**Advanced Accounting for Assets & Liabilities

Beyond basic straight-line depreciation, this section focuses on more complex methods. Accelerated Depreciation: We'll explore the double-declining balance and sum-of-the-years' digits methods, understanding how they impact earnings and taxes. Example: A company purchases a machine for $100,000 with a 5-year useful life. Using double-declining balance, the depreciation in year 1 is 40% (2/5 * 100%) of $100,000 = $40,000. Year 2 would be 40% of the remaining book value. Component Depreciation: We'll cover how to depreciate different parts of an asset separately, offering a more accurate reflection of their useful lives. Example: An aircraft's engine might have a shorter useful life than the airframe. Change in Estimate: Learning how to account for changes in estimated useful life and salvage value. Example: A company revises the estimated remaining life of a building from 20 years to 15 years. This necessitates recalculating the depreciation expense going forward. Intangible Asset Amortization: How to calculate and present impairment of intangible assets, along with different amortization periods.

This section covers the process of recognizing and measuring asset impairment. We'll examine the impairment models under both GAAP and IFRS. Triggering Events: Understand the indicators that signal an asset might be impaired (e.g., significant decrease in market value, adverse changes in the business climate). Impairment Tests: Learn the two-step impairment test (GAAP) and the recoverable amount test (IFRS). Example: A company's trademark value declines due to a competitor's success. It must evaluate whether the trademark's book value is recoverable. Measuring Impairment Loss: Calculating the impairment loss based on the difference between the asset's carrying value and its fair value (less costs of disposal under GAAP) or recoverable amount (higher of fair value less costs to sell and value in use under IFRS). Recoveries of Impairment (IFRS Only): Understand the accounting for recoveries of previously recognized impairment losses. Example: A company impairs an asset due to a slowdown in sales. Later, sales recover, and the asset's value increases, potentially requiring a reversal of the impairment loss (under IFRS, but not GAAP). Understanding how to classify the asset (goodwill, etc.) and the associated impact on profit and loss.

This section dives into accounting for specialized liabilities. Asset Retirement Obligations (ARO): Understand how to estimate, recognize, and measure AROs, including the present value of future costs. Example: A company has a legal obligation to dismantle a nuclear power plant at the end of its useful life. This requires estimating the cost of dismantling and recognizing a liability along with a corresponding asset retirement cost. Derivative Liabilities & Hedge Accounting: Accounting for derivatives used as hedges to reduce risk. This includes understanding the initial and subsequent measurement of derivative liabilities and the requirements for hedge accounting (e.g., documenting hedge effectiveness). Example: A company uses a forward contract to hedge against currency fluctuations related to a foreign sale. Fair Value Measurement (Level 1, 2, and 3 Inputs): Gain a deep understanding of fair value principles, including the hierarchy of inputs (Level 1: quoted prices in active markets; Level 2: observable inputs other than quoted prices; Level 3: unobservable inputs). Example: Valuing a financial instrument that uses Level 3 inputs involves complex modeling and requires significant judgment and disclosure.