profit 100,000 x 30%
If Profit Share
Dr. Investment in X Co A/C xxx
Cr. Revenue (share of profit) A/C xxx
3- When Investee Declares the Dividend
Dr. Cash/ Dividend Receivable A/C xxx
Cr. Investment in X Co A/C
Note: Dividend From the investee is treated as return of an investment, It ha
on the investor's income.
Note: If an investor can no longer be presumed to exercise significant influen
(due to a decrease in the level of ownership), it ceases to account for
the equity method.
Summary of Equity Method
Opening Investment value xxx
Plus Share of investee profit xxx
OR
Less Share of Investee loss (xxx)
Less Dividend Received/Receivable (xxx)
Value of closing Investment(B/S) xxx
1-Investments in Debt Securities =
Types of Investments From accounting point of view
1- Held To Maturity Securities =
Note- No unrealized gain or loss will arise because HTM are not marked to m
Financial Statement Presentation
2- Trading Securities - Fair Value Through Net Income
Trading securities are bought and held primarily for sale in the near te
and sold frequently.
Note Each trading security is initially recorded at Cost (including brokerage c
1- When we buy Trading Sec.
Dr. Trading security A/C xxx
Cr. Cash A/C xxx
2- Unrealized Gains /losses = due to changes in Fair value
For Gain For Loss
Dr. FV Adjustment(trading) xxx Dr.Unrealised Loss(I/S)
Cr. Unrealized Gain (I/S) xxx Cr. FV Adjustment(trading
Note
3- Dividend on stock Prefered Stock
Dr. Cash/Dividend Receivable xxx
Cr. Dividend income(I/S) xxx
4- Interest on Debt
Dr. Cash/Interest Receivable xxx
Cr. Interest income(I/S) xxx
5- When we sell the Investment
Dr. Cash A/C xxx
Dr. Realized Loss (I/S) (Difference) xxx
Cr. Trading Security A/C xxx
Cr. Realized Gain (I/S) (Difference) xxx
In B/S = Record the investment at current Market Value as Curren
Current Investment Value = (No.of stock or bond x Market
In I/S= All Realized and Unrealized Gains /losses = due to change
Interest and Dividend Income
In SOCF=
Question
3- Available for Sale Security
Relevant Journal Entries
1- When we buy the Security.
Dr. AFS security A/C xxx
Cr. Cash A/C xxx
2- Unrealized Gains /losses through OCI = due to changes in Fair value
For Gain For Loss
Dr. FV Adjustment (AFS) xxx Dr.Unrealised Loss(OCI)
Cr. Unrealized Gain (OCI) xxx Cr. FV Adjustment (AFS)
3- Dividend on Prefered Stock
Dr. Cash A/C xxx
Cr. Dividend income(I/S) xxx
4- Interest on Debt
Dr. Cash A/C xxx
Cr. Interest income(I/S) xxx
5- When we sell the Investment
Dr. Cash A/C xxx
Dr. OCI (If any gain there) xxx
Dr. Realized Loss (I/S) (Difference) xxx
Cr. AFS Security A/C xxx
Cr. Realized Gain (I/S) (Difference) xxx
In B/S = Record the investment at current Market Value as Curren
Current Investment Value = (No.of stock or bond x Market
In Equity Section, unrealized holding gains and losses are r
In I/S= Realized Gains /losses including (premium or discount am
Interest and Dividend Income
In OCI = Unrealized Gains and Losses
In SOCF= Cash flow from investing Activities
Question
Transfer between Catagories
Question 1
Question 2
Question 3
Property Plant and Equipment PPE
Types of PPE
1- Land & Building
2- Land Improvements - Such as landscaping, drainage, streets, street lig
parking lots, driveways, and fences.
3- Machinery and Equipment - such as furniture, fixtures (personal prop
attached to real property, such as central heating system), and vehicle
4- Leasehold Improvements - such as buildings constructed on, and othe
leased property by a lessee.
