Depreciation Accounting and Equity Securities

Abstract
This paper answers questions on depreciation accounting and compares and contrasts GAAP and IASB standards on equity securities. It distinguishes between revenue and capital expenditures and why this distinction is important. There are many different definitions of depreciation and I will present the one used in accounting. It also identifies the factors in determining the annual depreciation of an asset and whether they are objective or judgment based. I will also explain why depreciation is shown as an adjustment to cash in the operations section on the statement of cash flows. There are differences and similarities between the standards set forth through GAAP and IASB on the concept of equity securities. I will present some of these and then discuss which is more consistent when discussing the following topics: conservatism, comparability, relevance, neutrality, representational faithfulness, and physical capital maintenance. Overall, I believe that GAAP sets forth the better standard when it comes to equity securities.

Depreciation Accounting and Equity Securities Revenue expenditures are the regular expenses incurred to maintain an asset. They can be matched with revenue from the asset and should be charged to current expenses. Capital expenditures are expenses incurred to increase the future service potential of an asset. They should not be written off and expensed when incurred. Instead, it should be added to the unexpired cost of the asset and be charged to expense over the remaining period of the benefit. It is important to know the difference so you know when and how to expense maintenance to an asset. “If the asset’s life is increased, or if output is increased, its service potential has increased, and the cost of an expenditure should be capitalized and written off over the expected period of