The accounting for long-term assets has important implications for a company's reported results.

In this
chapter, we explain the application of the cost principle of accounting to property, plant, and equipment, such
as Rent-A-Wreck (USA) vehicles, as well as to natural resources and intangible assets such as the "Rent-AWreck" trademark. We also describe the methods that companies may use t o allocate an asset's cost over
its useful life. In addition, we discuss the accounting for expenditures incurred during the useful life of assets, such as the cost of replacing tires and brake pads on rental cars.
The content and organization of Chapter 9 are as follows.

Determining the cost

of plant assets
Depreciation
Revaluation of plant
assets
Expenditures during
useful life
Plant asset disposals

Accounting for extractable

natural resources
Financial statement
presentation

Accounting for intangibles

Types of intangibles
Research and
development costs

Presentation
Analysis

SECTION 1 Plant Assets

Plant assets are resources that have three characteristics: They have a physical substance (a definite size and shape), are used in the operations of a business, and are
not intended for sale to customers. They are also called property, plant, and equipment; plant and equipment; and fixed assets. These assets are expected to provide
services to the company for a number of years. Except for land, plant assets decline
in service potential over their useful lives.
Because plant assets play a key role in ongoing operations, companies keep
plant assets in good operating condition. They also replace worn-out or outdated
plant assets, and expand productive resources as needed. Many companies have
substantial investments in plant assets. Illustration 9-1 shows the percentages of
plant assets in relation to total assets of companies in a number of industries.
Illustration 9-1
Percentages o f plant assets
in relation t o total assets

Cathay Pacific Airlines (HKG)

Wendy's (USA)
Wal-Mart (USA)
Carrefour (FRA)
Hitachi UPN)
Microsoft Corporation (USA)
10 20
30
40
50
60
70
80
90
Plant assets as a percentage of total assets