18 Questions
What happens if a project is determined to be not technically feasible or not commercially viable?
Capitalization stops and costs are expensed immediately.
What must be proven for an asset to be available for sale or use?
Probable future economic benefits
Under the successful efforts method, what happens to costs if the site is unproductive?
The costs are written off as expenses.
When are costs incurred during the initial period of feasibility testing to determine the technical and financial feasibility of a proposed product expensed?
Before any tangible asset is created
How are unsuccessful efforts treated in terms of cost accounting?
Expensed initially and then potentially capitalized later.
In which phase are costs expensed if incurred prior to obtaining the legal right to explore a property?
Pre-Exploration and Evaluation Phase
Which costs are capitalized if a website is only used for advertising?
All expenditures
What is the criteria for derecognition of long-lived assets?
When the asset no longer provides future benefits.
When can costs for exploration and evaluation assets be capitalized?
When technical feasibility is reached
In the pre-exploration and evaluation phase, what kind of costs are typically incurred?
Acquisition costs for rights, geological surveys, and exploration.
How are costs treated in the post-exploration and evaluation phase after technical feasibility and commercial viability have been established?
Same principles as PP&E apply to these costs.
Under which scenario should computer software costs be classified as an intangible asset?
When integrated into PP&E as a separate component
What is the main objective for investors and lenders when assessing a company's cash flow potential?
To evaluate the company's ability to pay off debt obligations
What is the significance of high-quality earnings in relation to operating cash flows (OCF) and earnings per share (EPS)?
High-quality earnings lead to OCF being equal to EPS
What primary role do security analysts play in evaluating public companies?
Issuing recommendations to buy, hold, or sell shares
Why do employers tie bonus plans to stock option plans on net income?
To align employee compensation with company performance
What does the BoD aim to achieve by making decisions that maximize shareholder value?
Enhance the company's reputation in front of the bank
How do income tax authorities use information reported by a company?
To evaluate the compatibility of reported information with CRA filings
Learn about the capitalization process in project management, including stages such as post-exploration and evaluation phase, development and production stage, and costs considered for PP&E. Understand when capitalization would stop based on technical feasibility and commercial viability.
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