Glossary of Terms
This Glossary of Terms, provided for your reference, consists of accounting language used across our website and commonly used in topics surrounding fixed asset management.
Asset Disposal
An asset disposal is an event, normally recorded in the fixed asset register, whereby a fixed asset is disposed of, normally because it has reached or surpassed its useful life.
Asset Impairment
An asset impairment is a condition whereby an asset’s market value falls below its carrying amount. In this case, an asset’s market valuation is less than the book value of the asset and the future cash flows to be generated from the asset are less than the net difference of the market value and the book value of the asset.
Asset Re-life
An asset re-life is an event, normally recorded in the fixed asset register, whereby a fixed asset’s useful life is altered in some way, whether minimized or extended.
Asset Transfer
An asset transfer is an event, normally recorded in the fixed asset register, whereby a fixed asset is physically moved from one department or location to another.
Bill 198
Bill 198 is a legislative bill enacted in Canada, which is meant to protect investors and stakeholders by improving accuracy and reliability of corporate accounting disclosures. Bill 198 is also referred to as the "Canadian Sarbanes and Oxley" Act or CSOX.
Declining Balance Depreciation Method
Annual Depreciation = Depreciation Rate x Book Value at Beginning of Year
This is considered an accelerated depreciation method because it provides a higher depreciation charge in the first year of an asset’s life and then gradually decreases in subsequent years.
Double Declining Balance Depreciation Method
Book Value = Original Cost - Accumulated Depreciation
This is considered an accelerated depreciation method because it provides a higher depreciation charge in the first year of an asset’s life and then gradually decreases in subsequent years.
Escrow
Escrow is a legal arrangement whereby an asset, such as cash, property or other tangible assets, is kept in safekeeping under the trust of a neutral third party (or escrow agent) pending agreement of a contingency or condition. Once the condition has been agreed upon, the escrow agent will deliver the asset to the appropriate party.
Fixed Asset Management
Fixed Asset Management is an accounting process used to track fixed assets for the purpose of financial accounting (depreciation). Many companies also elect to track the whereabouts, quantity, condition and maintenance records relating to fixed assets.
Gross Book Value (GBV)
The gross book value is the original/historical price paid for an asset, without a depreciation deduction.
Net Book Value (NBV)
The net book value of an asset is equal to its original cost (book value) minus depreciation and amortization. Net book value is also often referred to as depreciated cost.
Revaluation
A revaluation of fixed assets is a technique used to accurately describe the true value of the capital goods a business owns. The purpose of a revaluation is to bring into the books the fair market value of fixed assets.
Straight-line Depreciation Method
Straight-line Depreciation = Acquisition Value – Salvage Value / Estimated Useful Life
The asset is written off evenly over the course of its useful life, resulting in equal depreciation from year to year.
TEU
Twenty-Foot Equivalent Units.
Year-to-Date (YTD)
Year-to-date is for the period starting January 1 of the current year and ending today.
Acronyms
ACRS: Accelerated Cost Recovery System
ACRS is a system of depreciation enacted by the Economic Recovery Tax Act of 1981. This depreciation method is based on recovery periods instead of useful life. These periods were predetermined by the Internal Revenue Service (IRS).
GAAP: Generally Accepted Accounting Principles
GAAP is a standard structure of guidelines for financial accounting, most often used in the U.S., that consists of rules which accountants are required to follow when recording transactions and preparing financial statements.
GASB: Governmental Accounting Standards Board
GASB is a private, non-governmental organization. Its task is to establish and improve standards of state and local governmental accounting and financial reporting and to educate the public, auditors and users of financial reports. GASB is the creator of GAAP.
IFRS
International Financial Reporting Standards (IFRS) are standards adopted by the International Accounting Standards Board (IASB). IFRSs are designed to apply to the general purpose financial statements and other financial reporting of all for-profit entities.
MACRS: Modified Accelerated Cost Recovery System
MACRS is the new accelerated cost recovery system, which was created following the release of the Tax Reform Act of 1986. It allows for greater accelerated depreciation over longer time periods. Faster acceleration enables organizations to deduct greater amounts during the first few years of an asset's life.
MUOP: Multiple Units of Production
MUOP is a depreciation method whereby the depreciation calculation, taken over a certain period of time, is a direct reflection of the number of units that particular asset or group of assets has produced over the same period of time.
SOX: Sarbanes-Oxley
Please refer to the glossary section above for more information.
