CONNECT ONLINE ACCESS FOR INTERMEDIATE
10th Edition
ISBN: 9781264798834
Author: SPICELAND
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 11, Problem 11.9DMP
Research Case 11–9
FASB codification; locate and extract relevant information and cite authoritative support for a financial reporting issue; impairment of property, plant, and equipment and intangible assets
• LO11–8
The company controller, Barry Melrose, has asked for your help in interpreting the authoritative accounting literature that addresses the recognition and measurement of impairment losses for property, plant, and equipment and intangible assets. “We have a significant amount of
Your task as assistant controller is to research the issue.
Required:
- 1. Obtain the relevant authoritative literature on accounting for the impairment of property, plant, and equipment and intangible assets using the FASB Accounting Standards Codification. You might gain access at the FASB website (www.fasb.org). Cite the reference locations regarding impairment of property, plant, and equipment and intangible assets.
- 2. When should property, plant, and equipment and finite-life intangible assets be tested for impairment?
- 3. Explain the process for measuring an impairment loss for property, plant, and equipment and finite-life intangible assets to be held and used.
- 4. What are the specific criteria that must be met for an asset or asset group to be classified as held-for-sale? What is the specific citation reference from the FASB Accounting Standards Codification that contains these criteria?
- 5. Explain the process for measuring an impairment loss for property, plant, and equipment and finite-life intangible assets classified as held-for-sale.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
34a
34 -
Which of the following statements about depreciation is false?
a)
The asset to be depreciated should be among the assets of the enterprise.
B)
Proportional depreciation method can be applied for all tangible fixed assets.
NS)
For a property, plant and equipment to be depreciated, its economic life must be more than one year.
D)
As a result of use, wear, tear, depreciation or obsolescence must be experienced in the tangible asset.
TO)
Depreciation is a type of expense that does not require a cash outflow.
2
Part A
AASB 116 – Property, Plant and Equipment standards explain the accounting treatment of increment and decrement of non- current assets.
Your manager confused about how increment and decrement of non-current assets work. Explain your manager revaluation increment, decrement and reversal of increment and decrement with illustrated examples.
EXERCISE 11–1 Indicate whether the items below are to be capitalized as an intangible asset or expensed. Which account(s) would each item be recorded to?
Salaries of research staff
Costs to test prototypes
Borrowing costs for development of a qualifying intangible asset
Executive salaries for time spent on development of an intangible asset
Costs to launch a new product
Purchase cost of a patent from a third party
Product research costs
Costs internally incurred to create goodwill
Legal costs to successfully defend a patent
Purchase price of new software
Training costs for new software
Direct costs of special programming needed when purchasing new software
Costs incurred in forming a corporation for purposes of commercializing a new product
Operating losses incurred in the start-up of a business to manufacture a patented produce
The purchase cost of a franchise
The cost of developing a patent
The cost of purchasing a patent from an inventor
Legal costs incurred in securing a patent…
Chapter 11 Solutions
CONNECT ONLINE ACCESS FOR INTERMEDIATE
Ch. 11 - Prob. 11.1QCh. 11 - Depreciation is a process of cost allocation, not...Ch. 11 - Identify and define the three characteristics of...Ch. 11 - Discuss the factors that influence the estimation...Ch. 11 - What is meant by depreciable base? How is it...Ch. 11 - Prob. 11.6QCh. 11 - Prob. 11.7QCh. 11 - Why are time-based depreciation methods used more...Ch. 11 - Prob. 11.9QCh. 11 - Prob. 11.10Q
