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Buildings, machinery, equipment, furniture, computers, parking lots, cars, and trucks
are examples of tangible assets that will not last indefinitely, but more than one year.
During each accounting period, a portion of the cost of these assets is being used
up. Each company, due its establishment, procures tangible assets as the base for
its operation. If you are responsible person (CEO) in the production company, it is
not unusual if you find out that some of your production assets are still in operation,
but they were completely depreciated. By this way, main accounting principles for
reporting on tangible assets (cost and revenue matching principle) are not respected.
The way the CEO solve this problem can have big impact on costing price and profit
or loss at the end of the year. Problem is that useful life of asset was not properly
assessed or revised. As result, carrying amount and income in financial statements
are not correct. Solving these problems is very important for creating consolidation
statements and representing financial statements due to International Financial Reporting
Standards, especially if large audit firms audit financial statements. The aim
of this work is to help understanding theoretical and practical issues on tangible assets,
especially depreciation, trough analyzing available literature, scientific works
written world abroad and practical research made by author.