5- Internally constructed assets
6- Miscellaneous items - such as tools, patterns and dies
Carrying Amount
Historical or Initial Cost
Less Accumulated Depreciation
Less Impairment Losses
Asset's Carrying Amount
PPE - Initial Measurement - General Principle
PPE are initially measured at historical cost which consists of
1- The amount paid to acquire the asset Such as,
Purchase price including import duties and non- refundable taxes, afte
Trade discount and rebates.
2- The costs needed to bring the asset to the condition and location ne
such as freight-in, installation costs, renovation or reconditioning costs
expenses of tests or trial runs, insurance and taxes during the reopera
3- The initial estimate of the costs of dismantling and removing the item
on which it is located
Summary
Cost of purchase
Less Discount/rebate
Add Non-refundable taxes (Import Duties)
Add Legal cost etc
Add Site preparation
Add Installation charges
Add Dismantling cost
Add Delivery and handling
Add Cost of testing
Add Interest/Borrowing cost to acquire or
construct the asset
Total cost/Historic cost
Entry to record the initial cost
Dr. Asset name 1000
Cr. Cash/Payable 1000
Note
Historical cost is adjusted for changes in utility over the life of the asse
imapairment) Expenses should be recognized at the time related rene
Note Depreciation does not start until PPE are placed in operation and begi
economic benefit
Note Under GAAP, PPE are not revalued upward to reflect appraisal or fair v
that are above historical cost (or carrying amount) of PPE.
Initial Cost - Land
Example
we have acquired land for $100,000, we incurred legal cost for land title = $5
we have certain trees on land which were sold later for $1000
what cost should be capitalized (asset)
Cost of purchase 100,000
Add legal cost 5000
Total historic cost 105,000
Less Sale of timber -1000
Net historic cost 104000
Initial Cost - Building
Initial Cost - Leasehold Improvements
Leasehold improvements, such as building constructed on leased land, are ac
in the same way as property to which title is held.
Note Term of lease may limit the depreciation period
Depreciation period = shorter off
a) Useful life of the asset or
b) (Remaining Lease term + Part or full Renewal period if certain)
If Renewal is not certain then take on
remaining lease period
Question
Initial Cost - Machinery and Equipment
Example
Question
Donated Assets
Measured at Fair Value
Dr. Asset A/C xxx
Cr. Contribution Revenue xxx
Acquisition of Group of Asset (Lum-sum Purchase)
We will allocate the lum-sum purchase price based on fair value of asset acqu
Subsequent Expenditure For PPE
The issue to determine whether the subsequent expenditures should be CAP
and to determine the accounting methods to be used.
Capital Expenditures (Asset) Revenue Expenditures
They provide additional benefits by 1- Maintain an asset's nor
1- Improving the quality of services rendered 2- These costs are recurri
by the asset to benefit future period a
2- Extending its useful life or incurred.
3- increasing its output
Additions
1- Substantial expenditures for extensions or expansions of existing asse
eg. Additional floor for a building
If Addition is essentially a separate asset If Addition is not essentia
its recorded in a separate account and depreciated Should be debited to the
over its own life. depreciated over the life
Dr. Asset (new) xxx Dr. Asset (Old)
Cr. Cash xxx Cr. Cash
Replacements and improvements (Betterments)
Replacement = Substitutes a new component of an asset for a similar one
eg. Tile roof for a tile roof
Improvement = substitutes a better component such as a more efficient heati
Case 1 = If the old component was recorded separately
Recording a central air conditioning system separately from the building
we will use Substitution Method
The basic entry under substitution method is
Dr. New Asset
Dr. Acc. Dep of old asset
Dr. Loss (Difference)
Cr. Old Asset (Cost)
Cr. Cash
Case 1 = If the component replaced or improved has not been separately ac
the old component has been modified
Replaced a central air conditioning system which was the part of building cos
Substitution Method is not used
If the replacement or improvement
Increased the assets services potential
But does not extend its useful life
Dr. Asset xxx
Cr. Cash xxx
Rearrangements, Reinstallations, Relocations
1- Relocation (moving) costs often are expensed as incurred.
2- if Carrying Value is known. The substitution method of accounting for the
if the original installation costs and accumulated depreciation are known.
