Intermediate Accounting: IFRS Edition, 2nd Edition

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. 1 Explain the concept of depreciation.
2. 2 Identify the factors involved in the depreciation process.
3. 3 Compare activity, straight-line, and diminishing-charge methods of depreciation.
4. 4 Explain component depreciation.
5. 5 Explain the accounting issues related to asset impairment.
6. 6 Explain the accounting procedures for depletion of mineral resources.
7. 7 Explain the accounting for revaluations.
8. 8 Explain how to report and analyze property, plant, equipment, and mineral resources.

Here Come the Write-Offs

The credit crisis starting in late 2008 affected many financial and non-financial 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 U.S. 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 (DEU).
• 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 ...