Wiley GAAP 2008

Perspective and Issues

Long‐lived assets are those expected to provide an economic benefit to the reporting entity for a number of future periods. GAAP regarding long‐lived assets involves the determination of the appropriate amounts at which to initially record the assets—which amounts will include costs associated with any legal obligations to eventually retire the assets and the cost of interest incurred during construction. In addition, determinations must be made of the appropriate method to be used to allocate those amounts over the periods to be benefited, subsequent increases in carrying value attributable to changes in the estimates of retirement costs to be incurred, the measurement of impairment losses, and the accounting for assets to be disposed of rather than kept in service.

Long‐lived assets are primarily operational assets and are classified into two basic types: tangible and intangible. Tangible assets have physical substance and are categorized as follows:

1. Depreciable

2. Depletable

3. Other tangible assets

Intangible assets have no physical substance. Their value is based on the rights or privileges to which the reporting entity is entitled.

Most of the accounting issues associated with long‐lived assets involve proper measurement and timing of the transactions. Adequate consideration must be given to the economic substance of the transaction.

All entities are required to review long‐lived assets and certain identifiable intangible assets for impairment whenever circumstances ...