The basic entry under substitution method is
Dr. New Asset
Dr. Acc. Dep of old asset
Dr. Loss (Difference)
Cr. Old Asset (Cost)
Cr. Cash
3- Otherwise if Carrying value is not known, these costs are material, they sh
new account and amortized over the period
Dr. Asset xxx
Cr. Cash xxx
Repair and Maintenance
If Minor and recurring = Revenue Expense
If Major and benefits to future benefit increase ( Capital Expenditure)
Summary
PPE - Depreciation
Definition
Depreciation is the process of systematically and rationally allocating the de
asset over its expected useful life.
Note. The depreciation method chosen should reflect the pattern in which e
(or services) from the assets are expected to be received
Entry to Record the Depreciation
Dr. Depreciation Expense xxx
Cr. Accumulated Depreciation xxx
Note
Note
Example
Depreciation Methods
1- Straight Line Method
1- Depreciation Expense = (Cost -RV) /Useful life
2- Depreciaton Expense = Cost of asset x Depreciation %
Note If depreciation % is not given, Depreciaton % = 100/ Useful life
Example
Note
Example
if we purchased the asset in October 1,
Annual Depreciation in first year = $180,000
Depreciation for 3 Months = $180000 x (3/12) = $45000
2- Declining Balance Method (Time Based Method)
This method gives us higer depreciation in earlier years and lower depreciatio
Depreciation Expense in Each year= CV of asset(Cost - Acc.Dep) x Depre
Note
Accelrated/Double declining method
eg. If Depreciation % is 20% , under double declining method, make it double
Depreciation Expense in Each year= CV of asset(Cost - Acc.Dep) x Depre
OR
Note- Your total accumulated depreciation should never exceed the Deprecia
900000=(1000,000 - 100000)
OR
Carrying value cannot be less than salvage value(100,000)
Example
Note In year 5th = 129600 x 40% = 51840 Dep Exp
years Dep Exp Dep Exp
1 400000 400000
2 240000 240000
3 144000 144000
4 86400 86400
5 51840 29600
Total Acc-Dep 922240 900000
Cost = 1000000 1000000
less Acc dep -922240 -900000
CV 77760 100000
Note- Your total accumulated depreciation should never exceed the Deprecia
900000=(1000,000 - 100000)
OR
Carrying value cannot be less than salvage value(100,000)
Dep Exp Profit
Retained Earnings
SLM Lower Higher Higher
Earlier Years
Earlier Years
DM/SYD Higher Lower Lower
SLM Higher Lower Lower
Later Years
DM/SYD Lower Higher Higher
3- Sum-of the Year's Digits (SYD)
Formula For Depreciation Expense
Calculating the Sum of the years Digit
Example
Dep Exp Profit
Retained Earnings
SLM Lower Higher Higher
Earlier Years
DM/SYD Higher Lower Lower
SLM Higher Lower Lower
Later Years
DM/SYD Lower Higher Higher
4- Units of Output Method
Example
5- Component Method
6- Group or Composite Depreciation
1- Composite asset is a way of grouping many asset so that their total cost is
and depreciated as one Asset
2- Composite method apply Straight Line depreciation method
3- Composite method applies to groups of dissimilar assets with varying use
4- Group method applies to similar assets.
5- They provide an efficient way to account for large numbers of depreciable
offsetting of under and overstated depreciation estimates.
Each Method Calculates
Depreciable Cost = Total Acquisition Cost - Salvage Value
Weighted Average Estimated Useful Life =
Total Annual Stra
Weighted Average Depreciation Rate =
Total
Note One accumulated depreciation account is also maintained
Periodic Depreciation = Cost of Asset in use during the period x Weigh
Example
Solution
Weighted Average Estimated Useful Life =
Total Annual Stra
Weighted Average Depreciation Rate =
Total
Note One accumulated depreciation account also is maintained
Periodic Depreciation = Cost of Asset in use during the period x Weight
$40000 = $580,000
Disposal or Retirement of Asset from Group
Gains and losses on disposal or retirements of assets are not recognized but
of accumulated depreciation. The entry is
Dr. Cash (Proceeds)
Dr. Accumulated Depreciation (diff)
Cr. Asset (Cost)
Cr. Accumulated Depreciation (diff)
Intangible Assets
Definition
An intangible asset is Identifiable asset if it is
(i) Separable OR
(ii) Convey to the holder contractual or legal rights to receive future economi
A non-monetary asset refers to an asset that a company holds that does not
value and is not easily convertible to cash or cash equivalents.
