Valuation at acquisition (operational assets) Essay

Valuation at acquisition (operational assets) - Essay Example clear operational assets world(a)ly include assets that whitethorn be covered under the broad category of Property Plant and Equipment like land and buildings, machineries and equipments, vehicles, and others. Such assets may be acquired by purchase or gift, or the entity may construct its own assets. Regardless of the method of acquisition, decisions need to be made as to which be should be capitalized and which bell which should be expensed with. In addition the amounts at which such assets should be capitalize is not clear.Intangible assets have the main characteristic is that they leave out physical substance. It is gener in ally difficult to estimate the value of intangibles and there is high degree of uncertainty regarding the length of time over which they pass on provide gross or future benefits to the entity. In general, the value of an intangible asset lies in its future use, and can be estimated from the in cremental profits that such use will through off.(Farok J. Contractor,2001, page 10)1 The initial accounting for intangibles is largely dependent on whether they are purchased or developed internally. Intangible assets include patents, goodwill, copyrights, trademarks, franchises, organizational costs and others.The general rule to capitalized costs is that the purchase price of an asset and all costs incurred in preparing the asset for its intended use are capitalized as part of cost of the asset. Let us examine the capitalization aspect under both tangible (Property Plant and Equipment) and intangible assetsCost of Land that needed to be capitalized is all the expenditure on its acquisition that is incurred for getting it ready for its intended use. Such costs are purchase price and the closing costs like effective fees, fee of the attorney and registration charges. Some time an old coordinate exists on land being acquired. Then costs of demolishing such structure and also the e xpenditure relating to clearing, filling, and