INVESTMENT PROPERTY

Cost model – depreciation Asset xx

Fv model – changes in fv Disc xx
N/P xx
Cash xx
Measurement of Transfers NP xx
Cost model CA Cash xx
(ip,oop,inv) Int exp xx
IP to OOP FV Disc on bp xx
OOP to IP @ FV FV – CA = PPE xx
Revaluation RS xx
Surplus IP xx
Issuance of Share Capital
PSPs
PPE xx
FV of Property (asset)
Inv to IP @ FV Remeasurement FV of Shares
in P/L Par value of shares (no share premium JE)
IP under construction FV – CA = P/L
@ FV Asset xx
Share Cap xx
Share Premium xx
CASH SURRENDER VALUE
INSURANCE PREMIUM Issuance of Bonds
Life insurance exp xx BAB
Cash xx FV of Bonds
Unexpired Premium FV of Asset
Prepaid Life Insurance xx FA of Bonds (no Prem on BP JE)
LIE xx
Dividends Asset xx
Bonds Payable xx
Cash xx
Prem on BP xx
LIE xx
INITIAL RECOGNITION Exchange
CSV xx w/ commercial substance (different cash flows)
LIE xx (1/3 of LIE) FV + Cash Paid
Retained Earnings xx (2/3 of LIE)
Asset (New) xx FV + Cash Paid
INCREASE IN CSV SUBSEQUENT YEAR Acc depn xx given
CSV xx Loss xx FV - CA
LIE xx Asset (old) xx Historical Cost
Cash xx Cash paid
PROCEEDS OF LIFE INSURANCE POLICY (DEATH)
Cash xx given
w/o commercial substance
CSV xx total debits
No gain/loss
LIE xx unexpired
CA + Cash Paid
Gain on Life Insu Settlement xx balancing fig
Asset (New) xx CA + Cash Paid
Acc depn xx given
PPE Asset (old) xx Historical Cost
Price + DACs + Dismantling = TOTAL COST Cash xx Cash paid

Measurement (COST or REVALUATION) Trade In

Cost: cost – depn – impairment FV + cash (fv approach)
Revaluation: fv – depn - impairment TIV + cash (tiv approach)
List price – cash = TIV
Cash Basis
Allocate basket price according to FV Asset (new) xx fv/tiv + cash
Acc depn xx given
Loss on exchange xx FV/TIV – CA
Acquisition on account Asset (old) xx historical cost
Net of discount Cash xx cash paid

Installment Basis Donation

Cash price Contributions from shareholders Recorded at FV + DACs
Use outstanding method for int exp Asset xx
Asset xx Donated Capital xx
Disc xx Expenses connected with the donation
N/P xx Donated Capital xx
Cash xx Cash xx
NP xx
Cash xx
Int exp xx
Construction
Disc on bp xx DM + DL + OH = cost

