Ch10 Beechy3e case 3 solution Essay

-In 1984, there was a switch from accelerated to straight line depreciation retroactively. Because of this, the depreciation expense decreased.

Furthermore, by adopting a historical cost approach the assets will be depreciated over that useful life which has been estimated. With the useful life of an asset being so subjective it is hard to apportion a useful figure to depreciation. By increasing the useful life of an asset you are effectively spreading the depreciation expense over a longer period of time resulting in lower depreciation expenses and vice versa. In fact, Zheng et al. (2012) go one step further and consider depreciation to be a strategy for managers to manipulate profits.

The method and term of amortization depend not only on the circumstance intellectual property is acquired, but also whether the acquisition is subject to Section 197. NewCo must determine the impact of Section 197 before it can analyze its ability to deduct consideration paid, irrespective of how payment is structured. Once Section 197 is eliminated as an option, NewCo can look to other Code provisions that apply the deductibility of acquisition payments including Section 167 (depreciation), Section 162, (ordinary and necessary business expenses), and Section 174 (research and experimental

I decided to use the accounts of BHP Billiton and Telstra. Based on their annual reports in 2015, the approach they used to value their intangible and depreciating assets was the straight-line method. For the straight-line depreciation method, the value of an asset is depreciated evenly each year over the estimated useful life of the asset.

at the end of 2015, it should be amortized over 10 years. The amount of

My response would be that depreciation matches the expense of the asset to the life of the asset. On the books, accumulated depreciation represents the amount claimed so far. Claiming depreciation gets you a slight tax break (say 15% to 35%). Prices go up in the mean time.

18). Once these criteria are met, development costs can then be capitalized and amortized over a period of time and as a result, would show the recognition of the continuous benefit from the development costs that contributed to the asset.

Depreciation is non-cash items because it is an estimate of the location of the cost of non-current assets to the particular year. What the Ltd needs to do next is that they need to remove the non-cash items. For example, debt depreciation is an expense that means to arrive at the Net income; it needs to minus in depreciation then will get the profit. So, the Ltd needs to add it back in order to remove the depreciation. Amortization is something the company has advertised and discount which took away from the Net income and then add back to Net income to figure it out what has happened to it. We subtract gains and add back

The amortization of an asset means that a company is allowed to split the value of the expenses stated in the income statement over several months instead of a one-time booking.

“An entity within the scope of the amendments that elects the accounting alternative in this Update should amortize goodwill on a straight-line basis over ten years, or less than ten years if the entity demonstrates that another useful life is more appropriate (Lange, 2).”

Depreciation is the decline in the future economic benefits of a depreciable non-current asset through wear and tear and obsolescence. It is an allocation process. It can be calculated by two main methods, each reflecting in a distinct prospect in the way the asset is used. Depreciation is to be treated as an estimated expense that does not set aside cash for the replacement of a non-current asset. In determining the cost of acquisition of the lathes, any capital expenditure made must be added to the purchase price of the lathes. This amount will be considered as the historical cost and will be used in calculating the depreciation expense

For example, in the annual report of Woolworth’s limit, which follows the A-IFRS mostly, it is easy to discover from the table 1 and table 2, that the expenses of amortization will be counted every year.

By this method, the asset is supposed to depreciate at a fixed percentage of its depreciated value (or book value) at the beginning of each year.  The amount set aside for depreciation will diminish with every successive period since the value of the asset at the beginning of every successive period tends to diminish.

Amortisation of financial asset should applied Effective Interest Method (EIM) which followed the application of discounted rate until. Moreover another FVA should followed has been controversial issues within financial institution.

Intangible assets are calculated on initial recognition at cost. After that they are carried at cost minus any amortization and impairment losses that are accumulated. If such assets have finite lives then they are amortized over that life and assessed for impairment if any. The amortization mechanism is reviewed at least once every financial year. This expense is recognized in the income statement. Gain and loss from intangible assets are measures as the difference between net disposal proceeds and carrying amount of asset and recognized in the profit and loss account.