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Amortization is the acquisition cost minus the residual value of an asset, calculated in a systematic manner over an asset's useful economic life. Depreciation is a corresponding concept for tangible assets. Methodologies for allocating amortization to each accounting period are generally the same as those for depreciation.
It covers money and other valuables belonging to an individual or to a business. [1] Total assets can also be called the balance sheet total. Assets can be grouped into two major classes: tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. [3]
IAS 16 permits two accounting models for measurement of the asset in periods subsequent to its recognition, namely the cost model and the revaluation model. [ 7 ] Under the cost model , the carrying amount of the asset is measured at cost less accumulated depreciation and eventual impairment (similar to the inventory's Lower of cost or market ...
Capital costs are fixed, one-time expenses incurred on the purchase of land, buildings, construction, and equipment used in the production of goods or in the rendering of services. In other words, it is the total cost needed to bring a project to a commercially operable status.
If the company deducts the purchase as a business expense the same year it purchased the equipment — and generated $500,000 in sales — it may show a profit of $100,000 for that year.
Goodwill is a special type of intangible asset that represents that portion of the entire business value that cannot be attributed to other income producing business assets, tangible or intangible. [3]
In most cases, only tangible assets are referred to as fixed. While IAS 16 (International Accounting Standard) does not define the term fixed asset, [2] it is often colloquially considered a synonym for property, plant and equipment. According to IAS 16.6, property, plant and equipment are tangible items that:
The Modified Accelerated Cost Recovery System (MACRS) is the current tax depreciation system in the United States. Under this system, the capitalized cost (basis) of tangible property is recovered over a specified life by annual deductions for depreciation. The lives are specified broadly in the Internal Revenue Code.