Fundamental Financial Accounting Key Terms and Concepts Chapter 6 - Accounting For and Presentation of Property, Plant and

Equipment, and Other Noncurrent Assets

accelerated depreciation method amortization annuity capital lease capitalizing copyright declining-balance depreciation method depletion discount rate expensing future value A depreciation calculation method that results in greater depreciation expense in the early periods of an asset's life than in the later periods of its life. The process of spreading the cost of an intangible asset over its useful life. The receipt or payment of a constant amount over fixed periods. A lease, usually long-term, that has the effect of financing the acquisition of an asset. Sometimes called a financing lease. To record an expenditure as an asset as opposed to expensing the expenditure. An amortizable intangible asset represented by the legally granted protection against unauthorized copying of a creative work. An accelerated depreciation method in which the declining net book value of the asset is multiplied by a constant rate. The accounting process recognizing that the cost of a natural resource asset is used up as the natural resource is consumed. The interest rate used in a present value calculation. To record an expenditure as an expense, as opposed to capitalizing the expenditure. The amount that a present investment will be worth at some point in the future, assuming a specified interest rate and the reinvestment of interest in each period that it is earned. A non-amortizable intangible asset arising from the purchase of a business for more than the fair market value of the net assets acquired. Goodwill is the present value of the expected earnings of the acquired business in excess of the earnings that would represent an average return on investment, discounted at the investor's required rate of return for the expected duration of the excess earnings. A long-lived asset represented by a contractual right, or an asset that is not physically identifiable. An amortizable intangible asset represented by the cost of improvements made to a leasehold by the lessee. The difference between the cost of an asset and the accumulated depreciation related to the asset. Sometimes called carrying value. A lease that does not involve any attributes of ownership. An amortizable intangible asset represented by a government-sanctioned monopoly over the use of a product or process. The value now of an amount to be received or paid at some future date, recognizing an interest (or discount) rate for the period from the present to the future date. The amount of cash (or equivalent value) received in a transaction. Calculation of periodic depreciation expense by dividing the amount to be depreciated by the number of periods over which the asset is to be depreciated.

goodwill

intangible asset leasehold improvement net book value operating lease patent present value proceeds straight-line depreciation method

Key Terms and Concepts - Chapter 5 - Page 2 of 2

trademark units-of-production depreciation method An amortizable intangible asset represented by a right to the exclusive use of an identifying mark. A depreciation method based on periodic use and life expressed in terms of asset utilization.