Three Attributes of an intangible asset are
1- Identifiability
2- Control (Power to obtain benefits from the asset)
3- Future Benefits (Increase in revenue or reduction in future costs)
Note. Intangible assets can take many forms. Common categories are
Initial Recognition
Entry to record the asset initially
Dr. Asset xxx
Cr. Cash xxx
Example
Organization and Startup Costs
IFRS Difference
1- Intangible assests may be accounted for under either the cost model (as u
or the revaluation model. The revaluation model can be applied only if the i
in an active market.
2-
Question # 1
Question # 2
Patent Cost = Fair Value
$80000 =
Finn owned stock of Edlow
Bisk = Owned patent
Question # 3
Question # 4
Accounting Sebsequent to Acquisition
Intangible With Finite Useful Life.
Initial Cost of Asset - Residual
Amortization Expense =
Useful Life
Amortizable Cost = Initial cost of asset - Residual Value
Initial Cost of Asset - Residual
Patent Amortization Expense =
Shorter Off
Entry to record amortization expense
Dr. Amortisation Expense xxx
Cr. Accumulated Amortisation/ Intang. Asset xxx
Useful life of an asset is the period during which it is expected to contribute e
to the future cash flows of the reporting entity.
Note. Useful life should be reevaluated each reporting period. A change in th
Prospectve change in amortization.
Residual Value = Estimated Fair Value - Disposal Cost
This Amount is zero unless
a) - A third party has committed to purchase the asset, or
b)- It can be determined from an exchange transaction in an exting marke
that is expected to exist at the end of the useful life.
Carrying Amount of Intangible Asset with Finite Useful Life
Historical Cost xxx
Less Accumulated Amortisation (xxx)
Less Impairment Losses (xxx)
CV of Asset xxx
Example
Note If an amortized intangible asset is later determined to have an indefin
1- No longer be amortized and
2- It should be tested for impairment only.
Note For Patent Only=
Note Intangible assets with finite life should also tested for Impairment
Example
Intangible With Indefinite Useful Life (Other Than Good Will).
An intangible asset with an indefinite useful life is not amortized
But it Should be tested for impairment.
Carrying Amount of Intangible Asset with Indefinite Useful Life
Historical Cost xxx
Less Impairment Losses (xxx)
CV of Asset xxx
Question #1
Question #2
Impairment of Intangible Assets
Impairment of Intangible Asset With Finite Life
Impairment of intangible asset is the permanent reduction in the value of as
one-time event such as
1- Change in legal or economic conditions
2- Changes in consumer demands, or damage that impacts the asset.
Testing for impairment occurs when events or changes in circumstances indic
of the asset may not be recoverable, or (Fair Value of asset is less than its car
If impairment is confirmed as result of testing, an impairment loss should be
and reduce the value of the impaired asset on the B/S.
Carrying Amount of Intangible Asset with Finite Useful Life
Historical Cost xxx
Less Accumulated Amortisation (xxx)
Less Impairment Losses (xxx)
CV of Asset xxx
Determination of Impairment Loss
Events or Changes in Circumstances Indicate a Possible Loss
If Yes
Carrying Amount > Sum of Undiscounted CashFlows
If Yes
Loss = Carrying Amount - Fair Value
Note
Entry to Record the impairment Loss
Dr. Impaiment Loss xxx
Cr. Intangible Asset xxx
Note A Previously recognized impairment loss must not be reversed
Note After the recognition of impairment loss, Adjusted CV of Asset = Fair
Note Ajusted CV of asset is its new cost basis
Example
Carrying Amount > Sum of Undiscounted CashFlows
360000 355000
Cost 900000
Less Acc.Amor. (540000)= (900000/5Y x 3Y)
360000
If Yes
Loss = Carrying Amount - Fair Value
10000= 360000 - 350000
Under IFRS - One Step Impairment
IF Carrying Value of Asset > Recoverable Amount
Greater Of
Fair Value - Costs to Sell
Example
Carrying Value of Asset = $360,000
Fair Value of Asset = $350,000
Costs to Sell = $5,000
PV of Value in Use = $320,000
IF Carrying Value of Asset > Recoverable Amount
$360,000 $345,000
Greater Of
Fair Value - Costs to Sell
$350000 - $5000 = $345000
Note An Impairment loss may be reversed (Except Good Will) if a change h
used to measure the recoverable amount.
