Wiley GAAP: Practical Implementation Guide and Workbook

Chapter 10. PROPERTY, PLANT, AND EQUIPMENT (ASC 360)

BACKGROUND AND INTRODUCTION

This Standard prescribes rules regarding the recognition, measurement, and disclosures relating to property, plant, and equipment (often referred to as fixed assets) that would enable users of financial statements to understand the extent of an entity's investment in such assets and the movements therein.

The principal issues involved relate to the recognition of items of property, plant, and equipment; determining their costs; and assessing the depreciation and impairment losses that need to be recognized.

DEFINITIONS OF KEY TERMS

Cost. The amount paid or fair value of other consideration given to acquire or construct an asset.

Depreciable amount. The cost of an asset less its residual value.

Depreciation. The systematic allocation of the depreciable amount of an asset over its expected useful life.

Fair value. The amount for which an asset could be exchanged between knowledgeable willing parties in an arm's-length transaction.

Property, plant, and equipment. Tangible assets that are held for use in production or supply of goods and services, for rental to others, or for administrative purposes and are expected to be used during more than one period.

Residual value (of an asset). The estimated amount, less estimated disposal costs, that could currently be realized from the asset's disposal if the asset were already of an age and condition expected at the end of its useful life.

Useful life. The period over which ...