American Greetings Ifrs Implement
American Greetings Corporation IFRS Implementation
Property, Plant, and Equipment is the largest asset account for American Greetings, with a 2011 net balance of $241,649,000. American Greetings carries its property, plant and equipment at cost. Depreciation and amortization of buildings, equipment and fixtures are computed principally by the straight-line method over the useful lives of the various assets. The cost of buildings is depreciated over 40 years; computer hardware and software over 3 to 7 years; machinery and equipment over 3 to 15 years; and furniture and fixtures over 8 to 20 years. IFRS does permit the use of the straight-line method, resulting in a constant charge over the useful life if the asset’s residual value does not change per IAS 16. However, American Greetings would need to implement component depreciation in order to fully align its depreciation practices with international standards. Although component depreciation is permissible under GAAP, it is not often used in practice. American Greetings would need to depreciate each component of an item of property, plant and equipment separately if its cost is significant in relation to the total cost of the item. For example, American Greetings would need to depreciate its greeting card distribution plant in Danville, Kentucky, by separate components such as its roof, plumbing, and electrical systems. In addition, American Greetings indicates that its Property, Plant, and Equipment are reviewed for impairment in accordance with ASC 360. The ASC 360 standard under US GAAP states that the test for impairment is only required if events or changes in circumstances indicate that the book value of the asset or asset group may not be recoverable. But in order to follow IFRS standards, American Greetings must assess its assets for indicators of impairment at the end of each reporting period. American Greetings states that intangible assets with finite useful lives are amortized to their
Property, Plant, and Equipment is the largest asset account for American Greetings, with a 2011 net balance of $241,649,000. American Greetings carries its property, plant and equipment at cost. Depreciation and amortization of buildings, equipment and fixtures are computed principally by the straight-line method over the useful lives of the various assets. The cost of buildings is depreciated over 40 years; computer hardware and software over 3 to 7 years; machinery and equipment over 3 to 15 years; and furniture and fixtures over 8 to 20 years. IFRS does permit the use of the straight-line method, resulting in a constant charge over the useful life if the asset’s residual value does not change per IAS 16. However, American Greetings would need to implement component depreciation in order to fully align its depreciation practices with international standards. Although component depreciation is permissible under GAAP, it is not often used in practice. American Greetings would need to depreciate each component of an item of property, plant and equipment separately if its cost is significant in relation to the total cost of the item. For example, American Greetings would need to depreciate its greeting card distribution plant in Danville, Kentucky, by separate components such as its roof, plumbing, and electrical systems. In addition, American Greetings indicates that its Property, Plant, and Equipment are reviewed for impairment in accordance with ASC 360. The ASC 360 standard under US GAAP states that the test for impairment is only required if events or changes in circumstances indicate that the book value of the asset or asset group may not be recoverable. But in order to follow IFRS standards, American Greetings must assess its assets for indicators of impairment at the end of each reporting period. American Greetings states that intangible assets with finite useful lives are amortized to their
Cited: American Greetings. (2011). American Greetings 2011 Annual Report. Cleveland: American Greetings, United States Securities and Exchange Commision. KPMG. (August 2009). IFRS Compared to US GAAP. KPMG. Spiceland, S. N. (2011). Intermediate Accounting. New York: McGraw Hill.