Chapter ten

In chapter ten of ‘Fundamental Accounting Principles’, John Wild (2012) discusses the topic on natural resources, plant assets and intangibles. Plant assets, often referred to as fixed assets, are assets that a company will use in its various operations for more than one accounting period. Natural resources on the other hand are assets that get consumed when a company uses them in its operations. These assets could be used until depletion, which is the process a company undergoes when it allocates costs for such resources until the time in which it is consumed. Intangibles are assets that cannot be touched or seen because they lack physical properties. They however play an important role to a company’s privileges and competitiveness.

In the case of plant assets, cost will be incurred in relation to the expenditure that will be involved in getting the fixed assets in place and ready for use. Even though these assets endure various accounting periods, they eventually depreciate and the company is responsible for allocating their costs as an expense after the benefit that the company has gained throughout the accounting periods (Wild, 2012). The company can therefore determine the asset’s salvage value, that is, it value after its benefit period; useful life, that is the duration the asset was productive during the company’s operations; and when it becomes obsolete, that is, the asset is no longer useful in the company’s operations and it does not offer a competitive advantage.

 In the case of intangibles and natural resources, there are those assets that have either limited or indefinite life. Most intangibles tend to have indefinite life where their usefulness is not limited by legal, competitive or economic factors. Natural resources on the other hand tend to have limited life and their cost is allocated in relation to the duration they are estimated to be useful for the company’s operations (Wild, 2012).

Reference

Wild J, (2012) “Fundamental accounting principles” McGraw Hill