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One of the most costly types of assets for any company is its property, plant, and...

One of the most costly types of assets for any company is its property, plant, and equipment. Select a company, or industry, of your choice and identify 2 common fixed assets they have (buildings, machines, etc). What causes these assets to depreciate and in what manner should it be recorded?



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I have taken the annual report of "American Tower" company

https://americantower.gcs-web.com/static-files/abaea648-59f3-4884-a186-4e5c57cccf55

It's a telecommunication company which provides cell phone towers and network to users.

Major assets are Equipment (Towers) and Building.

Fixed Assets are stated at cost of acquisition and subsequent improvements thereto, including taxes and duties, freight and other incidental expenses related to acquisition and installation. Capital work-in-progress is stated at cost. Site restoration cost obligations are capitalised when it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. The intangible component of license fee payable by the Company for cellular and basic circles, upon , i.e. Entry Fee, has been capitalised as an asset and the one time license fee paid by the Company for acquiring new licences (basic, cellular, national long distance and international long distance services) has been capitalised as an intangible asset.

DEPRECIATION/AMORTISATION

Depreciation on fixed assets is provided on the straight line method based on useful lives of respective assets as estimated by the management or at the rates prescribed whichever is higher. Leasehold land is amortised over the period of lease. Depreciation rates adopted by the Company varies for different assets.

An office building is a fixed asset because it has a useful life of more than one year and meets both the criteria of an asset. A tangible good is classified as an asset if its cost can be reliably measured and future economic benefits are expected from it.

When a fixed asset is acquired or constructed, it is recorded as a Non-current asset on the balance sheet instead of expensing it out in one-go.

The cost is then allocated systematically throughout its useful life as a depreciation expense in the income statement. Depreciation expense is charged due to usage, wear and tear or obsolescence.

An office building can be depreciated through any of the three following methods of depreciation:

>Straight-line

>Double declining

>Sum of year’s digits

ekkarill92 answered 2 years ago
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