Fixed Assets

Representing Fixed Assets Accounting for Fixed Assets Second Edition Raymond H. Peterson John Wiley and Sons, Inc. Copyright  © 2002 by John Wiley and Sons, Inc. , New York. All rights reserved.No some portion of this distribution might be repeated, put away in a recovery framework or transmitted in any structure or using any and all means, electronic, mechanical, copying, recording, filtering or something else, aside from as allowed under Sections 107 or 108 of the 1976 United States Copyright Act, without either the earlier composed consent of the Publisher, or approval through installment of the fitting per-duplicate charge to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4744.Requests to the Publisher for authorization ought to be routed to the Permissions Department, John Wiley and Sons, Inc. , 605 Third Avenue, New York, NY 10158-0012, (212) 850-6011, fax (212) 850-6008, E-Mail: PERMREQ @ WILEY. COM. This distribution is intended to give precise and legitimate data as to the topic secured. It is sold with the understanding that the distributer isn't occupied with rendering legitimate, bookkeeping, or other expert services.If lawful exhortation or other master help is required, the administrations of a skillful expert individual ought to be looked for. This title is likewise accessible in print as ISBN 0-471-09210-X. Some substance that shows up in the print rendition of this book may not be accessible in this electronic version. For more data about Wiley items, visit our site at www. Wiley. com To various individuals who affected my life and set me up for the activity of making this book: First, my mom, who instructed me to peruse, however permitted me to encounter the happiness regarding reading.She opened up for me the huge information accessible in libraries. Dr. Swim Moorehouse, resigned Professor of Accounting and previous Chairman of the Department of Business and Economics at California State University, Hayward, who numerous years prior, when I was an undergrad understudy in his bookkeeping course, animated my fervor about the bookkeeping capacity. Favored with classes of less than six understudies in another college, we spent many class hours talking about the hypothesis of accounting.These conversations largy affected my profession bearing. Baron Malone, a District Accounting Manager, who right off the bat in my profession constrained me to build up my own musings and not simply depend on past training. He likewise constrained me to aquire the aptitude of transcription, which made the production of this book a chance. Dodie Peterson, world’s best secretary, who changed over my ramblings into an original copy. Substance About the Author Preface Chapter 1 What Is Accounting for Fixed Assets?Introduction Consumption of Benefits Characteristics of Assets Need to Change Chapter 2 What Is an Asset? Presentation Historical Cost Matching Principle Fixed Assets Propert y Plant Equipment Defining Assets Government Accounting User Fees Not-revenue driven Accounting xv xvii 1 3 4 9 11 12 13 14 16 17 18 20 22 24 vii viii Contents Chapter 3 Classifications of Asset Transactions Introduction Classification Systems Accounting Policy Decisions Coding of Transactions Property Record Coding System 7 27 28 31 33 34 39 40 44 47 48 49 52 54 55 56 57 58 59 Chapter 4 Determining Base Unit Introduction Definition of Base Unit Purpose of a Base Unit Establishing Base Units Decision Rules Difficulties in Establishment Land Buildings Equipment Criteria for Establishing Base Units Examples Spare Parts Chapter 5 Control of Property, Plant, and Equipment Introduction Asset Accountant Asset Custodian Inventories Property Record System Identification of Assets Farm Owner Applied Numbers Contents ixIdentification of Specific Asset Items to Be Tagged Bar Coded Tags Security Chapter 6 Asset Policies Manual Introduction Purpose Creating the Manual Partial Sample Manual Use o f the Manual Property, Plant, and Equipment Custodian’s Responsibilities of Asset Accountant Procedures for Purchase of Physical Assets Approval Limits Minimum Capitalization Level Items Always Charged to Expense Account Transaction Reports Data Definitions Chapter 7 Establishing Value Introduction Historical Cost Other Values Uses of Values Insurance Collateral for a Loan Purchase or Sale of a Complete Business First Creation of Property Record 0 61 64 65 67 69 72 73 75 76 77 83 84 85 86 87 x ContentsValuation Techniques Management Information Periodic Assessment of Value Chapter 8 Allocation of Costs to Accounting Periods Introduction Costs of Using up Assets Depreciation Estimated Life Cost Basis Allocation Methods Accelerated Depreciation Other Depreciation Concerns Tax versus Book Depreciation Balance Sheet Disclosure Not-revenue driven Organizations Chapter 9 Regulated Utilities Introduction Differences in GAAP Telecommunications Accounting Basic Property Record Telecom munications