Intermediate Accounting, 15th Edition

CHAPTER 10 Acquisition and Disposition of Property, Plant, and Equipment

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Describe property, plant, and equipment.
2. Identify the costs to include in initial valuation of property, plant, and equipment.
3. Describe the accounting problems associated with self-constructed assets.
4. Describe the accounting problems associated with interest capitalization.
5. Understand accounting issues related to acquiring and valuing plant assets.
6. Describe the accounting treatment for costs subsequent to acquisition.
7. Describe the accounting treatment for the disposal of property, plant, and equipment.

Watch Your Spending

Investments in long-lived assets, such as property, plant, and equipment, are important elements in many companies' balance sheets. As Table 1 shows, capital expenditures on structures and equipment (whether new or used) are starting to grow again after the effects of the 2008 financial crisis.

Table 1: Total Capital Expenditures by Type for All U.S. Businesses, 2001 to 2010

Unfortunately, Table 1 also shows that capital expenditures' growth is overall stagnant in the last 10 years. However, better times may be ahead. To illustrate, the food and beverage industry increased its capital expenditures by 20 percent in 2011 and is estimated to increase them again by 4 percent in 2012. Table 2 identifies the five companies ...