After studying this chapter, you should be able to: Understand the importance of depreciation, impairment, and disposition from a business perspective; explain the concept of depreciation and identify the factors to consider when determining depreciation charges; identify how depreciation methods are selected; calculate and recognize depreciation using the straight-line, decreasing charge and activity methods;. | 1 1 CHAPTER 11: DEPRECIATION, IMPAIRMENT, and DISPOSITION 2 2 Chapter 11: Depreciation, Impairment, and Disposition After Studying this chapter you should be able to: Understand the importance of depreciation, impairment, and disposition from a business perspective. Explain the concept of depreciation and identify the factors to consider when determining depreciation charges. Identify how depreciation methods are selected; calculate and recognize depreciation using the straight-line, decreasing charge and activity methods. Explain the accounting issues for depletion of mineral resources. Explain and apply the accounting procedures for partial periods and a change in depreciation rate. Explain the issues and apply the accounting standards for capital asset impairment under both IFRS and ASPE. Account for derecognition of property, plant and equipment and explain and apply the accounting standards for long-lived assets that are held for sale. Describe the types of disclosures required for property, plant and equipment. Analyze a company’s investment in assets. Identify difference in account between IFRS and ASPE, and what changes are expected in the near future. 3 3 4 Chapter 11: Depreciation, Impairment, and Disposition 4 Depreciation – Concept Depreciation (and amortization more broadly) is a means of cost allocation It is not a method of valuation Depreciation involves: allocating the depreciable amount of property, plant, and equipment over the periods expected to benefit from the use of the assets This allocation is generally recognized as Depreciation Expense 5 LO1 5 Factors in the Depreciation Process Questions to be answered to determine the amount of depreciation expense: What asset components are depreciated separately? What is the asset’s depreciable amount? Over what period is the asset depreciated? What pattern best reflects how the asset’s economic benefits are used up? 6 LO2 6 Components Depreciated Separately Each significant part of a PP&E asset . | 1 1 CHAPTER 11: DEPRECIATION, IMPAIRMENT, and DISPOSITION 2 2 Chapter 11: Depreciation, Impairment, and Disposition After Studying this chapter you should be able to: Understand the importance of depreciation, impairment, and disposition from a business perspective. Explain the concept of depreciation and identify the factors to consider when determining depreciation charges. Identify how depreciation methods are selected; calculate and recognize depreciation using the straight-line, decreasing charge and activity methods. Explain the accounting issues for depletion of mineral resources. Explain and apply the accounting procedures for partial periods and a change in depreciation rate. Explain the issues and apply the accounting standards for capital asset impairment under both IFRS and ASPE. Account for derecognition of property, plant and equipment and explain and apply the accounting standards for long-lived assets that are held for sale. Describe the types of disclosures required .
