Chapter 7: PPE and intangibles
PPE and intangibles are non-current assets
they provide benefits that extend beyond a single financial period
Learning objective 1: understand
Understanding the different types of noncurrent assets
Property, plant and equipment
fixed assets/ long -term assets that are intangible
Types of PPE:
Land, leasehold improvements and buildings
Technical equipment and machinery
Factory and office equipment
Construction in progress
Right-of-use assets
Each has its own costs, accumulated depreciation, impairment
The cost of any asset is the sum of all the costs incurred to bring the asset to its
intended use.
Purchase price
Taxes
Commissions
Other costs to make the asset ready for use
Intangible assets
=identifiable non- monetary assets without physical substance
Amortization= allocation of the cost of intangible assets over the asset’s useful
life
goodwill, software, patents,…
Other noncurrent assets
, Learning objective 2: determine
Determine the cost of PPE on initial recognition
Recognition of PPE and intangible assets
When it is probable that future economic benefits associated with the item
will flow to the entity
Cost of an item can be measured
Measurement of PPE on initial recognition
Cost of an assets= the sum of all the costs incurred to bring the assets to its
intended use
Cost of PPE includes:
Purchase price, including import, taxes, discounts
Transportation costs
…
Directly attributes costs
Costs of employee benefits (wages and salaries)
Costs of site preparation
Delivery and handling costs
Installation and assembly costs
Costs that should not be included
Costs of opening a new facility
Costs of introducing a new product or service
Administration and ither general costs
Land and land improvements
Land costs
price, Brokerage commission, survey fees, legal fees, property taxes,
Expenditures for grading and clearing land, Removing any unwanted
buildings
Land improvement costs: subject to depreciation
Driveways signs, Fences, Sprinkler systems, paving, security systems,
lighting
Leasehold improvements
Improvements made to leased property, Depreciated or amortized over
the lease term
Debit: land (A): total cost of the
land
Credit: note payable (L): cost of
the land
PPE and intangibles are non-current assets
they provide benefits that extend beyond a single financial period
Learning objective 1: understand
Understanding the different types of noncurrent assets
Property, plant and equipment
fixed assets/ long -term assets that are intangible
Types of PPE:
Land, leasehold improvements and buildings
Technical equipment and machinery
Factory and office equipment
Construction in progress
Right-of-use assets
Each has its own costs, accumulated depreciation, impairment
The cost of any asset is the sum of all the costs incurred to bring the asset to its
intended use.
Purchase price
Taxes
Commissions
Other costs to make the asset ready for use
Intangible assets
=identifiable non- monetary assets without physical substance
Amortization= allocation of the cost of intangible assets over the asset’s useful
life
goodwill, software, patents,…
Other noncurrent assets
, Learning objective 2: determine
Determine the cost of PPE on initial recognition
Recognition of PPE and intangible assets
When it is probable that future economic benefits associated with the item
will flow to the entity
Cost of an item can be measured
Measurement of PPE on initial recognition
Cost of an assets= the sum of all the costs incurred to bring the assets to its
intended use
Cost of PPE includes:
Purchase price, including import, taxes, discounts
Transportation costs
…
Directly attributes costs
Costs of employee benefits (wages and salaries)
Costs of site preparation
Delivery and handling costs
Installation and assembly costs
Costs that should not be included
Costs of opening a new facility
Costs of introducing a new product or service
Administration and ither general costs
Land and land improvements
Land costs
price, Brokerage commission, survey fees, legal fees, property taxes,
Expenditures for grading and clearing land, Removing any unwanted
buildings
Land improvement costs: subject to depreciation
Driveways signs, Fences, Sprinkler systems, paving, security systems,
lighting
Leasehold improvements
Improvements made to leased property, Depreciated or amortized over
the lease term
Debit: land (A): total cost of the
land
Credit: note payable (L): cost of
the land
