imported>Doug Williamson |
imported>Doug Williamson |
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| 1. ''Financial reporting - accounting practices.''
| | The quotation of a rate of return, or a cost, on the basis of a nominal annual rate for compounding twice per year. |
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| Accounting depreciation spreads the cost of a long-term asset over its total life.
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| The depreciation accounting charge reflects:
| | <span style="color:#4B0082">'''Example'''</span> |
| * the estimated periodic cost to a business
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| * of a physical capital asset
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| * spread over its estimated useful economic life.
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| Accounting depreciation seeks to ensure that the total accounting cost of a capitalised asset is appropriately spread and matched to the economic benefits of using the asset.
| | '''Q.''' |
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| | A rate of return - quoted as an annual effective rate - is 4.04%. |
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| Methods of spreading the total accounting cost include Straight line, Reducing balance and Sum of the digits.
| | What is this same rate of return quoted on a semi-annual basis? |
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| Financial reporting standards generally permit the use of any systematic basis of allocating the total cost over the useful life of the asset.
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| | The same rate of return quoted on a semi-annual basis is: |
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| It's important to be clear about the distinction between the:
| | (1.0404<sup>(1/2)</sup> -1) x 2 |
| *Depreciation charge for the period, reflected in the income statement; and
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| *Cumulative depreciation provision at the end of the period, reflected in the balance sheet.
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| | = 4.00%. |
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| The depreciation charge is an in-period accounting expense, charged against profits for the period.
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| The cumulative provision for depreciation is a liability in the balance sheet. It's offset against the cost of the assets, to calculate their accounting net book value.
| | It is sometimes written as ''semiannual'', without the hyphen. |
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| More generally, any decrease in the value of an asset resulting from the passing of time.
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| 3. ''Foreign exchange''
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| A decrease in the value of a currency.
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| == See also == | | == See also == |
| * [[Accumulated depreciation]]
| | * [[Capital market]] |
| * [[Amortisation]]
| | * [[Semi-annual rate]] |
| * [[Appreciation]]
| | *[[Nominal annual rate]] |
| * [[Assets]]
| | *[[Rate of return]] |
| * [[Capital allowances]] | |
| * [[Carry trade]]
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| * [[CertICM]]
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| * [[Cost]]
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| * [[EBITDA]]
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| * [[International Fisher Effect]]
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| * [[Net book value]]
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| * [[Property, plant and equipment]]
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| * [[Provision]] | |
| * [[Reducing balance]] | |
| * [[Straight line]] | |
| * [[Sum of the digits]]
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| * [[Tax depreciation]]
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| * [[Writing down allowance]]
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| [[Category:Accounting,_tax_and_regulation]] | | [[Category:Long_term_funding]] |
| [[Category:Corporate_finance]] | | [[Category:Cash_management]] |
The quotation of a rate of return, or a cost, on the basis of a nominal annual rate for compounding twice per year.
Example
Q.
A rate of return - quoted as an annual effective rate - is 4.04%.
What is this same rate of return quoted on a semi-annual basis?
A.
The same rate of return quoted on a semi-annual basis is:
(1.0404(1/2) -1) x 2
= 4.00%.
It is sometimes written as semiannual, without the hyphen.
See also