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 […]
Is depreciation expense a fixed cost or a variable cost?
Let’s revisit the terms Fixed cost and Variable cost and then we will discuss where depreciation cost/expense really fits. Fixed costs are such costs that do not change with the change in activity level (e.g. units produced) with in the relevant range. Where relevant range can be defined in terms of time or activity level. […]
What is Contingent rent in leases?
IASB’s International Accounting Standard IAS 17 defines contingent rent as follows: Contingent rent is that portion of the lease payments that is not fixed in amount but is based on the future amount of a factor that changes other than with the passage of time (eg percentage of future sales, amount of future use, future […]
What is the difference between Complex asset and Cash generating unit?
To keep things simple, complex asset (or also known as separate component asset) and cash generating unit (CGU) is more of a concept rather than kinds of assets. These concepts are there just to make accounting easy and hassle without disturbing the basic accounting concepts. Complex asset is an asset in which different components are […]
What is Double declining balance method of depreciation?
Before we discuss Double Declining Balance method, lets have a review of basic Declining Balance method and understand how it works. Declining balance method: a type of accelerated depreciation method Declining Balance method or reducing balance method or diminishing balance method is basically one type of accelerated depreciation method which accelerates the recognition of depreciation […]
What is Specific identification method of inventory valuation?
Specific identification method is just another method to value ending inventory of the business to be reported in the financial statements. IAS 2 permits the use of specific identification method. According to this method each identified items of inventory is assigned specific cost and hence the name specific identification. In simple words cost is attributed […]
What is accelerated depreciation method?
i-ask! | Have a question? Ask Tutor! What is meant by accelerated depreciation method? When such method is used and how many types are there for this method? And what is the position of accounting standards on such depreciation method? As the name suggests, the accelerated depreciation method accelerates the the recognition of depreciation […]
What is the difference between Inception of lease and Commencement of lease?
IAS 17 distinguishes between Inception and Commencement of lease and the two terms represent two different instances of time which may be occurring at different or the same date. Usually inception and commencement of the lease occur at the same date but if they are occurring at different dates then the two have significant effects […]
How to know that a lease is a Finance lease or Operating lease?
The core principle to distinguish or differentiate finance lease agreement from operating lease agreement is that if substantial risks and rewards incidental to the ownership of an asset are transferred under a lease agreement to the lessee (person acquiring the asset for use) from the lessor (the owner of the asset) then it is a […]
What is the difference between Finance lease and Operating lease?
According to IAS 17 two types of leases are identified namely Finance lease and Operating lease. The distinction between the two primarily resulted from the implications of one of the important accounting concept Substance over form. Finance lease is a lease agreement in which substantially all the risks and rewards incidental to ownership of an […]
