1、Designation: E 2135 07Standard Terminology forProperty and Asset Management1This standard is issued under the fixed designation E 2135; the number immediately following the designation indicates the year oforiginal adoption or, in the case of revision, the year of last revision. A number in parenthe
2、ses indicates the year of last reapproval. Asuperscript epsilon (e) indicates an editorial change since the last revision or reapproval.1. Scope1.1 This terminology covers traditional property manage-ment definitions and some of the terms introduced in additionalasset management standards that are u
3、sed most often andconsidered most important. As new standards are developed,new terms will be added to this terminology in future revisions.2. Terminology2.1 Terms and Definitions:abandoned propertyproperty of any type over which therightful owner has relinquished possession and any claim ofan owner
4、ship interest, without assertion of an adverse rightto possession and control by the federal government. Thiswould include property left at a government facility andunclaimed by the rightful owner following notice of intent todispose. This property is a type of seized property.abandonmentvoluntary s
5、urrender of property, owned orleased, without naming a successor as owner or tenant. Theproperty will generally revert to a person holding a priorinterest or, in cases where no owner is apparent, to the state.abatementa reduction or cancellation of an assessed tax.ABC methodinventory management meth
6、od that catego-rizes items in terms of importance. Thus, more emphasis isplaced on higher dollar value items (“A”s) than on lesserdollar value items (“B”s), while the least important items(“C”s) receive the least time and attention. Inventory shouldbe analyzed frequently when using the ABC method. T
7、heprocedure for ABC analysis follows: (1) Separate finishedgoods into types (chairs of different models, and so on);separate raw materials into types (screws, nuts, and so on).(2) Calculate the annual dollar usage for each type ofinventory (multiply the unit cost by the expected futureannual usage).
8、(3) Rank each inventory type from highest to lowest, basedon annual dollar usage. (4) Classify the inventory as Athetop 20 %; Bthe next 30 %; and Cthe last 50 % of dollarsusage, respectively. (5) Tag the inventory with its appropri-ate ABC classification and record those classifications in theitem i
9、nventory master records.abnormal spoilagefor government accounting under theFAR, abnormal spoilage may or may not be allowable cost.If the cost is deemed allowable, the cost would normally becharged consistently with normal spoilage.accelerated cost recovery system (ACRS)system of depre-ciation for
10、tax purposes mandated by the Economic Recov-ery Act (ERA) of 1981 and modified by the Tax Reform Actof 1986. The type of property determines its class. Instead ofproviding statutory tables, prescribed methods of deprecia-tion are assigned to each class of property. For 3, 5, 7, and10 year classed, t
11、he relevant depreciation method is the200 % declining balance method. For 15 and 20 yearproperty, the appropriate method is the 150 % decliningbalance method switching to the straight-line method whenit will yield a larger allowance. For residential rentalproperty (27.5 years) and nonresidential rea
12、l property (31.5years), the applicable method is the straight-line method. Ataxpayer may make an irrevocable election to treat allproperty in one of the classes under the straight-line method.Property is statutorily placed in one of the classes. Thepurpose ofACRS is to encourage more capital investm
13、ent bybusinesses. It permits a faster recovery of the assets cost andthus provides larger tax benefits in the earlier years. See alsomodified accelerated cost recovery systems (MACRS).accelerated depreciationany method of calculating depre-ciation charges where the charges become progressivelysmalle
14、r each period. Examples are double-declining-balanceand sum-of-the-years-digits methods.accelerated depreciationmethod recognizing higheramounts of depreciation in the earlier years and loweramounts in the later years of a fixed assets life. Somemachines, for example, are more efficient early on and
15、generate greater service potential; matching dictates higherdepreciation expense in those years. Over time, depreciation1This terminology is under the jurisdiction of Committee E53 on PropertyManagement Systems and is the direct responsibility of Subcommittee E53.06 onTerminology.Current edition app
16、roved June 15, 2007. Published July 2007. Originallyapproved in 2001. Last previous edition approved in 2006 as E 2135 06a.1Copyright ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.expense moves in downward direction and maintenancecosts tend
17、to become higher; thus the effect of accelerateddepreciation is fairly even charges to income. Greatest taxbenefits from depreciation are enjoyed in the earlier years.(Examples include double declining balance and sum-of-the-years-digits method.)accessory iteman item that facilitates or enhances the
