F4 Notecards- Deck #4 Flashcards Preview

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Flashcards in F4 Notecards- Deck #4 Deck (21):
1

What are depreciable assets?

Long-lived assets not held for sale

2

What is physical depreciation?

Deterioration/wear

3

What is functional depreciation?

Obsolescense/inadequacy

4

Depreciation base =

Cost - salvage value

5

Composite or Group Depreciation

Composite = dissimilar assets
Group = similar assets

Averages the economic lives of a number of units and depreciates the entire class over a single life

Simplifies record keeping

6

Advantage of Component Depreciation

-More accurate
-Each component gets depreciated over its useful life

7

When one asset in the group is retired/sold,

NO gain/loss recognized; just plug to AD

8

Straight-line Depreciation Method

(Cost - salvage life)/ estimated useful life

9

Sum-of-the-Years'-Digits Depreciation Method

Accelerated depreciation method that gives higher depreciation expense in the early years


(Cost - salvage) X (Remaining life of asset/Sum of the years digits)

simple = N(N+1) / 2

10

Declining Balance Depreciation Method

2 x (1/N) x (Cost- AD)
*Asset can't be depreciated below the salvage value

11

Units of Production Depreciation Method

Step 1: (Cost - salvage)/estimated units or hours = rate per unit or hour
Step 2: Rate per unit X #of units produced = depreciation expense

12

Depletion applies to

Natural Resources

13

Depletion: Purchase cost includes:

Any costs to purchase and then prepare the land for removal/harvest

14

Depletion Base =

Cost - residual value (same as salvage value)

15

Cost Depletion Method

GAAP
Base / recoverable units = rate

16

Unit Depletion Rate Calculation

Step 1: Depletion Base = Cost of land + development costs + Restoration - Residual Value

Step 2: Unit Depletion = depletion base / estimated recoverable units

Step 3: Depletion for the Year = unit depletion X units extracted

Step 4: Depletion to Include in COGS = unit depletion X units sold

17

When is the units-of-production depreciation method most appropriate?

An asset's service potential declines with use

18

GAAP (fixed assets): If the sum of undiscounted expected future cash flows is less than the carrying amount, what gets recognized?

An impairment loss

19

IFRS (fixed assets): Impairment loss =

Fair value less costs to sell - carrying value

20

GAAP vs IFRS: reversal of impairment losses?

IFRS allows; GAAP does not

21

GAAP: Assets held for disposal vs assets held for use: Major difference =

Held for disposal = Restoration is permitted
Held for use = Restoration NOT permitted