Recent Articles

Derecognition of PPE and Intangible Assets

Derecognition happens when an asset is sold, exchanged or abandoned and therefore removed from the balance sheet.   Balance Sheet Income Statement Asset is sold Asset is removed from balance sheet. A loss/gain equal to carrying value less sale proceeds is reported on...

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Impairment of Long-lived Assets

A long-lived asset has become impaired when the book value of the asset as recorded on the balance sheet is not expected to be recovered during future operations. Example A call center operator recently capitalized a $2 million investment in production fixtures at a...

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Revaluation Model for Fixed Assets

US GAAP does not permit firms to revalue the fixed assets on their balance sheets. Assets are reported on the balance sheet after deducting accumulated depreciation and impairment charges. IFRS allows for revaluation if certain conditions are met or guidelines are...

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Amortization of Intangible Assets

As we learned earlier, the intangible assets can have finite lives or indefinite lives. For assets with finite lives, the cost is amortized over the life of the asset. The procedure and methods of amortization are the same as for depreciation, i.e., straight-line...

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Depreciation – Important Points

Choosing a Useful Life– In isolation, the shorter the useful life, the higher the depreciation expense.  A company’s management may attempt to show higher earnings in the near-term by increasing the useful life estimates for its long lived assets. Estimating Salvage...

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Impact of Depreciation Methods on Financial Statements

The table below summarizes the early year impacts on selected financial reporting items by choosing the straight-line method versus an accelerated depreciation method. ITEM IMPACTED STRAIGHT-LINE ACCELERATED Earnings, Equity, Profit Margins Higher, as depreciation...

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