Reading 37: Long-lived Assets-LOS e 习题精选 2011, concerning, different, methods, useful

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Session 9: Financial Reporting and Analysis: Inventories, Long-lived Assets, Income Taxes, and Non-current Liabilities
Reading 37: Long-lived Assets

LOS e: Discuss the different amortisation methods for intangible assets with finite lives, the effect of the choice of amortisation method, and the assumptions concerning useful life and residual value on amortisation expense.

 

 

Allocating an intangible asset’s cost to the income statement over time is known as:

A) amortization.

B) depreciation.

C) depletion.

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Allocating an intangible asset’s cost to the income statement over time is known as amortization. The same process is known as depreciation for tangible assets. For natural resources, allocation of cost to the income statement over time is commonly referred to as depletion.

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Under normal circumstances, intangible assets with indefinite lives are:

A) amortized over a reasonable period but not subject to impairment.

B) not amortized but subject to impairment.

C) amortized over a reasonable period and subject to impairment.

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Intangible assets with indefinite lives are not amortized but are subject to impairment charges. Under such situations, there may be in impairment in the asset value where events and circumstances indicate that the firm may not be able to recover the carrying value through future use. Examples include significant declines in market value of the asset or significant deterioration in the asset’s physical condition.

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Intangible assets with finite useful lives are:

A) amortized over their actual lives.

B) not amortized, but are tested for impairment at least annually.

C) amortized over their expected useful lives.

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Intangible assets with finite lives are amortized over their expected useful lives, which is an estimate. Actual lives of intangible assets are often not known in advance. Intangible assets with infinite lives are not amortized, but are tested for impairment at least annually.