Revaluation of Long-lived Assets. The Queensbury Corporation was founded in 1947 on a military installation that had been purchased from the U.S. government for a price of $1. Today, that same land carries a fair market value of $70 million. Consistent with the historical cost principle, The Queensbury Corporation continues to value the land at its original purchase price of $1 plus the cost of any improvements (such as roadways, lights, and drainage). Discuss the financial statement problems created by the historical cost principle for entities like The Queensbury Corporation that have significant investments in long-lived appreciating assets (such as land). Should these companies be allowed to revalue these assets? Why? How would a land revaluation be reflected in the financial statements? decommissioned

Revaluation of Long-lived Assets. The Queensbury Corporation was founded in 1947 on a military installation that had been purchased from the U.S. government for a price of $1. Today, that same land carries a fair market value of $70 million. Consistent with the historical cost principle, The Queensbury Corporation continues to value the land at its original purchase price of $1 plus the cost of any improvements (such as roadways, lights, and drainage). Discuss the financial statement problems created by the historical cost principle for entities like The Queensbury Corporation that have significant investments in long-lived appreciating assets (such as land). Should these companies be allowed to revalue these assets? Why? How would a land revaluation be reflected in the financial statements? decommissioned

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Q7.4 Revaluation of Long-Lived Assets

and all other advertising costs are expensed as incurred as components of marketing, general and administra-
"The production of in-store photography and signage is expensed when
The Queensbury Corporation was founded in 1947 on a decommissioned
ommences
tive expense" on the income statement. Discuss why the expensing of advertising costs is considered to
best practice." Can an argument be made that advertising costs should be capitalized?
Revaluation of Long-lived Assets.
Q7.4
military installation that had been purchased from the U.S. government for a price of $1. Today, that same
land carries a fair market value of $70 million. Consistent with the historical cost principle, The Queensburu
Corporation continues to value the land at its original purchase price of $1 plus the cost of any improvements
(such as roadways, lights, and drainage). Discuss the financial statement problems created by the historical
cost principle for entities like The Queensbury Corporation that have significant investments in long-lived
appreciating assets (such as land). Should these companies be allowed to revalue these assets? Why? How
would a land revaluation be reflected in the financial statements?
Capitalization of Interest Costs and Earnings Quality. Under U.S. GAAP, a company may capitalize any
interest costs associated with borrowings used in the self-construction of a business asset. Any capitalized inter-
est is added to the cost basis of the asset and then depreciated over the expected useful life of the asset. Some
investment professionals question the appropriateness of intereșt çanitalization observing that th
Q7.5

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