Common U.S. GAAP Issues Facing Accountants, 2nd Edition

Chapter 8Property, Plant, and Equipment — Including Capitalized Interest and Nonmonetary Transactions

Learning objectives

• Identify the requirements in FASB Accounting Standards Codification^® (ASC) 360, Property, Plant, and Equipment.
• Identify the requirements for capitalizing interest as it relates to property, plant, and equipment, in accordance with FASB ASC 835, Interest.
• Identify nonmonetary transactions as they relate to property, plant, and equipment, in accordance with FASB ASC 845, Nonmonetary Transactions.

Overview

This chapter discusses the GAAP requirements regarding property, plant, and equipment (PP&E) and two issues often encountered — interest capitalization and nonmonetary exchanges. This chapter does not address the topic of discontinued operations discussed in FASB ASC 360.

Property, plant, and equipment

FASB ASC 360 addresses the accounting and reporting for PP&E, including guidance for accumulated depreciation. In addition, FASB ASC 360 provides guidance for recognizing and measuring the impairment or disposal of long-lived assets.

PP&E typically consist of long-lived tangible assets used to create and distribute an entity’s products and services, and include the following:

• Land and land improvements
• Buildings
• Machinery and equipment
• Furniture and fixtures

Initial measurement

The initial cost of PP&E is the historical cost of acquiring the asset, which would include costs necessarily incurred to bring it to the condition and location necessary for ...