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Financial Statement AnalysisModule 7 of 9

Analysis of Long-Term Assets

5

Concepts

4

Formulas

1

Decisions

3

Quiz Questions

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Key Concepts

5 concepts covered in this module.

Depreciation Methods

Straight-line: equal annual charge. Accelerated (DDB): higher early charges. Units-of-production: based on usage.

Impairment

When carrying value exceeds recoverable amount. Write down to fair value. IFRS: reversal allowed (except goodwill). US GAAP: no reversal.

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Formulas

4 essential formulas for this module.

Straight-Line Depreciation

Annual Dep = (Cost - Residual Value) / Useful Life

Where: Equal annual charges

DDB Depreciation

Dep = (2 / Useful Life) × Beginning Book Value

Where: Double declining balance — ignore residual until final years

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Decision Frameworks

1 decision frameworks to guide your analysis.

Straight-line vs Accelerated depreciation?

  • SL: when asset provides uniform benefit over life
  • Accelerated: when asset loses value faster in early years (vehicles, tech)

Mind Map

Visual overview of how concepts connect in this module.

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Depreciation Methods

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Answer
Straight-line: equal annual charge. Accelerated (DDB): higher early charges. Units-of-production: based on usage.
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