Ch. 11 - Briefly explain the differences and similarities...Ch. 11 - Prob. 11.12QCh. 11 - Prob. 11.13QCh. 11 - What are some of the simplifying conventions a...Ch. 11 - Explain the accounting treatment required when a...Ch. 11 - Explain the accounting treatment and disclosures...Ch. 11 - Explain the steps required to correct an error in...Ch. 11 - Prob. 11.18QCh. 11 - Prob. 11.19QCh. 11 - Prob. 11.20QCh. 11 - Prob. 11.21QCh. 11 - Briefly explain the differences between U.S. GAAP...Ch. 11 - Under U.S. GAAP, litigation costs to successfully...Ch. 11 - Cost allocation At the beginning of its fiscal...Ch. 11 - Prob. 11.4BECh. 11 - Prob. 11.5BECh. 11 - Prob. 11.8BECh. 11 - Prob. 11.10BECh. 11 - Prob. 11.11BECh. 11 - Prob. 11.12BECh. 11 - Prob. 11.13BECh. 11 - Impairment; property, plant, and equipment LO118...Ch. 11 - Prob. 11.18BECh. 11 - IFRS; impairment; property, plant, and equipment ...Ch. 11 - Prob. 11.20BECh. 11 - Prob. 11.21BECh. 11 - IFRS; impairment; goodwill LO1110 IFRS Refer to...Ch. 11 - Subsequent expenditures LO119 Demmert...Ch. 11 - Prob. 11.1ECh. 11 - Prob. 11.2ECh. 11 - Prob. 11.3ECh. 11 - Prob. 11.4ECh. 11 - Depreciation methods; solving for unknowns LO112...Ch. 11 - Prob. 11.10ECh. 11 - Prob. 11.12ECh. 11 - Prob. 11.13ECh. 11 - Prob. 11.15ECh. 11 - Prob. 11.16ECh. 11 - Prob. 11.26ECh. 11 - Impairment; property, plant, and equipment LO118...Ch. 11 - IFRS; impairment; property, plant, and equipment ...Ch. 11 - Prob. 11.30ECh. 11 - Prob. 11.31ECh. 11 - Prob. 11.32ECh. 11 - Prob. 11.33ECh. 11 - FASB codification research LO118 The FASB...Ch. 11 - Prob. 11.35ECh. 11 - Subsequent expenditures LO119 Belltone Company...Ch. 11 - Concept s; terminology LO111 through LO116, LO118...Ch. 11 - Depreciation methods; change in methods LO112,...Ch. 11 - Prob. 11.6PCh. 11 - Prob. 11.7PCh. 11 - Prob. 11.10PCh. 11 - Prob. 11.12PCh. 11 - Prob. 11.14PCh. 11 - Analysis Case 111 Depreciation, depletion, and...Ch. 11 - Communication Case 112 Depreciation LO111 At a...Ch. 11 - Judgment Case 113 Straight-line method; composite...Ch. 11 - Prob. 11.4DMPCh. 11 - Prob. 11.8DMPCh. 11 - Research Case 119 FASB codification; locate and...Ch. 11 - Prob. 11.11DMPCh. 11 - Real World Case 1115 Depreciation and depletion...Ch. 11 - Prob. 11.16DMPCh. 11 - Target Case LO112, LO118, LO119 Target...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- hdr4arrow_forwardQ6 Which of the following assets are required to be impaired every yea? (i) Goodwill acquired in a business combination (ii) Intangible assets with indefinite useful life (iii) A machinery used in the normal production process of an entity (iv) An operating license that is useful for more than five years Select one: a. (iii) and (iv) b. (ii) and (iii) c. (i) and (ii) d. (i), (ii), (iii) and (iv)arrow_forwardQUESTION 10 Which of the following statements is false regarding intangible assets? O a. Intangibles with an indefinite life are not subject to amortization. O b.Purchased intangibles are recorded as assets for the amount paid to acquire them. O c. Internally developed intangibles should be recorded as assets for the amount spent to develop them. O d. Intangibles with a finite life should be amortized on a straight-line basis.arrow_forward
- 7 Which of the following costs may be capitalized? a. Cost of internally generated goodwill, b. Cost of internally generated mastheads c. Cost of improving an externally purchased goodwill d. Cost of customer list acquired externally 8. Subsequent expenditures on intangible assets are a. expensed immediately. b. capitalized only to extent that the litigation is successful. c. expensed unless they meet the recognition criteria for intangible assets. d. a or b as a matter of accounting policy choice.arrow_forwardGood nights 4 de mayo 7:26arrow_forwardExercise 5-21 (Algo) Asset Impairment [LO 5-2] In the current year, the building occupied by Sunshine City's Culture and Recreation Department suffered severe structural damage as a result of a hurricane. It had been 48 years since a hurricane had hit the Sunshine City area, although humicanes in Sunshine City's geographic area are not uncommon. The building had been purchased 10 years earlier at a cost of $2,100,000 and had accumulated depreciation of $525,000 as of the date of the hurricane. Based on a restoration cost analysis, city engineers estimate the impairment loss at $240,000; however, the city expects during the next fiscal year to receive insurance recoveries of $125,000 for the damage. Required a Should the estimated impairment loss be reported as an extraordinary Item? As a special item? A special Item O An extraordinary Item O Ordinary expense, disclosed in the notes to the financial statements Record the estimated impairment loss in the journal for governmental…arrow_forward
