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