Wiley GAAP 2008

Concepts, Rules, and Examples

Fixed Assets

Fixed assets (sometimes referred to as “property, plant, and equipment” or as “plant assets”) are tangible property used in a productive capacity that will benefit the reporting entity for a period longer than one year.

Among the accounting issues that can arise in accounting for fixed assets are

1. Determination of the amounts at which to initially record the assets, whether acquired through purchase or nonmonetary exchange; or through construction by the reporting entity

2. Whether management capitalizes discrete assets in groups or separately capitalizes the major individual components of individual assets (unit of account)

3. The proper accounting for postacquisition costs incurred with respect to the assets during their useful lives

4. The rate and pattern of allocation of amounts capitalized to the proper periods, including periods during which the assets become impaired

5. Events that cause the assets to be reclassified as held for sale

6. The recording of subsequent retirement and/or disposal of the assets at the end of their productive life

Cost considerations

Initial acquisition cost

Upon acquisition, the reporting entity capitalizes all the costs necessary to deliver the asset to its intended location and prepare it for its productive use. Examples of such costs relative to personal property include

1. Sales, use, excise, and other taxes imposed on the purchase

2. Import duties

3. Finders' fees

4. Freight costs and related shipping insurance

5. Storage and handling ...