What is an Impaired Asset? Explained

What is an Impaired Asset? Asset impairment is often confused with asset depreciation, which is a predictable and expected occurrence as an asset ages or incurs wear and tears over the course of normal use. In contrast, asset impairment reflects a more dramatic drop in asset value due to extenuating circumstances, such as changes in … Read more

What is the Half-Year Convention for Depreciation?

The half-year convention is used to calculate depreciation for tax purposes and states that a fixed asset is assumed to have been in service for one-half of its first year, irrespective of the actual purchase date. The remaining half-year of depreciation is deducted from earnings in the final year of depreciation. What is Half-Year Convention … Read more

What is Goodwill? Explained with Examples

Goodwill arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the fair market value of the tangible assets, the intangible assets that can be identified, and the liabilities obtained in the purchase. What is Goodwill? Goodwill is the excess of the purchase price paid … Read more

What is a Fully Depreciated Asset?

A fully depreciated asset is a plant asset or fixed asset where the asset’s book value is equal to its estimated salvage value. In other words, all of the depreciation that was intended (cost minus estimated salvage value) has been recorded. Definition of Fully Depreciated Assets Fully depreciated assets can be defined as any long-term … Read more

What is Economic Life?

Economic life, also known as service life, useful life or depreciable life, refers to how long an asset generates more income than it costs to maintain and operate i.e. how long it remains profitable to keep. When it costs too much to keep repairing so that no profit is made, it has reached the end … Read more

What is Capitalized Cost? Explained

A Capitalized Cost is the cost incurred in the purchase and financing of fixed assets. It includes not only the price paid for an asset but also the expenses incurred on its installation and transportation. What is a Capitalized Cost? A capitalized cost is recognized as part of a fixed asset, rather than being charged … Read more

What are Biological Assets? Measurement, Example

Biological assets can be held and accounted for by any business owner. However, because of their nature, they are, typically, of the utmost importance to farmers or any individuals whose primary source of profit comes from growing, selling, and shipping such goods. What are Biological Assets? Agricultural activity differs from other activities carried out by … Read more

What Asset retirement obligation for fixed assets

An asset retirement obligation (ARO) is a legal obligation that is associated with the retirement of a tangible, long-term asset. It is generally applicable when a company is responsible for removing equipment or cleaning up hazardous materials at some agreed-upon future date. Asset Retirement Obligation An asset retirement obligation (ARO) is an obligation to retire … Read more

What is Asset Disposal? Explained with Example

During its activity, it is not uncommon for a company to proceed with fixed asset disposal, either to replace it (example: renewal of equipment that has become obsolete), to obtain an asset gain (example: securities participatory), or due to normal changes in its activity. From an accounting point of view, it is then a question of noting all the changes in the assets of … Read more

Amortization of Intangible Assets – Calculation, Example and Methods

In business, amortization is the practice of writing down the value of an intangible asset, such as a copyright or patent, over its useful life. Amortization expenses can affect a company‚Äôs income statement and balance sheet, as well as its tax liability. Calculating amortization for accounting purposes is generally straightforward, although it can be tricky … Read more