Ch 9 Vocabulary Flashcards
(26 cards)
Amortizable amount
The cost of a finite-life intangible asset (for example, patent, copyright) less its residual value, if any. p 462
Amortization
The systematic allocation of the amortizable cost of a finite-life intangible asset over the shorter of the asset’s legal or useful life. p 461
Asset retirement costs
The amount added to the cost of a long-lived asset that relates to obligations to dismantle, remove, or restore an asset when it is retired. p 441
Asset turnover
A measure of how efficiently a company uses its total assets to generate sales. It is calculated by dividing net sales by average total assets [(beginning + ending total assets)/2]. p 470
Capital expenditures
Expenditures that benefit future periods. They are recorded (capitalized) as long-lived assets. p 441
Copyright
An exclusive right granted by the federal government allowing the owner to reproduce and sell an artistic or published work for a period extending over the life of the creator plus 50 years. p 463
Cost model
A model for accounting for a long-lived asset that carries the asset at its cost less any accumulated depreciation or amortization. p 445
Depreciable amount
The cost of a depreciable asset (for example, property, plant and equipment) less its residual value. p 446
Derecognized
The removal of a long-lived asset from the accounts upon its disposal or when it no longer provides any future benefits. p 456
Development costs
Expenditures related to the application of research to a plan or design for a new or improved product or process for commercial use. These costs are recorded (capitalized) as long-lived assets. p 464
Diminishing-balance method
A depreciation method in which depreciation expense is calculated by multiplying the carrying amount of an asset by a depreciation rate ( the straight-line rate, which is 100% divided by the useful life, adjusted for any multiplier effect). This method produces a decreasing periodic depreciation expense over the asset’s useful life. p 448
Finance lease
(also known as a capital lease) A long-term agreement allowing one party (the lessee) to use the asset of another party ( the lessor). The arrangement is accounted for as a purchase because the risks and rewards of owning the asset have been transferred to the lessee. p 444
Franchise
A contractual arrangement under which the franchisor grants the franchisee the right to sell certain products, to render specific services, or to use certain trademarks or trade names, usually within a designated geographic area. p 464
Goodwill
The value of favourable, unidentifiable attributes related to a company as a whole. It is calculated when one business acquires another and pays more than the fair value of the company’s net identifiable assets. p 465
impairment loss
The amount by which the carrying amount of an asset exceeds its recoverable amount p 453
licences
Operating rights to use property that are granted by a government agency to a company. p 465
Operating expenditures
Expenditures that benefit only the current period. They are immediately charged against revenues as an expense. p 440
Operating lease
An agreement allowing one party ( the lessee) to use the asset of another party ( the lessor). The arrangement is accounted for as a rental because the risks and rewards owning the asset have been retained by the lessor. p 444
Patent
An exclusive right issued by the federal government that enables the recipient to manufacture, sell, or otherwise control an invention for a period of 20 years from the date of the application. p 462
Research expenses
Expenditures on an original planned investigation that is done to gain new knowledge and understanding. These costs are expensed because criteria for recording them as assets have not been met. p 463
Residual value
An estimate of the amount that a company would obtain from the disposal of ab asset at the end of its useful life. p 446
Return on assets
A profitability measure that indicates the amount of profit generated by each dollar invested in assets. It is calculated as profit divided by average total assets [(beginning + ending total assets)/2]. It can also be calculated by multiplying profit margin by asset turnover. p 469
Revaluation model
A model of accounting for a long-lived asset that carries the asset at its fair value less accumulated depreciation or amortization. p 454
Straight-line method
A depreciation method in which depreciation expense is calculated by dividing an asset’s depreciable amount by its estimated useful life. This method produces the same periodic depreciation expense over the asset’s useful life. p 447
