Wiley GAAP 2008

Concepts, Rules, and Examples

Acquisition Costs

The cost of constructing a title plant includes the cost of obtaining, organizing, and summarizing historical information pertaining to a particular tract of land. Costs incurred to assemble a title plant are to be capitalized until the record is usable for conducting title searches. Costs incurred to construct a backplant (a title plant that predates the time span of an existing title plant) must also be capitalized. However, an enterprise may capitalize only those costs that are directly related to and traceable to the activities performed in constructing the title plant or backplant.

The purchase of a title plant or backplant, or an undivided interest therein (the right to its joint use) is recorded at cost as of the date acquired. If the title plant is acquired separately, it is recorded at the fair value of consideration given.

Capitalized title plant costs are not amortized or depreciated unless an impairment in the carrying amount of the title plant occurs. The following events or changes in circumstances can indicate that the carrying amount may not be recoverable. An impairment may be indicated by the following circumstances (not intended to be an exhaustive list):

1. Changing legal or statutory requirements

2. Economic factors, such as changing demand

3. Loss of competitive advantage

4. Failure to maintain an up‐to‐date title plant

5. Circumstances that indicate obsolescence, such as abandonment of title plant

The provisions of FAS 144 apply ...