18、operation of equipment but is not essential for its basicoperation.accountabilityindividual or departmental responsibility toperform a certain function. Accountability may be dictatedor implied by law, regulation, or agreement. For example, anauditor will be held accountable to financial statement u
19、sersrelying on the audited financial statements for failure touncover corporate fraud because of negligence in applyinggenerally accepted auditing standards (GAAS).accounting changechange in: (1) accounting principles(such as a new depreciation method); (2) accounting esti-mates (such as a revised p
20、rojection of doubtful accountsreceivable); or (3) the reporting entity (such as a merger ofcompanies). When an accounting change is made, appropri-ate footnote disclosure is required to explain its justificationand financial effect, thereby enabling readers to makeappropriate investment and credit j
21、udgments. Proper justifi-cation for a change in accounting principles may be theissuance of a new FASB pronouncement, SEC AccountingSeries Release (ASR), or IRS regulation. Changes in esti-mates are justified by changing circumstances such as agreater degree of wear and tear of a fixed asset thanori
22、ginally anticipated. Generally, the consistent use of ac-counting principles and procedures is essential in appraisingand entitys activities and in the projection of future results;however, changes in the reporting entity have to be retroac-tively reflected for comparative purposes.accretionincrease
23、 in economic worth through physicalchange, usually said of a natural resource such as an orchard,caused by natural growth. Contrast with appreciation.accumulated depreciationsum of depreciation chargestaken to date on a fixed asset. Accumulated depreciation is acontra account to the fixed asset to a
24、rrive at book value. Forexample, on 1/1/2000 an auto is bought costing $10,000,with a salvage value of $1000 and a life of 10 years. Usingstraight-line depreciation the accumulated depreciation on12/31/2003 would be $3600 ($900 3 4).acquisition(1) the act of acquiring. (2) Acquiring hardware,supplie
25、s or services through purchase, lease, or other means,including transfer or fabrication, whether the supplies orservices are already in existence or must be created, devel-oped, demonstrated, and evaluated.acquisitionthe acquiring by contract with appropriatedfunds of supplies or services (including
26、 construction) by andfor the use of the federal government through purchase orlease, whether the supplies or services are already inexistence or must be created, developed, demonstrated, andevaluated. Acquisition begins at the point when agencyneeds are established and includes the description of re
27、quire-ments to satisfy agency needs, solicitation and selection ofsources, award of contracts, contract financing, contractperformance, contract administration, and those technicaland management functions directly related to the process offulfilling agency needs by contract.activity-based depreciati
28、onproduction method of deprecia-tion.actual cash valuethe cost of replacing damaged propertywith other property of like kind and quality in the physicalcondition of the property immediately before the damage.actual costan amount determined on the basis of costincurred including standard cost properl
29、y adjusted for appli-cable variance.adjusted basisthe basis used to compute gain or loss ondisposition of an asset for tax purposes.Also, see book value.ad valorem taxlevy imposed on the value of property. Themost common ad valorem tax is that imposed by states,counties, and cities on real estate. A
30、d valorem taxes can,however, be imposed on personal property.agency-peculiar propertyas used in DoD, means militaryproperty and includes end items and integral components ofmilitary weapons systems, along with the related peculiarsupport equipment which is not readily available as acommercial item.a
31、llocateto assign an item of cost, or a group of items of cost,to one or more cost objectives.This term includes both directassignment of cost and the reassignment of a share from anindirect cost pool.amortizationgradual reduction of an amount over time.Examples are amortized expenses on intangible a
32、ssets anddeferred charges. Assets with limited life have to be writtendown over the period benefited. For example, all intangibleassets must be amortized using the straight-line method notexceeding 40 years; the amortization entry in that case is todebit amortization expense and credit the intangibl
33、e asset.amortizationthe gradual extinguishment of any amountover a period of time through a systematic allocation of theamount over a number of consecutive accounting periodssuch as the retirement of a debt by serial payments to asinking fund.amortizationnormally applies to intangibles whereas depre