Impairment of Intangible Asset With Indefinite Life
An intangible asset with an indefinite useful life (a nonamortized intangible a
for impairment at least annually.
Carrying Amount of Intangible Asset with Indefinite Useful Life
Historical Cost xxx
Less Impairment Losses (xxx)
CV of Asset xxx
Entry to Record the impairment Loss
Dr. Impairment Loss xxx
Cr. Intangible Asset xxx
Determination of Impairment Loss
Note A Previously recognized impairment loss must not be reversed
Note After the recognition of impairment loss, Adjusted CV of Asset = Fair
Note Ajusted CV of asset is its new cost basis
Example
IFRS Difference
A one-step quantitative impairment test is performed. No qualitative assessm
Question #1
Question #2
Question #3
Goodwill - Intangible Asset
Business Combination
A business combination is " a transaction or other event in which an acquirer
more businessess.
Control it is the direct or indirect ability to determine the direction of manag
1- This usually means one entity's direct or indirect ownership of more than 5
interests of another entity
2- Control may be obtain in many ways, such as by
a)- Transferring assets (such as cash, cash equivalents, or other assets
b)- Issuing equity interests.
c)- Incurring Liabiliteis, and
d)- combining two entities solely by contract.
Parent- is an entity that has a controlling financial interest in one or more sub
Example
Acquisition Method
A business combination must be accounted for using the Acquisition method
1- Determines the acquirer and the acquisition date
2- Recognizes and measures
a)- Identifiable assets acquired
b)- Liabilities assumed
c)- any noncontrolling interest
d)- Goodwill or a gain from bargain purchase
Measurement Principle.
The identifiable assets acquired, liabilities assumed, and any noncontrolling in
measured at acquisition date fair value.
Goodwill
How To Calculate Goodwill
(A) Sum of the acquisition date Fair Value of the
Consideration transferred N-1
Plus NCI recognized
Plus Any previously held equity interest in acquire
Less (B) The acquisition date Fair Value of the Net Assets Acquired
Identifiable assets acquired
Less Liabilities assumed
Fair value of Net Assets acquired
Goodwill | (Gain from bargain purchase)
Note-1 - Consideration Transferred (Not in CMA)
Settled with Assets Settled with Equity Sec
Liability in B/S Equity (APIC) in B/S
Premeasured to Fair Must not be
Value at each Remeasured to Fair
reporting date Value after its initial
recognition
Changes in Fair value
taken to I/S
Example
Example (Goodwill)
Example (Goodwill)
Note.
Assets
If FV of Asset > CV of Asset = difference will be added in Net Asset am
If FV of Asset < CV of Asset = difference will be subtracted from Net A
Liab
If FV of Liab > CV of liab = difference will be subtracted from net asset
If FV of liab < CV of liab = difference will be added in Net Asset
Impairment Test for Goodwill
Reporting Unit- is an operating segment or one of its components. A Compon
1- it is a business for which descrete financial information is available and
2- Segment management regularly reviews its operating results
Qualitative Assessment and Quantitative Assessment
Quantitative Assessment
1- If Carrying Value of Reporting Unit's Net >
Asset including Goodwill
CV of Asset's Including Goodwill
Less CV of Liabilities
CV of Net Assets
if Yes, there is an impariment
Note. The loss is limited to the total amount of goodwill allocated to that rep
It will be recorded in income statement and cannot be reversed
Entry To Record Impairment Loss
Dr. Impairment Loss xxx
Cr. Goodwill xxx
Example
Example
Equity securities of other company.
n we buy the Common stock of other company.
arket Value is Not Readily
Available
surement Alternative
air value
nrealised Loss(I/S) xxx
vestment A/C xxx
rket Value
ck x Market Value per Stock)
air value
xxx
t or loss, Calculate our share of profit/Loss
t/Loss $ x holding %
t 100,000 x 30%
If Loss Share
Dr. Loss (share of loss) A/C xxx
Cr. Investment in X Co A/C xxx
xxx
f an investment, It has no effect
ise significant influence, for example
eases to account for the investment using
Increase investment account
Decrease investment account
Decrease investment account
(will be covered in unit 4)
are not marked to market.
Net Income
or sale in the near term. They are purchased
ncluding brokerage commissions and taxes)
nrealised Loss(I/S) xxx
V Adjustment(trading) xxx
rket Value as Current Asset.
ck or bond x Market Value per Stock or bond)
sses = due to changes in Fair value
anges in Fair value
nrealised Loss(OCI) xxx
V Adjustment (AFS) xxx
rket Value as Current or Non- Current Asset.
ck or bond x Market Value per Stock or bond)
gains and losses are reported in accumulated OCI
mium or discount amortization)
ge, streets, street lighting, sewers, sidewalks,
tures (personal property), permanently
system), and vehicles
tructed on, and other modifications made to,
xxx
(xxx)
(xxx)
xxx
efundable taxes, after deducting
tion and location necessary for its intended use
reconditioning costs,
s during the reoperations period.
nd removing the item and restoring the site
xxx
(xxx)
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
1000
er the life of the asset (eg Depreciation and
he time related renenues are earned
n operation and begin to contribute
ect appraisal or fair value or market value
t) of PPE.
ost for land title = $5000
For historic cost
Dr. Land 105000
Cr. Cash 105000
For sale of timber
Dr. Cash 1000
Cr. Land 1000
n leased land, are accounted for by the lessee
eriod if certain)
certain then take only
Deprection Period = Shorter off
a) Useful life =15 Years
B) Lease term = 8 Years
Depreciation Exp = Cost / Life
15000 = 120000/ 8Yrs
Cost of Asset 120000
Less Acc. Dep -15000
Carrying Value 105000
Option A is Correct
ir value of asset acquired.
tures should be CAPITALISED or EXPENSED
nue Expenditures
aintain an asset's normal service capacity
ese costs are recurring, are not expected
nefit future period and are expensed when
sions of existing assets are capitalized
dition is not essentially a separate asset
ld be debited to the original asset account and
eciated over the life of original asset
sset (Old) xxx
xxx
t for a similar one
a more efficient heating system
om the building
xxx
xxx
xxx
xxx
xxx
t been separately accounted for or
e part of building cost.
mprovement
Asset service potential (unchanged)
Extends the useful life
Dr. Acc. Dep xxx
Cr. Cash xxx
of accounting for these costs may be used
ation are known.
xxx
xxx
xxx
xxx
are material, they should be debited to a
Expenditure)
ally allocating the depreciable base of a tangible
he pattern in which economic benefits
eceived
Expense in Income Statement
Contra account of asset
iation %
0/ Useful life
nd lower depreciation in later years
cc.Dep) x Depreciation %
thod, make it double say 40%
cc.Dep) x Depreciation %
exceed the Depreciable Base
100,000)
0 Dep Exp
Balance
Equal to Dep Base
exceed the Depreciable Base
Acc. Dep Carrying Value
ined Earnings
Higher Lower Higher
Lower Higher Lower
Lower Hiher Lower
Higher Lower Higher
years
1
2
3
4
5
Acc. Dep Carrying Value
ined Earnings
Higher Lower Higher
Lower Higher Lower
Lower Hiher Lower
Higher Lower Higher
hat their total cost is carried by,
method
ets with varying useful life, Or
mbers of depreciable assets. They also result in the
Total Depreciable Cost
Total Annual Straight line Depreciation
Total Annual Straight Line Deprecation
Total Acquisition Cost
intained
the period x Weighted Average Rate
Total Depreciable Cost
Total Annual Straight line Depreciation
Total Annual Straight Line Deprecation
Total Acquisition Cost
intained
the period x Weighted Average Rate
x 6.896551724%
(Not in CMA)
not recognized but are treated as adjustments
xxx
xxx
xxx
xxx
eive future economic benefit.
