中级财会ch10.ppt

Objectives 1. Identify the factors involved in depreciation. 2. Explain the alternative methods of cost allocation, including activity and time-based methods. 3. Record depreciation. 4. Explain the conceptual issues regarding depreciation methods. 5. Understand the disclosure of depreciation. Factors Involved in Depreciation Asset cost Service life Residual value Method of cost allocation Methods of Cost Allocation Activity (or use) methods Time-based methods a. Straight-line b. Accelerated (declining charge) (1) Sum-of-the-years’-digits (2) Declining balance Recording Depreciation Conceptual Evaluation of Depreciation Methods Effect of Depreciation on Rate of Return Disclosure of Depreciation Depreciation expense for the period. Balances of major classes of depreciable assets, by nature or function, at the balance sheet date. Accumulated depreciation, either by major classes of depreciable assets or in total, at the balance sheet date. A general description of the method or methods used in computing depreciation with respect to major classes of depreciable assets. Group Depreciation Composite Depreciation Depreciation for Partial Periods Impairment of Noncurrent Assets MACRS Principles 1. A mandated tax life, which is usually shorter than the economic life. 2. The acceleration of the cost recovery (except for buildings). 3. The elimination of residual value. Changes and Corrections of Depreciation A change in the depreciation method for currently owned assets is accounted for by a cumulative-effect change. Adoption of a new depreciation method for newly acquired assets does not require any adjustment to the accounts. A change in an estimate of the residual value or the service life of a currently owned asset is accounted for prospectively. Correction of an error in depreciation is treated as prior period adjustment. Depletion Impairment of Noncurrent Assets The FASB issued FASB Statement No. 144 which requires a company to review its pr