CHAPTER 11 Depreciation, Impairments, and Depletion
After studying this chapter, you should be able to:
- Explain the concept of depreciation.
- Identify the factors involved in the depreciation process.
- Compare activity, straight-line, and decreasing-charge methods of depreciation.
- Explain special depreciation methods.
- Explain the accounting issues related to asset impairment.
- Explain the accounting procedures for depletion of natural resources.
- Explain how to report and analyze property, plant, equipment, and natural resources.
Here Come the Write-Offs
The credit crisis starting in late 2008 affected many financial and nonfinancial institutions. Many of the statistics related to this crisis are sobering, as noted below.
- In October 2008, the FTSE 100 in the United Kingdom suffered its biggest one-day fall since October 1987. The index closed at its lowest level since October 2004.
- The Dow Jones Industrial Average fell below the 8,000 level for the first time since 2003.
- Germany's benchmark DAX tumbled after the collapse of the proposed rescue plan for Hypo Real Estate.
- Tightening credit and less disposable income led to Japanese electronic groups losing value. The Nikkei fell to its lowest point since February 2004.
- The Hong Kong Hang Seng dropped in line with the rest of Asia, closing below 17,000 points for the first time in two years in October 2008 and below 11,000 by November of that year.
- Governments spent billions of dollars bailing out financial institutions. ...