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Depreciable lives accounting change

2019-06-20 来源: 51due教员组 类别: Essay范文

下面为大家整理一篇优秀的essay代写范文- Depreciable lives accounting change,供大家参考学习,这篇论文讨论了折旧年限会计变更。海德公司决定降低折旧年限,使固定资产的成本与产生的收入相匹配,并据此制定了公认会计准则,要求对会计估计进行变更。为了符合GAAP,海德公司需要做出各种假设和估计,这些假设和估计影响财务报告的各个方面,随着实际信息的呈现,会计估计可能会发生变化。

Depreciable,折旧年限,essay代写,作业代写,代写

Based on the determination made by the company to reduce the depreciable lives to match the cost of the fixed assets with the revenue produce, Hyde company has a Generally Accepted Accounting Principles (GAAP) required change in account estimate. In order to conform with GAAP, Hyde company is required to make various assumptions and estimates that affect all aspects of financial reporting and as actual information is presented could have a change of accounting estimate. Under GAAP, Hyde company must account for a change in accounting estimate in the period of change and future periods if they are affected (Wahlen, Jones & Pagach, 2015). This means that the company does not need to perform a retrospective adjustment on a previously reported period rather the adjustment to reduce the depreciable lives of the assets will be a prospective revision recorded beginning in the period of the change in accounting estimate.

Hyde company will also need to disclose the revised amounts in the notes to its financial statements on how the change impacts income from continuing operations, net income and related earnings per share (Bragg, 2018). It’s important for the company to understand on the depreciable lives reduction will impact these items. The depreciation expense will increase over the reduced period which will have a direct negative effect on income from continuing operations, net income and earnings per share, however depreciation is added back for cash flow purposes. In order for the company to determine the effect of reducing the depreciable lives, Hyde company will need to calculate the revised periodic depreciation expense. At the beginning of the period of change, Hyde company will take the remaining book value of the assets less the salvage value and divide it by the new remaining depreciable life (Jan, 2013). Hyde company will then take the adjusted depreciation expense per period and debit depreciation expense and credit accumulated depreciation. The change of accounting estimate should also be disclosed in the financial statement notes to provide the amount of change and clarity to the company policy change if the useful life revision materially decreases the reported net income. The company should describe the revision in the footnotes to their financial statements to ensure shareholders and potential investors understand the financial impact of the change.

Thank you,

Matthew

References

Bragg, S. (2018, January 14). Change in accounting estimate. Retrieved September 5, 2018, from https://www.accountingtools.com/articles/2017/5/17/change-in-accounting-estimate

Jan, O. (2013). Changes in accounting estimates. Retrieved September 5, 2018, from https://accountingexplained.com/financial/statements/changes-in-accounting-estimates

Wahlen, J.M., Jones, J.P., Pagach, D.P. (2015). Intermediate Accounting: Reporting and Analysis. Mason, OH: South-Western, Cengage Learning. Retrieved September 5, 2018.

Reply

Straight line depreciation is one method of determining the value of business assets as they age. While it has some advantages, it may also have disadvantages, especially when reporting taxes. When money is spent to purchase an asset it is not recorded as an expense, rather the expense is spread over the useful life of the item as depreciation. This is what is known as straight line depreciation and it is the simplest method for expensing an asset.

When straight line depreciation is used, an asset may have a lower cash value than the amount shown on the books. Many assets, like cars, lose more in depreciation in the first year than they do in subsequent years. If straight line depreciation is employed to estimate the value of a car, the actual resale value at the end of the first year will be lower than the figure which would be obtained when calculating with the straight line depreciation technique. On the other hand, the company’s reported income will be higher than if the actual depreciation was used.

References

Straight Line Depreciation. (n.d.). StraightLineDepreciation.org. Retrieved October 2, 2016, from StraightLineDepreciation.org: http://www.straightlinedepreciation.org/Advantages-and-Disadvantages-of-Straight-Line-Depreciation.html

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