Bank Mandiri in cooperation with Citibank N.A.

Proprietary Material 2002

MODULE OBJECTIVES
At the end of this module you will be able to: Identify the various types of fixed assets Citicorp reflects on its books Apply the concept of depreciation and amortization to fixed assets Properly record fixed asset acquisitions and dispositions
Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

FIXED ASSETS

Recorded at cost Depreciated over useful life Gains / Losses recorded on disposition

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

CAPITALIZATION GUIDELINES

Premises & Installations

Over $1,000

Single-construction projects
Furniture & Equipment

Total cost over $5,000

Over $500 per item Unless items are bought as an integral part

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Costs Capitalized

Invoice Sales Tax Freight Insurance Installation

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Capitalizable Debit Fixed Assets Credit Cash / Equiv

Non-Capitalizable
Debit Expense (Premises or F & E) Credit Cash / Equiv

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Premises
Land Buildings Installations Leasehold Improvements Overseas: - No depreciation - 50 years - 10/20 years - Life of the lease

Follow local regulations Where significantly different - Adjust condicable

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Furniture and Equipment

Furniture and Equipment Specialized Equipment Computer Hardware PCs Decorative Art Autos - 10 years - up to 7 years - up to 5 years - up to 3 years - up to 10 years - 3 to 5 years

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Depreciation Policy
Consistent for all fixed assets A) Full month depreciation month of acquisition No depreciation month of disposition B) No depreciation - month of acquisition Full month in - month of disposition C) Half month depreciation in Month of acquisition and in month of disposition

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Depreciation Cost Useful life 5 years Monthly Dep. Exp. Dr Dep Exp - F & E Cr Accum Dep - F & E 9,000/60 mo = $150 150 150 9,000

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Sale:

Assume we sold an auto original cost of $9,000 for $4,000, that had accumulated depreciation of $6,000

Dr Dr

Accum Dep 6,000 Cash 4,000 Cr F&E 9,000 Cr Gain on Sale of F & E 1,000

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Sale / Disposition

Economic substance of transaction

Profit measurable Collectibility reasonably assured

Rewards/risks pass to buyer

Seller must not continue to have involvement in the asset

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Trade Ins

No gains recognized Losses recognized

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002

Construction Work in Progress

Accumulate costs until placed in service Segments - placed into service

Bank Mandiri in cooperation with Citibank N.A. Proprietary Material 2002