Please enable JavaScript.
Coggle requires JavaScript to display documents.
7.1. Analysis of LONG-TERM ASSETS - Coggle Diagram
7.1. Analysis of LONG-TERM ASSETS
Acc treatment of capitalized costs and expensed costs
Capitalize
Acc: Non current asset on BS
Outflow of CFI
Apply: Asset expected to provide a future economic benefit over multiple acc periods
In subsequent periods: The capitalized amount is allocated (expensed) over the asset's usefull life as depreciation expense (for tangible assets) or amortization expense (for intangible assets with finite lives).
Interest expense
When a firm constructs an asset for its own use or, for resale (rarely), the
interest that accrues during the construction period
is capitalized as a part of the asset's cost
The treatment of construction interest is similar under GAAP & IFRS
The interest cost is allocated to the IS through depreciation expense (if the asset is held for use), or COGS (held for sale).
Capitalized interest: Outflow of CFI
Analytical Implication:
Both capitalized and expensed interest should be used whe calculating interest coverage ratios
Any depreciation of capitalized interest on the IS should be added back when calculating income measures
Từ cần lưu ý
Salvage value = residual value = giá trị thanh lý
Expense
Account:
Cost in IS
Outflow of CFO
Apply : Asset expected to provide economic benefits in only the current period
In subsequent periods: ko có thì trừ hết vào expense rồi
Interest expense: Other Interest is expensed
Capitalized costs, compared to immediately expensing:
Nếu dùng vốn hóa thì các chỉ số sau sẽ như thế nào qua các năm so với expense ngay
Net income / EBIT
1st yr: Higher
Subsequent yrs: Lower
Interest expense
1st yr: Lower
sub yrs: Higher
Assets
1st yr: Higher
sub yrs: Higher
Revenue / Debt
1st yr: the same
sub yr: the same
Owner's equity:
1st yr: Higher
sub yrs: Higher
ROE:
1st yr: Higher
sub yrs: Lower
ROA:
1st yr: Higher
sub yrs: Lower
Debt-to-
equity
:
1st yr: Lower
sub yrs: Lower
Debt-to-
asset
:
1st yr: Lower
sub yrs: Lower
Interest coverage (EBIT/ Interest expense):
1st yr: Higher,
vì được vốn hóa luôn nên thấp
sub yrs: Lower
, ko được vốn hóa nên interest expense cao hơn, đồng thời gian EBIT bị giảm do khấu hao => trong khi đó, expense ngay đã dứt cái interest expense từ hồi mua
Total asset turnover (Revenue / Avg total asset)
1st yr: Lower
sub yrs: Lower
Measurement of Long-lived tangible assets
Revaluation model
(1) The case of gain in the initial revaluation
Initial revaluaiton:
Asset: carrying amount (CA) increase
Equity: Revaluation surplus ( RS) increase
Sub revaluation:
FV > CA
: CA tăng, RS tăng
FV < CA
but
khoản giảm < initial surplus
: CA giảm, RS giảm
FV < CA
và
khoản giảm > initial surplus
: CA giảm, RS = 0,
ghi nhận loss expense trong IS
(2) The case of loss in the initial revaluation
Initial revaluation:
FV < CA: CA giảm, ghi nhận loss expense trong IS
Sub revaluation:
FA < CA:
CA giảm, loss tăng
FA > CA
but
khoản tăng < initial loss
: CA tăng, ghi nhận gain income trong IS
FA > CA
và
khoảng tăng > initial loss
: CA tăng, gain tăng bằng initial loss, khoản dư thì ghi nhận RS tăng
Carrying value
IFRS:
Carrying value = Original cost - accumulated depreciation - Impairment
GAAP:
Carrying value = Fair value - Acummulated depreciation - Impairment charges
Depreciation
Requirement
IFRS: must depreciated the components of an asset separately, nếu thời gian hữu ích khác nhau đáng kể
GAAP: cho dùng nhưng ko ai dùng :>>
Method and calculation
(1) Straight-line:
Depreciation = (Cost - Salvage value) / Useful life = Depreciable cost / Depreciable life
(2) Unit of production:
Depreciation = (Cost - Salvage value) * Output in the period / Outputs unit in whole life
(3) Accelerated
Depreciation in year n = 2 x Beginning book value / depreciation life
Effect
Effect on financial statements
Change in estimates: Companies can increase earnings by choosing
longer depreciable
life and
higher salvage value
.
Net asset value
: higher
Asset turnover
: lower
Not effects on taxes and cash flow
Requirement of restratement:
No restratement
: Change in depreciation methods for newly acquired assets / useful life and salvage value
Restratement
: Change in depreciation method for all asset
Comparison of financial reporting of Investment property and PPE.
coi ở 157 SLIDE và 44 trong vở