Terms in this set (10)
Straight-line (SL) depreciation
Depreciation expense = (original cost - salvage value) / depreciable life
Higher depreciation expense in early years
Double-declining balance (DDB) method
DDB depreciation in year x = (2/asset life in years) * book value at beginning of year x
Depreciation expense per unit = (cost - salvage value) / expected number of units of production for entire life
Depreciation expense for period = Expense per unit * units for period
Impairments under IFRS
Assessed annually. Impaired when book value exceeds recoverable amount - greater of fair value less selling costs or value in use (PV of future cash flows). Write down to recoverable amount and recognize loss in income statement. Loss can be reserved.
Impairments under US GAAP
Assessed when suspected. Impaired when book value greater than future UNDISCOUNTED cash flow stream. Write down to fair value or discounted future cash flows and recognize loss in income statement.
Impairment - ROA and ROE
Lower in year of impairment
Higher in subsequent years
Average age (in years) of fixed assets
Accumulated depreciation / Annual Depreciation Expense
Average depreciable life of fixed assets
Ending Gross Investment / Annual Depreciation Expense
Remaining useful life of fixed assets
Ending Net Investment / Annual Depreciation Expense
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