Natrual resources

natural resources

Consists of standing timber and deposits of oil, gas and minerals

• Also called wasting assets

Wasting assets

• Physically extracted: deplete as they are used

• Replaced only by an act of nature

Cost determined long lived assets

• Include costs of acquiring and preparing asset for use

• Include asset retirement obligations: future restoration and clean-up costs

Amortization of natural resources

• The units-of-activity method is used to calculate amortization

• First calculate the amortizable cost per unit

• Amortization of natural resources is debited to inventory

• As it is a cost of extracting a saleable product

• When product is sold the cost is expensed to cost of goods sold

Intangible assets

Rights, privileges, and competitive advantages that have no physical substance

• Recorded at cost, include the cost to make it ready for its intended use or legally defend it

If intangible assets have a limited life then

• The it is amortized over its useful or legal life, whichever is shorter 

• Straight line method is often used

assets with indefinite lives are

not amortized

Patents

• right to conrtol an invention for 20 years 

• limited lives

Research and development

• limited life

• Research costs are expensed when incurred

• Development costs which lead to patents, copyrights and new products and processes are capitalized

Copy right

right to reproduce and sell artistic or published work for life of creator + 50 years

limited life

Other intangible assets (limited life)

• customer list

• non competition agreements

• sports contracts 

trademark and trade names 

Word, phrase, jingle or symbol that identifies an enterprise or product

indefinite

Franchises

indefinite

contractual arrangement giving the franchisee rights to sell products and use trademarks

liscneses

Indefnite

government grants to use public property

Good will

•The value of all favourable attributes of a company.

• Recorded only when a business is purchased.

• It is not amortized but is reviewed annually for impairment.

• indefinite