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1、Intermediate Accounting 高远高远 公共邮箱公共邮箱： 密码密码：accounting Course Outline 1. Accounting for Long term Assets -Tangible assets: PPE( property, plant and equipment) - Intangible assets: Goodwill 2. Consolidated accounts合并报表合并报表 -Consolidated balance sheet; consolidated income statements -treatment of good
2、will 3.Ratio Analysis -Liquidity, Profitability, and solvency ratios - including calculation of Earnings per share (EPS)DepreciationlThree factors of depreciationl1. cost (including invoice price, delivery, import duty, installation, renewals) or revalued amountl2. useful life:l3. residual valuelDep
3、reciation methods:l1.straight linel2.reducing balancel3.sum of digits 年数总和法年数总和法example 1Simple plc has purchased a machine.The details are as follows:Cost of machine $800,000Residual value $104,000Estimated life 4 yearsCalculate:the annual depreciation charge using the a)straight-line method, and b
4、)sum of digits methodexample 1 straight line $,000 Cost 800lDepreciation for year 1 174 Net book value 626lDepreciation for year 2 174 Net book value 452lDepreciation for year 3 174 Net book value 278lDepreciation for year 4 174lResidual value 104 Cost - estimated residual value = depn. charge per y
5、ear Estimated economic life (800-104) /4 = 174example 1 sum of digits Cost 800lDepreciation for year 1 278 696*4/10 Net book value 522lDepreciation for year 2 209 696*3/10 Net book value 313lDepreciation for year 3 139 696*2/10 Net book value 174lDepreciation for year 4 70 696*1/10lResidual value 10
6、4Step1: Total depreciable cost= Cost - estimated residual value = 800-104 =696 Step2: Total digits: 1+2+3+4=10 Step3: Calculate the depn Rate (4/10, 3/10, 2/10, 1/10)Step 4: total depreciable cost * depn rate for each yearExample 2lArthur purchased a plant costing $1,000. Required: using reducing ba
7、lance method with an estimated useful life of 5 years and a residual value of $238lDiminishing depn. rate = 1 - n (residual value)/cost = 1 - 5 (238)/1000 = 25% Cost 1000lDepreciation for year 1 250 (beginning NBVdepn. Rate) Net book value 750lDepreciation for year 2 188 Net book value 562lDepreciat
8、ion for year 3 140 Net book value 422lDepreciation for year 4 105 Net book value 317lDepreciation for year 5 79 Net book value 238SolutionRevaluationlRevalue the price of fixed assets, not the useful life.lCompany would like to do revaluation when the market price goes up. (NOT compulsary)lAny incre
9、ase in value leads to the increase of unrealised profit (also called revaluation surplus重重估盈余估盈余), this unrealised profit should be added into Revaluation Reserve account. Dr asset Cr revaluation reservePractical example 3 Qiguan Ltd.PLC owns a machine which was purchased at 200,000 8 years ago. Cur
10、rently this building has been revalued at 250,000. No salvage value. The estimated useful life of this machine was 25 years at purchase, which still holds true. Required: Calculate the amount the revaluation surplus 重估盈余重估盈余, new annual depreciation charge and additional depreciation. Practical exam
11、ple 3Solution:NBV at date of revaluation= 200,000 (200000/25 x 8)= 136000Revaluation surplus = 250000 136000 = 114000“Old” depreciation = 200000/25 = 8000“New” depreciation = 250000/(25-8) the remaining life = 14705Additional depreciation = 14705-8000=6705Practical example 4 A fixed asset cost 15,00
12、0 six year ago. It was depreciated using straight line method with no residual value. The company has now adopted the current value approach for its building and this building has been revalued to 16,000. The fixed asset has an estimated useful life of 30 years when it was purchased but it has now b
13、een decided that the asset has a total useful life of 35 years. Calculate:-The NBV-Revaluation surplus-The old annual depreciation charge-The new annual depreciation chargePractical example 4SOLUTIONNBV at the date of revaluation :15,000 (15,000/30 x 6)= 12000Revaluation surplus:= 16,000 - 12,000= 4
14、000Old dep. 15,000/30 = 500New dep. 16,000/(35-6) = 552Additional depn 52Diminution 跌价跌价lRevaluation is not compulsary for companies, however, where companies revalue their fixed assets these revaluations must be kept up to date.lAnd that could be one reason diminution happens.lOnce diminution of a
15、fixed asset happens, there is a reduction in the revaluation reserve. Then there may be a reduction against profits, where profit and loss account (expense) increase. (Eg.p5 of your notes) Dr revaluation reserve profit and loss Cr assetImpairment of fixed assets 资产减值资产减值lCarrying value = Book value
16、(账面价值账面价值)lRecoverable amount (可收回价值可收回价值) is higher of realisable value 可变现价值可变现价值 value in use 使用价值使用价值 (selling value) (present value)lCarrying value recoverable amount no impairmentlCarrying value recoverable amount impairment loss (expense)orPractical example 5Information:lCarrying amount as at
17、 2002 balance sheet 96500lNet realizable value 70000lValue in use 86245Question: What is the revised carrying amount of the asset? Journalize the impairment loss.Solution:lRecoverable amount = 86245 (50%)lMinority Interest 少数股东权益少数股东权益 - Share of subsidiary not held by parent but by outside partylAs
18、sociate关联公司关联公司 - significantly influenced by the parent company (20-50%)Consolidated accountsParent CompanyMinority Interest20%Subsidiary Company1Subsidiary Company2Subsidiary Company3Subsidiary Company80%AssociateCompany 30%Consolidated accountsTreatment:lAll of a subsidiarys accounts are included
19、 (consolidated)+ recognize minority interest lOnly proportion share of associates net assets and profit1. Consolidated accountslExample:达能达能l1996年，收购武汉东西湖啤酒年，收购武汉东西湖啤酒54.2%的股的股权；收购深圳益力食品公司权；收购深圳益力食品公司54.2%股权。股权。l2000年年3月，达能收购乐百氏月，达能收购乐百氏92%的股权。的股权。l2004年，收购梅林正广和饮用水有限公司年，收购梅林正广和饮用水有限公司50%股份。股份。l 2006
20、年年7月，法国达能以持股月，法国达能以持股22.18%的比的比例成为中国汇源集团的第二大股东。例成为中国汇源集团的第二大股东。lSource:http:/ Consolidated accountsIssues:lWhen must consolidated accounts be prepared? by which company?lWhich companies included?lHow to deal with goodwill? (when value of investment by holding company does not equal share capital of subsidiary) And minority interest?
