What is complex asset or separate component asset?
An asset that consistes of different components and each component is significant in relation to the cost of the asset then such assets are called complex assets or separate components asset. This becomes an important point of discussion when each component is needed to be depreciated separately because: each component is of significant value in […]
What is NIFO inventory valuation method?
NIFO - Next in, First out is an inventory valuation technique in which issues to the production hall are valued at the current market price i.e. current cost or replacement cost instead of the cost at which material was bought i.e. historical cost. This valuation method attempts to keep the production cost accurate according to […]
What are different inventory valuation methods?
There are numerous valuation techniques to value the inventory or stock. However, here is the short list of those which are known. To learn more about each method, click the name! Specific identification method FIFO - First in, First out method LIFO - Last in, First out method HIFO - Highest in, First out NIFO […]
What are the limitations of Balance Sheet or Statement of Financial Position?
Statement of financial position or Balance sheet is the essential part of the complete set of financial statements. It is also one of the most sort after source of information for the users of financial statement for decision making purposes. It provides an insight into the financial status of the entity and can also provide […]
What is the recognition criteria for subsequent expenditures incurred on non-current assets?
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 expenditures include repair and maintenance, overhauling, upgradation, replacement costs etc. However, not all the subsequent costs can be capitalized in the carrying amount (carrying value or […]
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. […]
Is ‘Cost of goods sold’ a Product cost or a Period cost?
Before we discuss under what heading should we classify cost of goods sold, let’s first of all clear out our minds for the terms inventoriable costs and period costs with a quick review. You can the answer on difference between period costs and product costs in good detail here. Inventoriable costs (Product cost) or Product […]
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 […]
