Property, Plant, and Equipment from Acquisition to Disposal

This chapter covers long-lived tangible assets from acquisition through disposal. The major issue is knowing which costs belong in the asset, how they are allocated over time, and when changes in value or use require a different accounting response.

In This Chapter

• Property, Plant, and Equipment Acquisition and Capitalization covers initial recognition and cost build-up.
• Depreciation Methods and Depletion Calculations explains cost allocation techniques.
• Repairs, Betterments, Replacements, and Other Subsequent Costs separates maintenance from capitalizable improvement.
• PP&E Impairment Testing and Asset Retirement Obligations covers decline-in-value and obligation recognition issues.
• Assets Held for Sale and Disposal Accounting explains the end-stage classification and measurement changes.

How to Use This Chapter

• Read this chapter after inventory so asset accounting progresses from current to long-lived assets.
• Separate initial capitalization from later measurement and disposal questions.
• Return here when a FAR problem mixes acquisition cost, depreciation, and impairment in the same fact pattern.

In this section

• Property, Plant, and Equipment Acquisition and Capitalization
  Explore direct vs. indirect costs, interest capitalization, and the distinction between repairs and capital improvements for property, plant, and equipment assets.
• Depreciation Methods and Depletion Calculations
  A comprehensive guide exploring Straight-Line, Double-Declining Balance, and Sum-of-the-Years’-Digits depreciation methods, plus depletion for natural resources. Includes formulas, partial-year examples, practical illustrations, visual diagrams, and best practices.
• Repairs, Betterments, Replacements, and Other Subsequent Costs
  Learn the key principles and best practices surrounding capitalizing or expensing subsequent expenditures on Property, Plant, and Equipment assets, including major repairs, betterments, and replacements.
• PP&E Impairment Testing and Asset Retirement Obligations
  Detailed guidance on the two-step and one-step impairment test frameworks under U.S. GAAP, accompanied by an in-depth look at measuring and recording ARO liabilities.
• Assets Held for Sale and Disposal Accounting
  Comprehensive guidance on the classification, measurement, and cessation of depreciation for long-lived assets held for sale or disposal under U.S. GAAP and IFRS.