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....
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...
Why impairment of goodwill is not reversed?
First of all we must be clear that goodwill is an intangible asset that entities can recognize in their financial statements but only such goodwill that is acquired in business combination. Internal goodwill or...
How Goodwill is an asset?
If we look for the answer to the question that why goodwill is an asset, then there is no specific explanation given in two of the renowned accounting frameworks i.e. IFRSs and US GAAPs....
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...
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...
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...
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...
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...
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...