Question

Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine each of the following: 

1. The specific eight-digit Codification citation (XXX-XX-XX-X) that discusses depreciation as a systematic and rational allocation of cost rather than a process of valuation. 

2. The specific nine-digit Codification citation (XXX-XX-XX-XX) that involves the calculation of an impairment loss for property, plant, and equipment. 

3. The specific nine-digit Codification citation (XXX-XX-XX-XX) that provides guidance on accounting for a change in depreciation method. 

4. The specific eight-digit Codification citation (XXX-XX-XX-X) that indicates goodwill should not be amortized.

 

 

Answer 1

1. 

FASB ACS 360-10-35-4:“Property, Plant, and Equipment—Overall—Subsequent Measurement—Depreciation.”

 

“The cost of a productive facility is one of the costs of the services it renders during its useful economic life. Generally accepted accounting principles (GAAP) require that this cost be spread over the expected useful life of the facility in such a way as to allocate it as equitably as possible to the periods during which services are obtained from the use of the facility. This procedure is known as depreciation accounting, a system of accounting which aims to distribute the cost or other basic value of tangible capital assets, less salvage (if any), over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational manner. It is a process of allocation, not of valuation.”

 

2. 

FASB ASC 360-10-35-7:“Property, Plant, and Equipment—Overall—Subsequent Measurement”

 

“An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, whether in use or under development. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.”

 

3. 

FASB ASC 250-10-45-18:“Accounting Changes and Error Correction—Overall—Other Presentation Matters.” “Distinguishing between a change in an accounting principle and a change in an accounting estimate is sometimes difficult. In some cases, a change in accounting estimate is effected by a change in accounting principle. One example of this type of change is a change in method of depreciation, amortization, or depletion for long-lived, nonfinancial assets (hereinafter referred to as depreciation method). The new depreciation method is adopted in partial or complete recognition of a change in the estimated future benefits inherent in the asset, the pattern of consumption of those benefits, or the information available to the entity about those benefits. Theeffect of the change in accounting principle, or the method of applying it, may be inseparable from the effect of the change in accounting estimate. Changes of that type often are related to thecontinuing process of obtaining additional information and revising estimates and, therefore, shall be considered changes in estimates for purposes of applying this Subtopic.”

 

4.

FASB ASC 350-20-35-1: “Intangibles-Goodwill and Other—Goodwill—Subsequent Measurement.”

 

Goodwill shall not be amortized. Instead, goodwill shall be tested for impairment at a level of reporting referred to as reporting unit.

1. 

FASB ACS 360-10-35-4:“Property, Plant, and Equipment—Overall—Subsequent Measurement—Depreciation.”