Explain the Derecognition of Debt
At maturity, the discount or premium on bonds is fully amortized and the carrying amount is equal to the face value. Upon repayment, bonds payable are reduced by the carrying amount (face value), and cash is reduced by the same…
Reported and Common-size Cash Flow Statements
Users of financial statements can obtain useful information about a company by analyzing its cash flow statement. This can help them to understand the company’s business and earnings as well as predict its future cash flows. The common-size analysis of…
Analyze and Intperret Financial Statement Disclosures
Users of financial statements can use financial statement disclosures to deepen their understanding of a company’s investments in tangible and intangible assets. Financial statement disclosures divulge such details as how those investments have changed during a reporting period, how the…
Impairment, Revaluation and Derecognition
The impairment, revaluation, and derecognition of a company’s property, plant, and equipment, as well as its intangible assets, can significantly affect its financial statements and the financial ratios derived from them. The Effect of Impairment, Revaluation, and Derecognition on Financial…
Explain the Impairment of Property, Plant, and Equipment and Intangible Assets
An asset is said to be impaired when its carrying amount is greater than its recoverable amount or fair value. Impairment losses will be recognized whenever the asset’s carrying amount is not recoverable. At the end of each reporting period,…
Different Amortization Methods for Intangible Assets
Amortization refers to the process of allocating the cost of an intangible asset over the asset’s useful life. Only the intangible assets which are assumed to have finite useful lives are amortized over their useful lives, along the lines by…
Capitalizing vs Expensing – Effects on Ratios
Discretion regarding whether to expense or capitalize expenditures can impede comparability across companies. For example, a company that expenses its expenditure instead of capitalizing it will have lower profitability in the first year but higher profitability in subsequent years, indicating…
Financial Reporting of Intangible Assets
There are three primary ways intangible assets may be acquired: purchased in situations other than business combinations, developed internally, and acquired in business combinations. The accounting treatment accorded to an asset depends on which of these methods is used in…
