Long term assets

Long-Term Asset s
© 2009 Larry M. Walt her, under nonexclusive license t o Christ opher J. Skousen &
Vent us Publishing ApS. All m at erial in t his publicat ion is copyright ed, and t he exclusive
propert y of Larry M. Walt her or his licensors ( all right s reserved) .
I SBN 978- 87- 7681- 488- 5

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Contents

Long-Term Assets

Cont ent s
Part 1. Long-Term Investments

7

1.
1.1

Intent-Based Accounting
The Fair Value Measurement Option

8
9

2.
2.1

2.2
2.3
2.4
2.5

Available for Sale Securities
Other Comprehensive Income
An Illustration
Alternative: A Valuation Adjustments Account
Dividends and Interest
The Balance Sheet Appearance

10
10
11
12
12
12

3.
3.1
3.2
3.3
3.4
3.5

Held to Maturity Securities
The Issue Price
Recording the Initial Investments
Illustration of Bonds Purchased at Par

Illustration of Bonds Purchased at a Premium
Illustration of Bonds Purchased at a Discount

15
15
15
16
17
20

4.

The Equity Method of Accounting

22

5.
5.1
5.2
5.3

Investments Requiring Consolidation
Economic Entity Concept and Control
Accounting Issues
Goodwill

24
24
24
26

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Contents

Long-Term Assets

5.4

5.5

The Consolidated Balance Sheet
The Consolidated Income Statement

26
27

Part 2. Property, Plant and Equipment

28

6.
6.1
6.2
6.3
6.4
6.5
6.6
6.7

What Costs are Included in Property, Plant and Equipment
Cost to Assign to Items of Property, Plant and Equipment
Interest Cost
Training Costs
A Distinction Between Land and Land Improvements
Lump-Sum Acquisitions
Professional Judgment
Materiality Considerations

29
29
30
30
30
31
32
32

7.

Equipment Leases

33

8.

Service Life and Cost Allocation

34

9.
9.1
9.2

Depreciation Methodology
Many Methods
Some Important Terminology

36

37
37

10.
10.1
10.2

The Straight-Line Method
Fractional Period Depreciation
Spreadsheet Software

40
40
41

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