Plant in Service Chart of Accounts Railroads Property Accounts Cost of Construction Units of Property List of Units of Property Accounting for Engineering Costs 88 89 90 93 94 95 96 97 98 99 100 101 105 106 107 109 110 111 114 115 Contents xiCommon and Contract Motor Carriers of Passengers Carrier Operating Property Depreciation Minor Items Uniform System of Accountsâ€Tangible Accounts Account Definitions Chapter 10 Government Accounting Introduction Measurement Focus Fund Accounting Funding for Government Assets Accounting Standard Setting Measuring Service Efforts and Accomplishments Current Government GAAP Property Records Infrastructure Assets Measurement of Utilization Establishing Property Record Establishing Property Record Units Infrastructure Property Units Planning Accounting Policies Software Selection Off-the-Shelf Software Chapter 11 Not-revenue driven Accounting Introduction Accounting Definition of Not-revenue driven Organizations 117 119 123 124 125 12 6 127 128 129 130 131 132 133 134 135 136 xii ContentsAccounting Problems of Not-revenue driven Organizations Formal Accounting Standards Need for Change in Not-revenue driven Accounting for Property, Plant, and Equipment Creating Property Records Property Record System Documentation Chapter 12 Creation and Verification of Property Records Introduction Purpose of Property Record New Concept Requirements for a Physical Asset Database Property Record Units Coding Systems Property Record Codes for Motor Vehicles Other Codes Required Property Record ID Number Maintenance of the Property Record Database Responsibilities of Asset Manager Updating Records Recording Maintenance Costs Verification of Physical Existence Military Commander Approach Foreign Corrupt Practices Act Fully Depreciated Assets Reports from the Property Record System Chapter 13 Computer Programs Introduction Asset Database Software 138 139 140 141 143 145 147 149 150 151 152 155 156 157 158 159 160 161 163 164 165 167 167One-Write Systems Existing Database Programs Software Selection Off-the-Shelf Property Record Database Packages Review Copies of Software Evaluation of Software Packages Program Review Checklist for Program Review Database Fields Bibliography Index 168 169 170 171 172 175 176 179 185 xiii About the Author Raymond (Ray) H. Peterson is as of now the senior accomplice of Ray Peterson and Associates, a counseling firm contribution business help with setting up and changing bookkeeping frameworks. He has filled in as the treasurer of various philanthropic associations. He has more than thirty years experience as an administration bookkeeper with the Bell System. He resigned as Director of Financial Accounting with Pacific Bell. Mr. Peterson has dealt with the structure of Pacific Telephone and Telegraph Companies detail property records.During the three-year separation of the Bell System, he was delegated to a Federal Communications Commission team to make another uniform arrangement of records for phone organizations. The proposed framework was received by the FCC and was introduced in all phone organizations. Mr. Peterson served for a long time on the Institute of Management Accountants Financial Accounting Standards Committee and its antecedent Subcommittee on Management Accounting Statement Promulgation. He got a BS from California State University at Hayward and a MBA from Golden Gate University in San Francisco. He additionally showed bookkeeping and the executives data frameworks at Golden Gate University. xv PrefaceSince the primary release of this book in 1994, very little change has happened to bookkeeping principles for Property, Plant, and Equipment in business. The GAAP declared by the Financial Accounting, FASB, has been to facilitate the idea of recognizing the expense of an advantage and spreading that cost over the bookkeeping time frames that advantage. Representing commitments, impedances, and financing of advantages have been tended to by the FASB. Conversely, much has occurred in the territories of Not-for-Profit and Government representing fixed resources. FASB requested the capitalization of benefits and charging of deterioration by Not-for-Profits. The administration Accounting measures Board was made as an equivalent to the FASB with the power and duty to proclaim GAAP for governments.They supplanted the Government Finance Officers Association and its â€Å"Blue Book†, Governmental Accounting, Auditing, and Financial Reporting as the â€Å"official† bookkeeping rules for State and Local government. An early advance by the new GASB was to suspend devaluation for â€Å"government† not-revenue driven bookkeeping. There was an assurance of purview among FASB and GASB which are illustrated in Chapter 10, â€Å"Government Accounting† and Chapter 11, â€Å"Not-For-Profit Accounting. † Then the GASB gave idea papers that moved government bookkeeping toward the practices since a long time ago held as appr