Property, Plant, and Equipment and Intangible Assets

These flashcards cover the essential concepts and terms related to Property, Plant, and Equipment, and Intangible Assets from the lecture notes.

Property, plant, and equipment

Tangible long-lived assets used in the operations of a business, including land, buildings, and machinery.

Intangible assets

Non-physical assets providing exclusive rights or benefits to the owner, such as patents and copyrights.

Capitalization

The process of recording costs as an asset rather than an expense, allowing costs to be amortized over time.

Asset retirement obligation (ARO)

A legal obligation associated with the retirement of a long-lived asset, requiring recognition as a liability at fair value.

Goodwill

The unique value of a company that arises from its reputation, clientele, and other intangible factors.

Lump-sum purchases

Acquisition of a group of assets for a single price, where the cost is allocated among the individual assets.

Noncash acquisitions

Acquisition of assets where cash is not exchanged at the time of purchase, such as through trades or equity issuance.

Research and Development (R&D)

Efforts aimed at discovering new knowledge or developing new products, with associated costs being expensed in the current period.

Cost of land

Includes purchase price, attorney fees, commissions, and other expenditures necessary to prepare the land for use.

Cost of equipment

Comprises purchase price, taxes, transportation, installation, and any costs to prepare the equipment for use.

Cloud computing costs

Costs related to cloud arrangements treated as intangible asset purchases when certain conditions are met.

Self-constructed assets

Assets built by a company for its own use, requiring careful tracking of costs due to lack of market transaction.

Asset retirement obligation recognition

The requirement to recognize an ARO at fair value in the period it is incurred.

Fair value

The estimated price at which an asset would trade in a competitive marketplace.

Exchanges of nonmonetary assets

Valuation of assets received in a trade based on the fair value of the assets given up.

Interest capitalization

The process of adding interest costs incurred during construction to the asset's cost on the balance sheet.

Patents

Exclusive rights granted for inventions, lasting typically 20 years from the filing date.

Copyrights

Legal protections granted to creators of original works, lasting the life of the creator plus 70 years.

Trademarks

Brand identifiers, protected for a period of 10 years and renewable, identifying goods or services of a specific company.

Franchises

Contracts granting the right to sell or produce goods under a company's trademark for a specified period.

Research costs vs. Non-R&D costs

Research costs are aimed at discovering knowledge, while non-R&D costs relate to routine production or quality control activities.