ch10tc.ppt

Learning Objectives Describe property, plant, and equipment. Identify the costs to include in initial valuation of property, plant, and equipment. Describe the accounting problems associated with self-constructed assets. Describe the accounting problems associated with interest capitalization. Understand accounting issues related to acquiring and valuing plant assets. Describe the accounting treatment for costs subsequent to acquisition. Describe the accounting treatment for the disposal of property, plant, and equipment. Property, Plant, and Equipment Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Begins when: Expenditures for the asset have been made. Activities for readying the asset are in progress . Interest costs are being incurred. Acquisition of PPE Capitalize the lesser of: Actual interest costs Avoidable interest - the amount of interest that could have been avoided if expenditures for the asset had not been made. Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Selecting Appropriate Interest Rate: For the portion of weighted-average accumulated expenditures that is less than or equal to any amounts borrowed specifically to finance construction of the assets, use the interest rate incurred on the specific borrowings. For the portion of weighted-average accumulated expenditures that is greater than any debt incurred specifically to finance construction of the assets, use a weighted average of interest rates incurred on all other outstanding debt during the period. Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Acquisition of PPE Valuation of PPE Valuation of PPE Valuation of PPE Valuation of PPE Valuation of PPE Valuation of PPE Valu