From the course: Financial Accounting Foundations

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Long-term assets including impairment

Long-term assets including impairment

From the course: Financial Accounting Foundations

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Long-term assets including impairment

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- Long-term assets such as buildings and equipment are reported in the balance sheet at their historical cost. Well, almost their historical cost. Technically, these building and equipment assets are reported at their net cost, net of depreciation. For example, in its 2018 financial statements, ExxonMobil reported that it held property, plant, and equipment with a historical cost of $477 billion. However, ExxonMobil listed this property, plant, and equipment in its balance sheet at $247 billion net. Net of what? Depreciation of $230 billion. Roughly speaking, ExxonMobil had already used up about half of the long-term service potential of its existing property, plant, and equipment. Depreciation is the accountant's rough estimate of the wear and tear on a long-term asset that comes about through normal use. For example, consider the device that you are using right now to watch or listen to this course. Will that device last more than one year? Probably. Will that device last forever?…

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