34、-ciation applies to tangible assets.amortizeto write off a regular portion of an assets cost overa fixed period of time. Examples are amortization expenseon an intangible asset and depletion expense on a naturalresource. See also sales return.appraisal(1) estimate of the value of an asset. An asset
35、maybe a piece of property, a collectible, or a precious metal. Inthe case of property, for example, an appraisal is made forthe purposes of: (a) allocating the purchase price to theassets acquired (for example, land, building, equipment); (b)determining the amount of hazard insurance to carry; (c)de
36、termining the value of death for estate tax purposes; and(d) determining a reasonable asking price in a sale. (2)Activities such as inspection and testing of materials, in-process items, finished goods, and packaging.appraisalthe process of obtaining a valuation for an asset orliability that involve
37、s expert opinion rather than explicitmarket transaction.appraisal method of depreciationthe periodic depreciationE2135072charge is the difference between the beginning and end-of-period appraised value of the asset if that difference ispositive. If negative, there is no charge. Not generallyaccepted
38、.appreciationincrease in the value of an asset. The asset maybe real estate or a security. For example, an individual sold100 shares of XYZ companys stock for $105 per share thathe bought 10 years ago for $25 per share. The amount ofappreciation was $8000 = ($105 $25) 3 100 shares.assemblya number o
39、f parts or subassemblies joined to-gether.assessed valuationa dollar amount for real estate or otherproperty used by a government as a basis for levying taxes.The amount may or may not bear some relation to marketvalue.assessed valuevalue established by a government for realestate or other property
40、as a basis for levying taxes. Forexample, an individual receives a statement that, in thejudgment of the local tax assessor, the individuals propertyis worth $50,000. If by law, properties in this jurisdiction areassessed at 80 % of market value, the individuals assessedvalue then is $40,000 (80 % o
41、f $50,000) and property taxeswill be based on this assessed value.asset(1) anything owned having monetary value; (2) tan-gible or intangible items owned by an entity that haveprobable economic benefits that can be obtained or con-trolled by the entity.asseteconomic resource that is expected to provi
42、de benefitsto a business. An asset has three vital characteristics: (1)future probable economic benefit; (2) control by the entity;and (3) results from a prior event or transaction. Assets areexpressed in money or are convertible into money. They canbe recognized and measured in conformity with gene
43、rallyaccepted accounting principles (GAAP). Examples of own-ership rights or service potentials are cash, automobiles, andland.An asset may be tangible or intangible. The former hasphysical substance such as a building. The latter lacksphysical substance or results from a right granted by thegovernm
44、ent or another company such as goodwill and apatent. An asset may be current or noncurrent. A currentasset has a life of one year or less (for example, inventory)while a noncurrent asset has a life in excess of one year (forexample, machinery).asset accountability unita tangible capital asset which
45、is acomponent of plant and equipment that is capitalized whenacquired or whose replacement is capitalized when the unitis removed, transferred, sold, abandoned, demolished, orotherwise disposed of.average age of inventorynumber of days an average inven-tory item takes to sell: For example, assume th
46、at averageinventory is $47,500 and cost of goods sold is $500.000. Theaverage age of inventory is ($47,500/$500,000) 3 365 days= 34.7 days. See also days to sell inventory. AverageInventory divided by Average Age of Inventory = Cost ofGoods Sold 3 365 days.average inventoryamount equaling about half
47、 maximuminventory when demand is relatively constant. For example,if the maximum inventory is 500 units and depletion occursat a fairly constant rate, the average inventory equals 250units (500/2).average lifeestimated useful-life expectancy of a depre-ciable group of assets. See also depreciation;
48、economic life;useful life.bailmentcontractual transfer of dollars or personal propertyfor a specified objective. An example is the consignment ofgoods from the consignor to consignee. Another example isa bank holding an asset of a borrower as collateral. In abailment, the deliverer is called the bai
49、lor and the receiver istermed the bailee.bargain purchaseasset or goods acquired for materially lessthan fair market value. For example, a buyer may be able toget a bargain price on furniture from a seller in a liquidationsituation.bargain purchase optiona provision allowing the lessee theoption of purchasing the leased property for an amount,exclusive of lease payments, which is sufficiently lower thanthe expected fair value of the property at the date the optionbecome exercisable. Exercise of the option must appearreasonably assu
