PPE Flashcards
What are the two method to capitalized interest?
Weighted average
1. Find amt of debt paid during the year factored by months
2. Find the average rate of interest (total interest paid /total borrowing)
1*2 = interest expense
Specific method
- Same as before,
- Use the construction loan first to be more specific, if no construction loan left, use the average of non-construction loan rate
SDY calculation
Beg CV. Deprciable cost. Depre. Exp. CV
- *. 5/15 = 266.67. 733. 33
- *. 4/15 = 213.33. 520
- 3/15 = 160. 360
- 2/15 = 106.67. 253.33
- 1/15 = 53.33. 200
- *. 5/15 = 266.67. 733. 33
Natural resources capitalized value =?
Acquisition + Exploration cost + development costs
Mood used can be
Successful effort method: only successful ones are capitalized, unsuccessful are expensed
Full costing method: all costs incurred are count (capitalized amount
Impairment on assets
Held for sale
Held for use
Held for disposal
Can be held for sale, for use or for disposition
Ask the key test question: if the undiscounted future cash flow is recoverable compare with BV?
If yes,then no impairment
Held for use impairment expense =CV-FV and then depreciate based on new value
Held for sale (disposal) : no impairment test, only compare BV to (FV less cost to sale), the asset bs,use written down to (FV-cost to sale), no depreciation. Under GAAP, reversal is permitted for asset held for sale.
When calculating condemnation gains from involuntary conversion, what costs are capitalized in CV?
Attorneys fee for closing title
Appraisal cost for the property
When calculating the depreciation expense after impairment with SV, how is depreciation expense calculated, what is new CV at year end?
(New value -SV)/ n = deprecation expense
** use total new value - depreciation expense = new CV of the asset
Impairment under IFRS
Review annually. (GAAP: only when event occurs)
Interest earned on construction funds can offset the interest cost (GAAP: prohibited)
Restoration of impairment loss permitted (GAAP: not allowed)
Impaired when CV > PV of future CF (recoverable amount)
for assets carried at cost of amortized cost
Recoverable amount = higher of 1) FV-cost to sale. 2) value in use (discounted cash flow)
Impairment loss can be reversed except goodwill
Long term security investment decline value report at second year end?
At cumulative loss at the price since the date of the acquisition
Where is gain or loss record for AFS security?
What about HTM?
At income stmt
In OCI if gain or loss classified as other than temporary
HTM record at amortized cost
Org has the intent and ability to HTM
When there are loss on AFS security, if the loss is permanent, the loss consider realized or unrealized?
Since its permanent, so consider realized in I/S
If there are temporary loss, treat as a deduction in OCI
How is HTM bond purchased at discount or premium record?
Recorded at FV because HTM bond discount or premiums are amortized during the term of the bond
when transferring investment accounts, what are G/L recorded?
Mostly depends in where transfer to, if to trading, all would be record in income,
If transfer to HTM and AFS, record in AOCI, unless transfer from or to trading
What situation, the constructions interest expense yield the same?
1) the total construction expense exceed the total interest bearing debt
2) the debt all have the same rate
Calculate depreciation expense when estimate useful has changed
[(Historical cost -AD ) - SV ] / remaining useful life = Depre. Exp.
Under IFRS, if the equipment wrote down 10K, on the second year, the FV increased by 15, how to record the increase?
Recover the 10k to the original, another 5k record in OCI as revaluation surplus account
