Chapter 9

Long-Lived Assets

Accounting Principles
Ninth Canadian Edition
Weygandt; Kieso; Kimmel; Trenholm; Warren; Novak
Prepared by Debbie Musil, FCPA, FCMA
Copyright ©2022 John Wiley & Sons Canada, Ltd.
Learning Objective 3
Explain the factors that cause changes in periodic
depreciation and calculate revised depreciation for
property, plant, and equipment.

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Revising Periodic Depreciation
• Annual depreciation must be revised if there are:
o Capital expenditures during the useful life of an asset
o Impairments in the fair value of an asset
o Changes in an asset’s fair value when using the
revaluation model
o Changes in the appropriate depreciation method,
asset’s estimated useful life, or residual value

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Capital Expenditures During Useful Life
− Operating
• Expenditures on existing capital assets are classified
as operating or capital
• Ordinary repairs (operating expenditures):
o Costs to maintain operating efficiency and productive
life of the long-lived asset
o Usually small amounts that occur frequently
o Debited to Repairs Expense as incurred

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Capital Expenditures During Useful Life
− Capital
• Additions and improvements (capital expenditures):
o Costs incurred to increase the efficiency, productive
capacity, or expected useful life of the long-lived asset
o Usually material in amount and occur infrequently
o Debited to the long-lived asset affected

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Impairments
• Long-lived assets are considered impaired when
carrying amount > asset’s recoverable amount
o Greater of asset’s fair value less costs to sell or asset’s
value in use
• Amount of impairment loss
= Carrying Amount − Recoverable Amount

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Impairments – Calculation and Entry
• Calculation and entry to record impairment loss:

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Revaluation Model
• Carrying amount = fair value less any subsequent
accumulated depreciation less any subsequent
impairment losses
• Can only be used if fair value can be reliably measured
• Only for IFRS; rarely used by any companies
o Cost model used by almost all companies

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Changes in Depreciation Method,
Useful Life, Residual Value
• Each must be reviewed at least annually
• Any changes will cause a revision to the depreciation
calculations

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Revised Depreciation Calculations
• When a change is made:
o Depreciation expense for current and future years is
revised
o No correction of previous depreciation expense

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Copyright
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