definition points
- have a long useful life
- not meant for sale
- used to support business operations
types of NCA
- tangible (PP&E, investment properties)
- intangible (software, patents, goodwill)
- financial
when do we put goodwill onto BS
only aquisition goodwill - extra price you pay when aquiring another company
buying FA 1
initial cost
purchase price + necessary expenss to make it operational (installation, testing)
entry PPE purchased on credit
D: PPE
C: payables for fixed assets
buying FA 2
subsequent measurement (posted when asset is ready for use)
Historical cost - accumulated depreciatoin/amortisation - impairment)
-> value shown in BS
- posted when asset is ready for use
depretiation and amortisation meaning
spreads the cost of an asset over the years that benefit from it. assets lose value because of limited useful life eg. wear and tear, legal expiry, technological obsolensce)
- begins when asset is ready for use
does land depreciate?
no
depreciation equation
cost - residual value / useful life
depreciation entry
D: depreciation expense
C: accumulated depreciation
sale (or disposal) of PPE
- remove asset cost (credit PPE)
- removed accumulated depreciation (debit)
- record cash recieved
- recognise gain or loss
full NCA life-cycle overview
- initial measurement
- capitalisation (asset)
- subsequent measurement
- depreciation
- disposal (gain or loss)
depreciation v. amortisation
depreciation: used for tangible non current assets
amortisation: used for intangible non current assets