holds that does not have a precise dollar
uture costs)
categories are
the cost model (as under U.S. GAAP)
e applied only if the intangible asset is traded
Capitalized Cost =
Purchase Price 100000
Plus Non- Refundable Tax 5000
Plus Legal Cost 10500
Total Cost 115500
Expense in I/S=
Training Cost 7000
Plus R & D Cost 24000
Plus Saleries of Admin staff 12000
Plus Refundable Taxes 0
Total Expense Amount xxx
nt Cost = Fair Value of asset given in exchange transaction
00 = 2000 Shares x 40 FV
owned stock of Edlow
= Owned patent
of Asset - Residual Value
Useful Life
of Asset - Residual Value
Shorter Off
a)- Useful Life
b)- Legal Life
ected to contribute either directly or indirectly
period. A change in the estimate results in
osal Cost
on in an exting market for the asset
d to have an indefinite useful life, it must
for Impairment
Good Will).
mortized
eful Life
tion in the value of asset due to unusual or
mpacts the asset.
n circumstances indicate that the Carrying Amount
set is less than its carrying value at reporting date).
rment loss should be recorded in I/S.
a Possible Loss
ted CashFlows Recoverablity Test
Value Measurement Test
In I/S under continued Operation
Reduce the Asset Value in B/S
t be reversed
d CV of Asset = Fair Value of Asset
ted CashFlows
In B/S = Carrying Amount=
Cost of Asset 900000
Less Acc. Amortisation -540000
Less Impairment Loss -10000
Adjusted CV =FV 350000
Value
mount
Value in Use
mount Impariment Loss = $15000
Value in Use
$320,000
d Will) if a change has occurred in the estimates
e Life
mortized intangible asset) must be reviewed
eful Life
In I/S under continued Operation
Reduce the Asset Value in B/S
t be reversed
d CV of Asset = Fair Value of Asset
o qualitative assessment exists.
in which an acquirer obtains control of one or
e direction of management and policies of investee.
ership of more than 50% of the outstanding voting
ents, or other assets including a business).
st in one or more subsidiaries.
Acquisition method. It
any noncontrolling interest is the acquiree must be
60% xxx
20% xxx
20% xxx
xxx xxx
s Acquired
xxx
(xxx)
xxx (xxx)
xxx/(xxx)
ded in Net Asset amount
btracted from Net Asset amount
acted from net asset
d in Net Asset
mponents. A Component is a reporting unit if
n is available and
Fair value of Reprting Unit (Given)
xxx
(xxx)
xxx
If No, Goodwill is not impaired
allocated to that reporting unit.
ot be reversed
Dr. Impairment Loss xxx
Cr. Investment xxx
1000000
-360000
640000
5
4
2
1
5 5/15 x 900000=
4 4/15 x 900000
3 3/15 x 900000
2 2/15 x 900000
1 1/15 x 900000
15
520000
13 yrs
$40,000
$40,000 6.8966%
580000
Plane
Exterior
Cost
Less Acc. Dep
8M/30Yrs
Engine
Cost
Less Dep
2M/5yrs= 0.4M
Cost - Acc Dep)
1 100000-0= 100000
2 80000
Dp %= 100%/Useful
100/10
Gain/ Loss on Disposal=
Sale Proceeds
Less CV
Gain
Cost/ Life
100000/10Y= 10000Pa. X3 Y
Cost
Less Acc. Dep
Plane
8M Cost
Acc. Dep Less Acc-Dep
CV
0.266M
2M
0.4M
x Dp%= Dep Exp Acc. Dep
x 20%= 20000 20000
x 20%= 16000
0%/Useful
10% x2= 20%
Proceeds 100 100
-80 -110
20 -10
0Y= 10000Pa. X3 Yrs = 30000 Acc. Dep
100000
-30000
70000
10M
-0.5
Ending CV
100000-20000
80000
