Accounting Standards Codification Essay

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You had asked me to research over what accounting period should Green Products Company’s new asset, a production plant, be depreciated. As per the client, they believe that the useful life of the plant will be 40 years. As per ASC 360-10-35-4 (Property, Plant and Equipment- Subsequent Measurement) The cost of a productive facility is one of the costs of the services it renders during its useful economic life. Generally accepted accounting principles (GAAP) require that this cost be spread over the expected useful life of the facility in such a way as to allocate it as equitably as possible to the periods during which services are obtained from the use of the facility. This procedure is known as depreciation accounting, a system of accounting which aims to distribute the cost or other basic value of tangible capital assets, less salvage (if any), over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational manner. It is a process of allocation, not of valuation. The plant should be depreciated over its useful life. Green Products company can choose either a double declining depreciation or straight line depreciation, whichever is more beneficial for the company On a separate note, you had asked me to research how Jettison Manufacturing should classify its contingent debt obligations in year 2. As per Jettison’s information, their lender, National Bank, has accepted Jettison’s modifications and will not be requesting payment in full. According to ASC 470-10-45-11 (Debt – Other Presentation Matter) “ Current liabilities shall include long-term obligations that are or will be callable by the creditor either because the debtor's violation of a provision of the debt agreement at the balance sheet date makes the obligation callable or because the violation, if not cured within a specified grace period, will

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