Chapter 11 completes the discussion of accounting for property, plant, and equipment and intangible assets by addressing the allocation of the cost of these assets to the periods benefited by their use. Expenditures subsequent to acquisition and impairment are also covered in this chapter. | Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment Chapter 11 Chapter 11: Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment. Chapter 11 completes the discussion of accounting for property, plant, and equipment and intangible assets by addressing the allocation of the cost of these assets to the periods benefited by their use. Expenditures subsequent to acquisition and impairment are also covered in this chapter. Some of the cost is allocated to each period. Expense* Acquisition Cost (Balance Sheet) (Income Statement) The matching principle requires that part of the acquisition cost of property, plant, and equipment and intangible assets be expensed in periods when the future revenues are earned. Depreciation, depletion, and amortization are cost allocation processes used to help meet the matching principle requirements. Cost Allocation – An Overview *Depreciation of an asset used to produce a product is a product cost that does not become an expense until the product is sold. The matching principle requires that part of the acquisition cost of property, plant, and equipment and intangible assets be expensed in periods when the future revenues are earned. A portion of an asset’s cost is moved from the balance sheet to the income statement each period. Depreciation, depletion, and amortization are cost allocation processes. We allocate the cost of the asset to expense over its useful life in some rational and systematic manner. The unused portion of the asset’s cost appears in the balance sheet. We allocate a portion of the cost to expense in the income statement each accounting period. Accumulated depreciation represents the depreciation taken on the asset since its purchase, and is deducted from the asset’s cost in the balance sheet to net to the book value of the asset. Depreciation, depletion, or amortization of an asset used in manufacturing a product is a part of the product cost that is included in . | Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment Chapter 11 Chapter 11: Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment. Chapter 11 completes the discussion of accounting for property, plant, and equipment and intangible assets by addressing the allocation of the cost of these assets to the periods benefited by their use. Expenditures subsequent to acquisition and impairment are also covered in this chapter. Some of the cost is allocated to each period. Expense* Acquisition Cost (Balance Sheet) (Income Statement) The matching principle requires that part of the acquisition cost of property, plant, and equipment and intangible assets be expensed in periods when the future revenues are earned. Depreciation, depletion, and amortization are cost allocation processes used to help meet the matching principle requirements. Cost Allocation – An Overview *Depreciation of an asset used to produce a product is a product cost that .
