Property,Plant,and Equipment: Acquisition and Disposition DONALD E.KIESO’JERRY J.WEYGANDT TERRY D.WARFIELD Chapter Intermediate Accounting 10 Intermediate Accounting 12th Edition Kieso,Weygandt,and Warfield wun Chapter 10-1 Prepared by Coby Harmon,University of California,Santa Barbara
Chapter 10-1 Property, Plant, and Equipment: Acquisition and Disposition Intermediate Accounting 12th Edition Kieso, Weygandt, and Warfield Prepared by Coby Harmon, University of California, Santa Barbara
Learning Objectives 1.Describe property,plant,and equipment. 2.Identify the costs to include in initial valuation of property, plant,and equipment. 3.Describe the accounting problems associated with self- constructed assets. 4.Describe the accounting problems associated with interest capitalization. 5.Understand accounting issues related to acquiring and valuing plant assets. 6.Describe the accounting treatment for costs subsequent to acquisition. 7.Describe the accounting treatment for the disposal of property, plant,and equipment. Chapter 10-2
Chapter 10-2 Learning Objectives
Acguisition and Disposition of Property,Plant,and Equipment Cost Acquisition Valuation Subsequent to Dispositions Acquisition 0 Acquisition costs: 0 Cash discounts Additions ●Sale Land,buildings, 0 Deferred 0 Improvements 0 Involuntary equipment contracts and conversion Self-constructed 0 Lump-sum replacements 0 Miscellaneous assets purchases 0 Rearrangement problems Interest costs ●Stock issuance and reinstallation Observations ●Nonmonetary o Repairs exchanges o Summary Contributions Other valuation methods Chapter 10-3
Chapter 10-3 Acquisition and Disposition of Property, Plant, and Equipment
Property,Plant,and Equipment Property,plant,and equipment includes land,buildings, and equipment (machinery,furniture,tools). Major characteristics include: "Used in operations"and not for resale. Long-term in nature and usually depreciated Possess physical substance. Chapter 10-4 LO 1 Describe property,plant,and equipment
Chapter 10-4 “Used in operations” and not for resale. Long-term in nature and usually depreciated. Possess physical substance. Property, plant, and equipment includes land, buildings, and equipment (machinery, furniture, tools). Major characteristics include: Property, Plant, and Equipment
Acguisition and Valuation of PP&E Valued at Historical Cost,reasons include: ● At acquisition,cost reflects fair value. Historical cost is reliable. Companies should not anticipate gains and losses but should recognize gains and losses only when the asset is sold. APB Opinion No.6 states, “property,plant,and equipment should not be written up to reflect appraisal,market,or current values which are above cost." Chapter LO 2 Identify the costs to include in initial valuation 10-5 of property,plant,and equipment
Chapter 10-5 At acquisition, cost reflects fair value. Historical cost is reliable. Companies should not anticipate gains and losses but should recognize gains and losses only when the asset is sold. Valued at Historical Cost, reasons include: Acquisition and Valuation of PP&E APB Opinion No. 6 states, “property, plant, and equipment should not be written up to reflect appraisal, market, or current values which are above cost