Today, that property may be reasonably valued at $375,000. However, many financial experts argue that historical cost may be too conservative a value for assets because the sum is not adjusted even in stable market conditions.įor example, say a company purchased a building and the land it sits on for $60,000 in 1975. Use of historical cost prevents the over-valuation of an asset this can be particularly useful when asset appreciation is due to volatile market conditions. Impairment of both tangible and intangible assets is recorded as a separate expense on the income sheet and is neither amortized nor depreciated. Indefinite life intangible assets are not amortized however, they are assessed for impairment annually. The value of limited-life intangible assets is amortized (not depreciated) and generally goes down over time. There are two types of intangible assets: limited-life and indefinite life. Impaired assets are written down from historical cost to fair market value as a depreciation expense.
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