Chapter 9 Reporting and Analyzing Long-Lived Assets

land

costs include the cash purchase price, closing costs such as title and attorneys fees, real estate brokers' commissions and accrues property taxes and other liens on the land

land improvements

structural additions made to land, such as driveways, parking lots, fences, landscaping, and underground sprinklers, these are expenses

buildings

facilities used in operations, such as stores, offices, factories, warehouses, and airplane hangars

equipment

assets used in operations such as store check-out computers, office furniture, factory machinery, and delivery trucks

ordinary repairs

maintain the operating efficiency and productive life

additions and improvements

increase operating efficiency, productive capacity or useful life of a plant asset are added to the asset

depreciation

is the allocation of the cost of a plant asset to expense over its useful life in a rational and systematic manner. Land is not a depreciable asset

obsolescence

the process by which an asset becomes out of date before it physically wears out

straight line

depreciable cost divided by the useful life to arrive at an annual rate of depreciation

units of activity

useful life is expressed in terms of the total units of production or the use expected from the asset

declining balance

depreciation is based on the declining book value

intangible assets

Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance.

Amortization

the allocation go the cost of an intangible asset

patents

exclusive rights to make or sell inventions

research and development costs

Expenditures that may lead to patents, copyrights, new processes, and new products; must be expensed as incurred.

copyrights

grants from the federal government, giving the owner the exclusive right to produce and sell an artistic or published work for a period of the life of the creator plus 70 years

trademarks and trade names

Symbol, name, phrase, or jingle identified with a company, product, or service.

franchise

the agreement that the franchisor grants the franchisee the right to sell certain products, provide specific services, or use certain trademarks

license

agreement between a governmental body and a business enterprise in which the enterprise is permitted to use public property in performing its services

goodwill

value of all favorable attributes to relate to a business enterprise, such as exceptional management, desirable location, good customer relations, skilled employees, high-quality products and harmonious relations with labor unions

depletion

the allocation of the cost of natural resources in a rational and systematic manner over the resource's useful life