This case helps students understand the impact on the financial statements of the following: the selection of the useful life of an asset, method of depreciation, expense vs. capitalization and impairment of an asset.

 

Students assume the role of the chief financial officer and need to review a wide variety of costs incurred during the installation of a major asset. Using the guiding rule “all costs needed to get the asset operational are capitalized,” some costs are capitalized and others are expensed. Additionally, the effect of different depreciation assumptions and the impairment of assets on the financial statements are explored. Depreciation calculations are not required and the disposal of an asset are not covered in this case.