No Cash Price
Use PV
Use amortization table for INT EXP
DP xx
PV of note (xx) = annual payment x PV of OA
COST xx
 GOVERNMENT GRANT General Borrowing
Prorate based on expenses Principal Borrowing Cost Interest)
xxx x rate = xxx
Cash xx
xxx x rate = xxx
Deferred Grant Inc. xx
xxx x rate = xxx
DGI xx
xxx / xxx = CAPITALIZATION RATE
Grant Income xx
actual BC
Expense xx
Cash xx
expenditures (ave CA) x cap rate = capitalizable BC
Prorate based on depreciation
capitalizable BC must NOT exceed actual BC
Cash xx excess is interest expense
Deferred Grant Inc. xx
Building xx
Cash xx Specific and General Borrowing
Depn xx find the ff:
Acc depn xx - Cap rate of General
DGI xx - Ave Expenditures
Grant Income xx Ave exp xx
Specific (xx) x rate = xxx
Gov Grant receivable as COMPENSATION General xx x cap rate = xxx Capitalizable BC
Cash xx *check if interest is compounded for specific loan
Grant Income xx
Construction more than 1 year
Presentation Do same process as specific and general
Related to asset: Add CBC to Actual (total) Expenditures to get Cost for next year
Deferred income Then do same process for next year
Deduction from asset
Related to income More than 1 year but less than 2 years
Separately Same process but in solving for ave expenditures, fraction will
Other income depend on what month will the construction end
Deduction from expense Ex:
august = use n/8 in finding ave exp
for cbc, use xxx x interest rate x 8/12
Deduction from asset
Asset xx
Cash xx LAND AND BUILDING
Cash xx Land Building
Asset xx (deduct gov grant) - Purchase price - Purchase price
Depn xx (based on net amount of asset) - Legal fees - Legal fees
Acc depn xx - Broker/agent comm - Unpaid real property tax
- Escrow fees up to date of acquisition
Repayment - Registration/transfer of title - Interest, mortgage, liens
Noncompliance - Relocation/reconstruction - Payments to vacate
Change in accounting estimate - Mortgage - Renovating/remodeling
- Unpaid real property tax up costs
Grant related to income (deferred income approach)
to date of acquisition - DM, DL, OH
DGI xx unamortized portion - Survey - Building permit/license
Loss on repayment xx portion initially recorded - Clearing, grading, leveling, - Architect fee
Cash xx landfill - Superintendent fee
Deduction from asset approach - Option to buy - Cost of excavation
re-establish deducted portion - Special assessment tax - Temporary building
*Includes total depn on re-established portion (cost/life x years passed) - Interest during
Asset xx construction (expenses)
Cash xx - Service equipment made
*Depn xx permanent part of plan
Acc depn xx - Temporary safety fence
and cost of removal
Grant of Interest-free loan - Safety inspection fee
- Sale of scrap (deducted
FA – PV of loan = Disc on BP
from cost)
Land Improvements
Cash xx
Disc on bp xx -non depreciable = land
N/P xx ex:surveying, clearing, grading, leveling, landfill
DGI xx (same amount as DISC) -depreciable = land improvement
Int exp xx (amortization = pv x rate) ex: fences, water system, drainage, sidewalk, pavement, trees,
Disc on bp xx shrubs, landscaping
DGI xx (same amount as int ext) Sidewalks, pavements, parking lot, driveways
Grant income xx -part of blueprint = building
Note Payable xx (annual payment) -not part/occasionally = land improvement
Cash xx
Claims for Damages
Expensed
BORROWING COSTS Building Fixtures
Specific Borrowing Immovable = building
Actual borrowing cost xx Movable = Furniture & Fixtures
Interest income (xx)
Capitalizable BC xx Ventilating, light, elevator
Installed during construction = building
Not during = building improvement
PIC Interpretation Major Replacement
1. Land and old building purchased at single cost Separate identification PRACTICABLE
a. Usable B = allocate according to FV Eliminate original asset
b. Unusable B = all cost to land Loss on retirement of asset xx remaining CA
2. old building demolished immediately for new building Acc depn xx given
a. CA of usable building: Asset xx cost
i.Loss IF NEW BUILDING is PPE/IP Record replacement
ii.Part of Cost if Inventory Asset xx
b. Demolition cost – salvage value is capitalized as cost of Cash xx
new building (IP, PPE, INV) (still part of cost even if not
for new building)
3. Acquired Building and used prior period but demolished in
current period for new building New depn
a. CA of old BLDG = loss IF NEW BUILDING IS PPE/IP/INV Depn xx
b. Net demolition cost is cost of new bldg. Acc depn xx
c. Payments to vacate are of new bldg.
Asset cost – retired + new xx
MACHINERY Acc depn – retired acc depn (xx)
- Purchase price NEW CA basis of depn xx / UL = depn exp
- Freight, handling, etc
- Insurance while in transit Separate identification NOT PRACTICABLE
- Discounted replacement cost
- Installation cost, site preparation and assembling Eliminate original asset – DISCOUNTED REPLACEMENT COST
- Cost of testing, trial run, cost to prepare machine for use Loss on retirement of asset xx remaining CA
- Initial estimate of cost of dismantling and removing which Acc depn xx given
entity has present obligation Asset xx cost
- Consultant fee Record replacement
- Safety rail Asset xx REPLACEMENT COST
- Water device Cash xx
- Adjustment changes New depn
- Irrecoverable/nonrefundable purchase tax Depn xx NEW DEPN
Acc depn xx
Tools
Not machinery Asset cost – retired + new xx
Acc depn – retired acc depn (xx)
NEW CA basis of depn xx / UL = depn exp
Patterns and Dies
Assets
Depreciated DEPRECIATION
Special order = cost of special product Straight line
-
Equipment Composite and group
Motor vehicle registration = expensed Depreciable amt / total annual depn = composite life
Total Annual depn / total cost = composite rate
Total cost x rate = annual depn to be recorded
Returnable containers
Working hours/output method
Big units = PPE
Small/individual = NCA Similar to depletion
not returnable = expensed SYD
n x ((n+1)/2)
consider starting date
Capital expenditure if in the middle of year, the next your would still include part of the
Benefits current and future periods -> asset first fraction’s depreciation
Declining balance
Revenue Expenditure 1/life x 200/150%
Benefits current period -> expense Do not consider residual value
Inventory method
Subsequent Cost Asset, beg – asset, end = depn exp
Probable and measurable No acc depn, Cr to Asset account instead
Increase service potential = capitalized Used in Small, inexpensive assets
Maintains performance = expensed
Capitalized Expensed Acquisition (record acquisition cost)
Tools xx
Additions Replacement Cash xx
-new unit (depn over UL) Minor parts Sale of the used tools
-expansion, enlargement, etc. Not better than old asset Cash xx
(depn shorter of remaining UL Ordinary repair Tools xx
of asset or UL of expansion) Depn xx
Improvements/Betterments Rearrangement Tools xx
-increase service life/capacity
Replacement Tools, beg + acquisition – sold xx
Major parts Tools, end (xx)
New asset Depreciation xx
Extraordinary repair
Retirement Method REVALUATION
No depn until asset is retired Fv – acc depn – impairment
cogs – salvage proceeds = depn If fv of revalued assets differs materially from CA, revaluation is
necessary

