A portion of fixed assets are reduced by usage are converted into

cash through charging depreciation. For correct measurement of income,

proper measurement of depreciation is essential, as depreciation constitutes a
part of total cost of production.
Assets are classified into two categories:
Tangible
Intangible.
Tangible assets are assets that one can touch, hold, or feel. Typically
called fixed assets in accounting literature, tangible assets are the physical
things that a business uses in the production of goods and services. They
constitute the production facilities, buildings, equipment, and vehicles.
These operational assets of a business include furniture, computers, and
similar items not used up within a year.
Intangible assets are primarily financing items: stocs, bonds,
mortgages, etc. !quipment manufacturers have financial assets in finished
goods or inventory held for sale, as well as plant and equipment that will be
sold to other businesses. The inventory is a financial asset" when sold for use
in a production line it becomes a fixed asset to the purchaser.
EQUIPMENT:
!quipment includes the machinery, computers, office equipment, and
all other long#lived items necessary for the operation of the business. These
items require more managerial control because of their portability and
general usefulness for other than the purpose intended when acquired. They
range in price from a minimum capitali$ation level to many millions of
dollars for complex production machinery.
%ecause of the wide variety of requirements for different items of
equipment, we shall discuss them in several categories, including:
Tools
%uilding systems &heating, cooling, elevators'
Irrigation equipment
Furniture and office equipment
(omputers
)rinting presses
Applicable to all enterprises for which accounting period commences
on or after *#+#,--+. It is applicable to transactions in foreign
currency and translating financial statements of foreign
subsidiary.branches.
/onetary items denominated in Foreign (urrency shall be reported
using closing rates.
0on#monetary items carried in terms of historical cost in foreign
currency shall be reported at the exchange rate on the date of the
transaction.
!xchange differences shall be recogni$ed as income.expenses in the period
in which they arise except in case of fixed assets and differences on account
of forward contracts
Translation of foreign exchange transaction of revenue items except
opening.closing inventories and depreciation shall be made by applying rate
at the date of the transactions. For convenience purposes an average rate or
weighted average rate may be used, provided it approximates the rate of
exchange

1pening and closing inventories shall be translated at rates prevalent on
opening and closing dates, respectively and depreciation amount shall be
converted by applying the rate used for translation of the asset2