Non-Current Assets

A. Types of Assets

Asset type	Term used for cost allocation	Methods of cost allocation
1. Land	Remains at historical cost until sold	None
2. "Fixed Assets" (Buildings, equipment)	Depreciation	Straight -line Unit of Output (a variation of straight-line) Declining balance method Sum of the years digit method
3. Intangible Assets	Amortization	Straight-line
4. Natural resources	Depletion	Unit of output

B. Determination of the Cost of Assets

Basic rule: All costs required to acquire the asset and to place it in service.

This includes all acquisition costs, costs needed to modify the asset for its intended use and any installation costs. for example:

Acquisition costs

Modification Costs

Installation costs

Purchase price

Transfer fees

Sales commission

Freight charges

Modification to equipment

Remodeling (of a building)

Modification to the building specifically for a piece of equipment (add to cost of equipment)

Basic installation

Testing of equipment

Assets that are "self constructed" or developed internally:

For self-constructed assets, the cost of the asset consists of material, labor and overhead plus any avoidable interest incurred during construction.

Most of the cost of internally developed intangible assets (goodwill, patents, etc.) with the exception of legal costs (filing fees for patent application, legal fees to defend a patent, etc. are normally expensed under FAS 2. Exception: