Glossary

Acquisition Cost (Purchase Price)

An acquisition cost, also referred to as the cost of acquisition, is the cost that a company recognizes on its books for property or equipment after adjusting for discounts, incentives, closing costs and other necessary expenditures but before sales taxes.

Purchase Date

The date on which an asset is purchased as indicated on a contract or certificate. Used in tax accounting to determine the cost basis and holding period of the asset for proper depreciation.

Accumulated Depreciation

The amount of a long-term asset's cost that has been allocated to Depreciation Expense since the time that the assets was acquired.

CY Depreciation Costs

The amount of the asset's cost that will be added to Depreciation Expense in current year.

Depreciation

A reduction in the value of an asset with the passage of time, due in particular to wear and tear.

Book Value

Book value of an asset is the value at which the asset is carried on a balance sheet and calculated by taking the cost of an asset minus the accumulated depreciation.

Current Value

Is the accounting that assets and liabilities be measured at the current value at which they could be sold or settled as of the current date.

Replacement Cost

The amount that an entity would have to pay to replace an asset at the present time.

Salvage Value

Is the estimated resale value of an asset at the end of its useful life.

Physical Life

Is how long the Asset will be functioning.

Service Life

Is how long the Asset will be useful.

Economic Life

When an asset ceases to be the lowest cost alternative to satisfy a specified level of performance or service level

Remaining Life

Service Life - (Current Date – Purchase Date)

Asset Condition Assessment 

Is the process of continuous or periodic inspection, assessment, measurement and interpretation of the resultant data to indicate the condition of a specific asset so as to determine the need for some preventative or remedial action.

Straight-Line Depreciation

The most common method of depreciation, which involves depreciating the equipment an equal amount over each period. ((Acquisition Cost – Salvage Value) / Service Life)

Maintenance/Defect Inspection (Type 1)

Designed to determine the need for maintenance and/or temporary works.

Overall Asset Inspection (Type 2)

designed to assess the overall condition of an asset and determine its remaining useful life.

Asset Condition “Types”

  • Good - Asset is “as new” or requires only routine maintenance to keep it in service
  • Fair – Asset has a 20% chance of breaking down within any year
  • Poor -  Asset has a 50% chance of breaking down within any year
  • Very Poor -  Asset will likely break down within 1 year
  • Unknown – Asset condition is unknown and may pose a risk

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