Question

Explain how PPE and intangible assets acquired through donation are valued

Answer 1

PPE and intangible assets received as a donation are valued at their fair market value at the time of receipt. This valuation reflects their economic worth and the basis for subsequent depreciation or amortization, which is essential for financial statement analysis.

Step-by-step explanation:

When Property, Plant, and Equipment (PPE) and intangible assets are acquired through donation, they are valued and recorded at their fair market value at the time of receipt. Fair market value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

For PPE, this includes costs related to bringing the asset to the location and condition necessary for its intended use. For intangible assets, factors such as future economic benefits, lifespan, and any associated costs play a role in determining their value.

Donated assets are not simply recorded as free; instead, they are recognized at their fair market value to reflect their economic worth to the entity. This information is crucial for stakeholders who analyze the financial statements to assess the entity's financial health.

Fair market value also establishes the basis for subsequent depreciation or amortization of the donated assets.

Answer 2

PPE (Property, Plant, and Equipment) acquired through donation is typically valued at fair market value at the time of the donation, while intangible assets acquired through donation are valued at fair value, which may involve estimating the asset's market value or relying on a professional appraisal.

Step-by-step explanation:

When an entity receives PPE through donation, it is valued at its fair market value at the time of the donation. This ensures that the organization recognizes the asset on its balance sheet at a reasonable and justifiable value.

Intangible assets acquired through donation, such as patents or trademarks, are also valued at their fair value. Fair value may be determined by estimating the market value of the asset or, in the case of complex intangibles, seeking a professional appraisal to ascertain a reliable fair value.