Cost Replacement cost / FV Appreciation

Acquisition asset xx xx xx
Tools xx depn (xx) (xx) (xx)
Cash xx xx xx xx
Retirement CA SV RS
Cash xx proceeds from retirement
Depn xx cogs - proceeds Record revaluation (appreciation amounts)
Tools (cogs *FIFO) xx
Asset xx
Acc depn xx
Replacement Method Revaluation surp xx
no depn until asset retired and replaced Reval surp realization
replacement cost – salvage proceeds = depn Reval surp xx
if not replaced, historical cost of asset retired = depreciation Retained Earnings xx

Acquisition excess of retirement (acquired units – retired units) Change in Life & Residual Value
Tools xx
Cost RC/FV Appreciation
Cash xx
asset xx xx xx
Replacement of tools retired
RV of RC/FV (xx) (xx) __
Depreciation xx
Depreciable amt xx xx xx
Cash xx
Acc depn (xx) (xx) (xx)
retired units x acquisition price xx Remaining xx xx xx
proceeds from retirement (xx) Depreciable amt
depreciation xx CA SV RS
Cost acc/depn is based on its original RV
Change in UL JE:
revised life – years passed = new UL Asset xx
past depn not corrected Acc depn xx
Reval surp xx
Change in Depn Method Depn xx based on SV
Acc depn xx
CA from old depn method will become new depreciable amount Reval surp xx based on RS
RE xx
DEPLETION
Accounting for exploration cost Sale of revalued asset
Successful effort method Sale price – CA = G/L
Large corporations
ONLY Dry holes/unsuccessful = expensed Cash xx
Acc depn xx
Full Cost method Building xx
Small corporations Gain on sale xx
ALL, successful or unsuccessful = expensed Reval surp xx
RE xx
Revision of depletion rate
If recoverable deposits are at: IMPAIRMENT
BEGINNING of year, divide by that amount only CA > *recoverable amount = impairment
END of year, divide by new estimation + extracted *higher of value in use or FV– cost of disp

