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Chapter 10: Long-Term Assets

L01 Types of Long-Term Assets and Issues Related to Accounting for them

• Long-Term Assets:
o Useful life > 1
o Used in operations
o Not for sale
• Carrying Value or Book Value (vs. basis)
• Asset Impairment
o Occurs when future cash flow (w/o discount) < carrying value
o Reduce carrying value to present value for future cash flows
• Tangible Assets – Depreciation (except Land)
• Natural Resources – Depletion
• Intangible Assets – Amortization (except goodwill)
• Acquisition of long term assets (investing activity)
o Payback period
o NPV calculation
• Financing long-term assets (financing activity)
o Matching the period of estimated useful life the period of payback
o NYS example with school districts
• Applying Matching Rule to Long-Term Assets
o Relevance vs. Reliability
1. Determine cost (original carrying value)
2. Allocate against revenue
3. Distinguish between repairs and betterments for accounting purposes......

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Approximate Word Count: 5506
Approximate Pages: 23 (250 words per double-spaced page)

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