- Good afternoon E 12-1 5 mayo 3:28arrow_forwardQ23 Which of the following statement(s) is (are) true? (i) An intangible asset is impaired if the carrying amount is higher than its recoverable amount (ii) Recoverable amount is the asset’s fair value or its value-in-use at the reporting date. (iii) For an intangible asset with infinite useful life, impairment test should be performed only if there is evidence to indicate that an intangible asset has been impaired. (iv) For an intangible asset with finite useful life, impairment test should be performed annually even if there is no evidence that the asset has been impaired. Select one: a. (i), (ii), (iii) and (iv) b. (i) and (ii) only c. (i) and (iv) only d. (i) onlyarrow_forwardg Ex Preview Work It is determined that the fair market value of the Dryer division is %241.250,000,The recorded amount for Dryer's net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value of $150.000 above the carrying value. Instructions: (a) Compute the amount of goodwill recognized if any on May 31 2004 (b) Determine the impairment loss, if any to be recorded on December 31 2004.(c)Assume that the fair value of the Dryer division is $1 100,000 instead of $1.250.000 Prepare the Jol journal entry to record the impairment, loss, if any on December 31. 2004) doarrow_forward
- Subject - account Please help mearrow_forward3. (a) IAS 36 Impairment of Assets provides accounting guidance for the impairment of non-current assets. Requirement: Explain what a cash-generating unit (CGU) is and how an impairment loss in a CGU should be accounted for in accordance with IAS 36.< (b) The carrying amounts of the assets of a cash-generating unit (CGU) are as follows: 2 Goodwill Patents and copyrights Property, plant and equipment J £000 50,000 50,000 150,000 250,000 E 2 2 J There is evidence to indicate that the CGU is impaired. The recoverable amount of the CGU is £180,000. The fair value less costs disposal for the patents and copyrights is estimated at £35,000 and the fair value less costs of disposal for the property, plant and equipment is estimated at £140,000. < Requirement:< Calculate the amount of the impairment loss and explain how this should be allocated between the assets of the CGU.< (c) Explain how IFRS 13 Fair Value Measurement establishes a fair value hierarchy to categorise inputs used to measure…arrow_forwardQuestion 37 As a specialist in the accounting of intangible assets, explain if the costs identified can be capitalized. - Tea Limited discovered that it had been manufacturing a product illegally because this product was patented and yet Bee did not have the necessary rights. Bee immediately shut down its factory and hired a firm of lawyers to act on its behalf in the acquisition of the necessary rights to manufacture this product - Legal fees of R60 000 were incurred during July 2007. The legal process was finalised on 31 July 2007, when Tea was then required to pay R900 000 to purchase the rights, including R90 000 in refundable VAT - During the July factory shut-down: - overhead costs of R50 000 were incurred; and - significant market share was lost with the result that Tea’s t total sales over August and September was R30 000 but its expenses were R60 000, resulting in a loss of R40 000 - To increase market share, Bee spent an extra R35 000 aggressively marketing their…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Corporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Corporate Financial Accounting
Accounting
ISBN:9781305653535
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
US GAAP vs IFRS; Author: The Finance Storyteller;https://www.youtube.com/watch?v=7B96MhOGaqE;License: Standard Youtube License