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BYP 9-5 (Continued)
(1) its earnings are generating more cash than the earnings of Pinson
Company, and (2) depreciation expense has no effect on cash. Cash
BYP 9-6 COMMUNICATION ACTIVITY
that should be considered include:
1. Some relatively small companies may spend less on R&D because they
must expense these costs. However, the vast majority of companies
purposes.
Requiring companies to expense R&D costs instead of allowing them to
run.
2. The tangible future benefits of R&D costs may not be realized for
several years, if ever. Conversely, the purchase of a long-lived asset
BYP 9-7 ETHICS CASE
(a) The stakeholders in this situation are:
Robert Griffin, president of Turner Container Company.
(b) The intentional misstatement of the life of an asset or the amount of the
salvage value is unethical for whatever the reason. There is nothing per se
The fact that the competition uses a longer life on its equipment is not
Old Estimates
Asset cost
Estimated salvage
Depreciable cost
Depreciation per year (1/8)
$3,500,000
300,000
3,200,000
$ 400,000
Revised Estimates
Asset cost
Estimated salvage
Depreciable cost
Depreciation taken to date ($400,000 X 2)
Remaining life in years
Depreciation per year
$3,500,000
300,000
3,200,000
800,000
2,400,000
10 years
$ 240,000
BYP 9-8 ALL ABOUT YOU
(b) For the most part, the value of a brand is not reported on a company’s
balance sheet. Most companies are required to expense all costs related
to the maintenance of a brand name. Also any research and development
BYP 9-9 FASB CODIFICATION ACTIVITY
(a) Capitalize is used to indicate that the cost would be recorded as the
(b) Intangible assets are assets that lack physical substance. (The term
intangible asset is used to refer to intangible assets other than goodwill.)
(c) Codification reference 360-10-35-2 addresses the concept of depreciation
accounting and the various factors to consider in selecting the related
IFRS EXERCISES
IFRS9-1
IFRS9-2
Revaluation is an accounting procedure that adjusts plant assets to fair
IFRS9-3
Both types of development expenditures relate to the creation of new
products but one is expensed and the other is capitalized. Development
IFRS9-4
Warehouse component: ($280,000 – $50,000)/20 = $11,500
IFRS9-5
(a) Accumulated Depreciation—Plant Assets ............. 60,000
Revaluation Surplus ...................................... 45,000
IFRS9-5 (Continued)
(b) Accumulated Depreciation—Plant Assets ............. 60,000
IFRS9-6
Development Expense .................................................... 400,000
IFRS9-7 INTERNATIONAL FINANCIAL STATEMENT ANALYSIS
(a) Zetar uses straight line and reducing-balance depreciation methods.
(b) Goodwill is reviewed annually for impairment.
(c) Accumulated Depreciation ...................... 50
