This accounting standard codifies the U.S. Generally Accepted Accounting Principles (GAAP) for tangible, long-lived assets used in operations. These assets, encompassing items such as land, buildings, machinery, vehicles, and furniture, are recognized at cost and systematically expensed over their useful lives through depreciation or amortization. For instance, a manufacturing company’s assembly line machinery would fall under this standard, requiring the company to track its cost, estimate its useful life, and depreciate it accordingly.
Accurate reporting under this guidance provides crucial information for investors and stakeholders. It allows for informed assessments of a company’s financial health and operational capacity by offering insights into the value and condition of its productive assets. Historically, standardized treatment of these assets has evolved to ensure greater transparency and comparability across financial statements. Consistent application of these principles contributes to market stability and investor confidence.
