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| Accelerated amortization method | An amortization method that produces larger amortization charges during the early years of an asset's life and smaller charges in the later years. (See page(s) 621) |
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| Amortization | process of systematically allocating the cost of a capital asset to expense over its estimated useful life. (See page(s) 614) |
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| Basket purchase | See lump-sum purchase (See page(s) 613) |
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| Betterment | An expenditure to make a capital asset more efficient or productive and/or extend the useful life of a capital asset beyond original expectations; also called an improvement. Betterments are debited to a capital asset account. (See page(s) 610) |
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| Book value | The original cost of a capital asset less its accumulated amortization. (See page(s) 615) |
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| Capital assets | Tangible and intangible assets (excluding goodwill) used in the operations of a company that have a useful life of more than one accounting period. (See page(s) 608) |
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| Capital cost allowance (CCA) | The system of amortization required by federal income tax law. (See page(s) 623) |
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| Capital expenditures | Costs of capital assets that provide material benefits extending beyond the current period. They are debited to capital asset accounts and reported on the balance sheet. (See page(s) 610) |
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| Change in an accounting estimate | A change in a calculated amount used in the financial statements that results from new information or subsequent developments and from better insight or improved judgement. (See page(s) 626) |
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| Copyright | A right granted by the federal government or by international agreement giving the owner the exclusive privilege to publish and sell musical, literary, or artistic work during the life of the creator plus 50 years. (See page(s) 636) |
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| Cost | Includes all normal and reasonable expenditures necessary to get a capital asset in place and ready for its intended use. (See page(s) 609) |
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| Declining-balance amortization | An amortization method in which a capital asset's amortization charge for the period is determined by applying a constant amortization rate (up to twice the straight-line rate) each year to the asset's book value at the beginning of the year. (See page(s) 621) |
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| Depletion | The process of allocating the cost of natural resources to the periods in which they are consumed. Another term for amortization of natural resources. (See page(s) 614) |
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| Depreciation | An American term used to describe amortization. See amortization. (See page(s) 614) |
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| Double-declining-balance amortization | An amortization method in which amortization is determined at twice the straight-line rate. (See page(s) 621) |
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| Fixed assets | See property, plant, and equipment. (See page(s) 608) |
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| Goodwill | The amount by which the value of a company exceeds the fair market value of the company's net assets if purchased separately; goodwill is an intangible asset; it is not a capital asset; goodwill is not amortized but is instead subject to impairment. (See page(s) 637) |
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| Half-year rule | A method of calculating amortization for partial periods. Six months' amortization is taken for the partial period regardless of when the asset was acquired or disposed of. The half-year rule is used to calculate CCA in the first year of an asset's life for tax purposes. (See page(s) 625) |
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| Impairment of goodwill | Results when the current value of goodwill is less than its carrying value. (See page(s) 638) |
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| Inadequacy | A condition in which the capacity of the company's capital assets is too small to meet the company's productive demands. (See page(s) 616) |
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| Intangible assets | Rights, privileges, and competitive advantages to the owner of assets used in operations that have a useful life of more than one accounting period but have no physical substance; examples include patents, copyrights, leaseholds, franchises, and trademarks. Goodwill is an intangible asset. (See page(s) 608) |
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| Intangible capital assets | Intangible assets that include patents, copyrights, leaseholds, franchises, and trademarks. Goodwill is an intangible asset but it is not a capital asset. (See page(s) 635) |
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| Land improvements | Assets that increase the usefulness of land but that have a limited useful life and are subject to amortization. (See page(s) 612) |
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| Lease | A contract allowing property rental. (See page(s) 613) |
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| Leasehold | A name for the rights granted to the lessee by the lessor in a lease. (See page(s) 637) |
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| Leasehold improvement | An asset resulting from a lessee paying for alterations or improvements to the leased property. (See page(s) 613) |
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| Lessee | The party to a lease that secures the right to possess and use the property. (See page(s) 613) |
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| Lessor | The party to a lease that grants to another the right to possess and use property. (See page(s) 613) |
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| Lump-sum purchase | Purchase of capital assets in a group with a single transaction for a lump-sum price. The cost of the purchase must be allocated to individual asset accounts; also called a basket purchase. (See page(s) 613) |
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| Natural resources | Assets that are physically consumed when used; examples include timber, mineral deposits, and oil and gas fields; also called wasting assets. (See page(s) 633) |
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| Obsolescence | A condition in which, because of new inventions and improvements, a capital asset can no longer be used to produce goods or services with a competitive advantage. (See page(s) 616) |
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| Patent | An exclusive right granted to its owner by the federal government to manufacture and sell a machine or device, or to use a process, for 20 years. (See page(s) 636) |
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| PPE | A common abbreviation for property, plant, and equipment. (See page(s) 608) |
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| Property, plant, and equipment | Tangible capital assets used in the operations of a company that have a useful life of more than one accounting period; often abbreviated as PPE; sometimes referred to as fixed assets. (See page(s) 608) |
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| Repairs | Expenditures made to keep a capital asset in normal, good operating condition; treated as a revenue expenditure. (See page(s) 610) |
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| Revenue expenditure | An expenditure that should appear on the current income statement as an expense and be deducted from the period's revenues because it does not provide a material benefit in future periods. (See page(s) 610) |
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| Revised amortization | Recalculating amortization because of a change in cost, salvage value, or useful life. (See page(s) 626) |
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| Salvage value | Management's estimate of the amount that will be recovered at the end of a capital asset's useful life through a sale or as a trade-in allowance on the purchase of a new asset; also called residual or scrap value. (See page(s) 616) |
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| Service life | See useful life. (See page(s) 616) |
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| Straight-line amortization | A method that allocates an equal portion of the total amortization for a capital asset (cost minus salvage) to each accounting period in its useful life. (See page(s) 617) |
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| Trademark | A symbol, name, phrase, or jingle identified with a company, product, or service. Also referred to as trade name. (See page(s) 636) |
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| Units-of-production amortization | A method that charges a varying amount to expense for each period of an asset's useful life depending on its usage; expense is calculated by taking the cost of the asset less its salvage value and dividing by the total number of units expected to be produced during its useful life. (See page(s) 620) |
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| Useful life | The length of time in which a capital asset will be productively used in the operations of the business; also called service life. (See page(s) 616) |