What factors are considered in determining useful life of intangible asset?
Determining useful life of an intangible asset is not as easy as a tangible asset as most often intangible assets are of such nature that are unique and have no similar asset in the market through which can ascertain its value and useful life. And we cannot ignore determination of useful life aspect of the […]
Is Residual value of the asset calculated on Present value or Future value basis?
One of the reasons for charging depreciation against the historical cost of the asset, revalued amount or simply carrying value of asset is that asset’s book value should be reduced to such residual value which was expected at the time of purchase. For that, depreciation expense charged in an accounting period is adjusted accordingly. Residual […]
What is meant by Economic benefits and how they flow to the entity?
It is easy to understand that entities around the world hold different sets of machinery, plant, equipment, building, land and other kinds of assets through which it offers products or services to its customers and in return earn income and generate cash. Products are made through different machines and the value these machines and equipment add […]
What is ‘Declining balance to Straight line crossover’ method of depreciation?
Majority of the students studying accounting, either at initial stages or experienced in accountancy academics, are familiar with two of the most renowned depreciation methods used by entities to calculate depreciation expense for the period are straight-line and declining balance methods. One of the reason why these methods are so widely used is the fact that […]
What is meant by Depreciation?
Depreciation simply means a steady decrease in the value of asset. Often it is studied in relation to the time period over which such decrease in the value has occurred. Therefore, often it is also defined as the value lost by the asset over its useful life i.e. the time period for which it was subjected […]
Can we capitalize material relocation expenses incurred on non-current asset?
First of all we must be clear about subsequent expenditures, criteria for capitalizing subsequent expenditures in carrying amount of non-current/fixed assets and relocation costs or expenses. Subsequent expenditures refers to such costs which are incurred after the asset is recognized in the financial statement and brought to the location and condition intended. Examples of such […]
Can we capitalize Tax amounts?
According to IAS 16 the purchase price of the asset includes the amount of non-refundable taxes i.e. such taxes which cannot be claimed back are capitalized and are included in the cost of the asset at the time of purchase. For example, when the asset is purchased or imported then buyer/importer is required to pay […]
Is cash a tangible asset or an intangible asset?
In order to check the status of an asset whether it relates to a particular class or not, it is always a good idea that we go for the definitions provided in the relevant pronouncements first as they give the criteria whether a certain asset can be classified in one way or not. In this […]
Why don’t we revalue current assets like non-current assets?
Concept of revaluation of assets is usually associated with non-current assets only. The main reason why the term ‘revaluation’ is just attached with non-current asset might be that International Accounting Standard (IAS) 16 use this term. Therefore, usually revaluation of assets refers to revaluation of non-current assets. But this does not mean that other assets […]
How POSSESSION and CONTROL of an asset are different in financial acconuting?
Possession of an asset might mean just having a physical control of the asset. The party who holds the asset is the possessor of such asset. But the word control holds special meaning in the business world. Especially in financial accounting. And understanding the meaning of control and ability to differentiate between the possession and […]