Depreciation of Mining Property Impair when indications are present

Shorter of UL of asset or UL of wasting asset Assess at each reporting date whether there are indications
UL of A < UL of WA= straight line Intangible asset w indefinite life = test impairment annually
UL of A > UL of WA = output method
if movable eqpt & can be used in future projects = STRAIGHT LINE FV-cost of disp = market price – costs of disposal
Output method of depn Value in use = revenue – costs (excl depn) = net cf x pv
Cost of asset / total units x extracted = depn
Reversal of impairment
Shutdown LOWER of CA (no impairment) or recoverable amount
Use STRAIGHT LINE METHOD in year of shutdown
CA / Remaining Life = depn
After year of shutdown, return to output method and solve for new CA – no impairment / RA (lower) xx
rate per unit by remaining CA / revised estimate of deposits CA with impairment (*net of current depn) (xx)
Gain on Reversal of Impairment xx
Wasting Asset Doctrine
JE
Dividends in excess of Retained Earnings Acc depn xx
Formula: Gain on reversal of imp. xx
Retained earnings xx
Acc depletion xx
Capital liquidated (xx) CGU
Unrealized depletion in end, inv (xx) end inv x last price CA of ALL Assets xx
MAXIMUM DIVIDEND xx VIU (often) (xx)
Impairment Loss xx
allocated to (1) GWill & (2) noncash assets (via CA of ALL assets)
JE
Imp loss xx JE (internally developed)
Goodwill xx r&D exp xx expensed
Acc depn – asset xx cash xx
Land xx patent xx licensing
Acc depn – asset xx cash xx
Inventory xx amortization of patent xx annually
patent xx
Reallocation of Impairment Loss legal exp xx expensed
CA of assets MUST NOT below FV – cost of disp cash xx
Reallocate using CA of other assets patent written off xx Net Patent Account
patent xx

GOODWILL Trademark
10-year legal life renewable
PURCHASE PRICE – NET ASSETS @ FV (A-L) = GW Market-related
Not amortized
Residual approach Annual impairment test if there is indication
Cash xx Copyright
Asset1 xx Life of author + 50 years
Asset2 xx Artistic-related
Asset3 xx amortization via output method
Goodwill xx Annual impairment test if there is indication
Liability1 xx
Liability2 xx Franchise
Cash xx Definite or indefinite period
Contract-based
Direct approach
Avg earnings = total earnings/years periodic fee
1. Purchase of avg excess earnings Franchise fee exp xx
Cash xx
Avg earnings xx
Initial franchise fee
Normal earnings (xx) = net assets x rate of return
Franchise xx
Avg excess earnings xx * years = GW
Cash xx
Note payable xx
2. Capitalization of avg excess earnings First installment
Avg excess earnings / cap rate = GW NP xx
Int exp xx NP x int. rate
Cash xx
3. Capitalization of avg earnings
Amortization
Avg earnings / cap rate – net assets = GW Amortization of franchise xx franchise/life
Franchise xx
4. PV method
Avg excess earnings x pv of OA = GW R&D COST
Negative Goodwill
Purchase price < net FV of assets = Negative GW
Cr to Gain on Bargain Purchase

JE
Cash xx
Asset1 xx
Asset2 xx
Liability1 xx
Liability2 xx
Cash xx
Gain on barg purch xx

IDENTIFIABLE INTANGIBLE ASSETS

Patent
20-year legal life nonrenewable but extendable
Technology based
Annual impairment test if there is indication
Cost:
price, import duties, nonrefundable purch tax, DACs, Licensing
Cost of litigation
expensed
Amortization
-Internally developed = shorter of legal life(20) or useful life
-from original patentee = shorter of remaining legal life or UL
-competitive patent = remaining life of old patent
-related patent:
extend life (related + unamortized old) = extended life
no extension = new (own life) & old (remaining life)