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Financial Accounting

prof. Adriana Tiron Tudor- course

att

Agenda course

1. Objectives

2. Assets definition and recognision

3. Tangible assets

4. Depreciation

5. Recording of the transactions with tangible assets

Lands and lands’ improvements

Buildings, machinery, equipment, furniture

Tangible assets in progress

Real estate investments

That tangible assets

represent a significant portion of both total and fixed assets

are physically observable items, held for use in the

production, sale or supply of goods or services, for rental to

others, or for administrative purpose, and are expected to be

used during more than one period

are different from inventories

1. Objectives

After studying this chapter, you will understand:

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How to

distinguish capital expenditures and revenue expenditures

record internally constructed tangible assets

handle financing or borrowing ( interest) cost

1. Objectives

What

the concept of depreciation represents

the main methods of depreciation are

the main concepts are that allow the preparation of a

depreciation schedule

An asset represents a source controlled by the entity

as a result of past events

which is expected to generate future economic benefits for the entity

with a cost that can be credibly evaluated;

2. 1. Assets definition

An asset is recorded in the balance sheet when:Future economic benefits are likely to be realized as a result of

keeping (storing), using, selling that certain asset;

That certain asset has a cost or a value that can be evaluated

credibly.

The non-current assets are also called investment goods, long term assets or immobile

goods.

have the following characteristics: A period of utilization longer than a year;

They participate in the development of multiple economic circuits; they are not consumed nor replaced at their first utilization.

They are fixed in the activity of the patrimonial unit; they aren’t directly destined for sale.

They are held for use in the production or supply of goods or services, for rental to others or for administrative purpose

2. Assets definition

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In most countries of the Western Europe, the assets are presented in the reverse order of liquidity, as follows:

Non-current assets intangible assets

tangible assets

financial assets

Current assets inventory

receivable

short term investments

cash

Regulation assets pre-payments

2. Assets recognition

2.2 Assets recognition in BS

►2012 Financial documents

http://www.lvmh.com/investor-relations/documentation/results?date=2013

2.2. Assets recognition

Which of the following are examples of

fixed assets?

Cars on display at a showroom

Machine installed at a factory

Employees with more than one year of service

remaining before their retirement

Prof.PhD Adriana Tiron Tudor

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Questions/Discussion

A company buys 10 trucks with the payment in

2 weeks. Where will be recorded the trucks

knowing that the company’s object of activity

is :

a. transport

b. trade with trucks

What do you think ?

Which is the proportion that tangible assets

represent in balance sheet in each case.

2.2. Assets recognition

The recognition of the assets in the balance sheet

usually takes place along with the recognition of a

debt or an income in the profit and loss account (the

principle of the connection between the expenses

and incomes).

Acquisition Asset = Supplier (2=4)

Internally constructed Asset = Capitalized costs (2=7)

2.2. Assets recognition

birth life death

•Definition/

•Recognition

•Measurement

•Acquisition cost

•Production cost

Depreciation

Subsequent

expenditures

Capital

expenditures

Sale

Removing a

fully

depreciated

asset from

the books

3. Tangible assets

Accounting issues in reporting tangible assets

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3. Tangible assets

3. Tangible assets

are also called investment goods, long term assets or

immobile goods.

have the following characteristics:

A period of utilization and liquidation longer than a

year;

They participate in the development of multiple

economic circuits; they are not consumed nor replaced

at their first utilization.

They are fixed in the activity of the patrimonial unit;

they aren’t directly destined for sale.

RO value higher than 2.500 Ron ( fiscal recognition)

3. Tangible assets

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Contains the material goods of long term utilization in the activity of the entity.

According to the IAS 16 a tangible asset must be acknowledged in the balance sheet if:

It is estimated to generate economic benefits for the artificial person and

The cost of the asset can be evaluated credibly

Are recorded at cost.

cost consists of all expenditures necessary to acquire the asset and make it ready for its intended use.

3. Tangible assets

In the category of the tangible assets are contained:

The land

Land improvements

Buildings

Equipment, machinery, motor vehicles

Furniture

Mineral resources assets

Productive biological assets ( animals)

Tangible assets in transfer/progress

Real estate investments

3. Tangible assets

1. Land and land improvements are recorded

on two categories: land and land

improvements.

The land can be displayed on the following

categories: build on lands, non build on lands, lands

with deposits, agricultural, forest lands etc.

The land improvements are investments

effectuated and destined to enrich the lands, lakes,

swamps, other similar elements but also irrigation

systems, works of access, recordation at the energy

sources, embankments etc.

3. Tangible assets

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Acquisitions

Cost of Land Includes:

the cash purchase price

closing costs such as title and attorney's fees

real estate brokers commissions

accrued property taxes and other liens on the land

assumed by the purchaser.

3. Tangible assets

All expenditures necessary to make the improvements ready for their intended use.

Examples:

Drive ways

Parking lots

Fences

Underground sprinklers

Cost of Land Improvements include:

3. Tangible assets

The buildings contain halls, administrative

buildings, warehouses, including the

necessary installations (heat, telephone,

energy, water etc.) where the

enterprise’s activities take place:

production,

services,

commerce,

administration etc.

3. Tangible assets

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