Chapter Review

Key Takeaways

• PP&E consists of tangible long-lived assets used in business operations.
• Assets are initially recorded at historical cost, including directly attributable acquisition costs.
• Land is not depreciated, but land improvements are depreciated.
• Capital expenditures increase future benefits and are capitalized.
• Routine repairs and maintenance are expensed.
• Depreciation allocates asset cost over its useful life using methods such as straight-line, double-declining balance, and units-of-production.
• Asset retirement obligations are recognized when legal restoration obligations exist.
• Disposal gains and losses are measured using proceeds less carrying amount.
• PP&E is reported at cost less accumulated depreciation on the balance sheet.
• Financial analysts evaluate PP&E using turnover and efficiency ratios.

Property, Plant & Equipment represents long-term investments whose costs must be matched carefully with the revenues they help generate.