Fixed Asset Accounting 5th Edition Steven M. Bragg Table of Contents Chapter 1 – Introduction to Fixed Assets ............................................................................................. 1 Learning Objectives ............................................................................................................................. 1 Introduction ......................................................................................................................................... 1 What are Fixed Assets? ....................................................................................................................... 1 The “Fixed Asset” Designation ............................................................................................................. 2 Fixed Asset Classifications .................................................................................................................. 2 Applicable Accounting Frameworks ..................................................................................................... 3 Accounting for Fixed Assets................................................................................................................. 4 Accounting for Intangible Assets .......................................................................................................... 4 Accounting for Not-for-Profit Fixed Assets ............................................................................................ 5 Fixed Asset Disclosures ...................................................................................................................... 5 Fixed Asset Controls............................................................................................................................ 5 Fixed Asset Policies and Procedures ................................................................................................... 5 Fixed Asset Record Keeping................................................................................................................ 6 Fixed Asset Auditing ............................................................................................................................ 6 Fixed Asset Measurements ................................................................................................................. 6 Summary ............................................................................................................................................. 7 Review Questions................................................................................................................................ 8 Review Answers .................................................................................................................................. 9 Chapter 2 – Capital Budgeting Analysis ............................................................................................. 11 Learning Objectives ........................................................................................................................... 11 Introduction ....................................................................................................................................... 11 Overview of Capital Budgeting ........................................................................................................... 11 Bottleneck Analysis ........................................................................................................................... 12 Net Present Value Analysis ............................................................................................................... 12 The Payback Method ......................................................................................................................... 14 Discounted Payback ...................................................................................................................... 15 Capital Budget Proposal Analysis ...................................................................................................... 16 The Outsourcing Decision .................................................................................................................. 17 The Capital Budgeting Application Form ............................................................................................ 17 The Post Installation Review .............................................................................................................. 19 The Lease or Buy Decision ................................................................................................................ 20 Leasing Concerns.............................................................................................................................. 21 Leasing Advantages .......................................................................................................................... 22 Capital Budgeting with Little Cash ...................................................................................................... 23 Summary ........................................................................................................................................... 24 Review Questions.............................................................................................................................. 25 Review Answers ................................................................................................................................ 26 Chapter 3 – Initial Fixed Asset Recognition ....................................................................................... 27 Learning Objectives ........................................................................................................................... 27 Introduction ....................................................................................................................................... 27 The Capitalization Limit ..................................................................................................................... 27 The Base Unit.................................................................................................................................... 28 GAAP: The Initial Measurement of a Fixed Asset ............................................................................... 29 Patent Measurement ..................................................................................................................... 30 Interpretive Commentary ............................................................................................................... 30 GAAP: The Measurement of Assets Acquired in a Business Combination .......................................... 31 GAAP: The Measurement of Assets Acquired in a Finance Lease ...................................................... 31 GAAP: Non-Monetary Exchanges ...................................................................................................... 32 GAAP: Internal-Use Software ............................................................................................................ 35 GAAP: Website Development Costs .................................................................................................. 37 IFRS: Initial Inclusions in a Fixed Asset.............................................................................................. 37 Table of Contents IFRS: Initial Cost of a Fixed Asset ...................................................................................................... 39 IFRS: The Measurement of Assets Acquired in a Business Combination............................................ 40 IFRS: The Measurement of Assets Acquired in a Finance Lease ....................................................... 41 IFRS: Non-Monetary Exchanges........................................................................................................ 41 IFRS: Website Development Costs .................................................................................................... 42 IFRS: Internally Developed Intangible Assets ..................................................................................... 43 Summary ........................................................................................................................................... 44 Review Questions.............................................................................................................................. 45 Review Answers ................................................................................................................................ 46 Chapter 4 – Interest Capitalization ...................................................................................................... 47 Learning Objectives ........................................................................................................................... 47 Introduction ....................................................................................................................................... 47 Why and When Do We Capitalize Interest?........................................................................................ 47 Assets for Which Interest Must Be Capitalized ................................................................................... 48 Assets for Which Interest Capitalization is Not Allowed ...................................................................... 48 The Interest Capitalization Period .....................................................................................................