▪ Depreciation
IAS 16 allows two methods of depreciation:
♦ Straight line
Depreciation = (cost –residual value)/Useful economic life
Or
(cost - residual value) * % (depreciated rate)
♦ Reducing balance (Depreciated on Net book value)
Depreciation = NBV @ opening * % (depreciated rate)
♦ Additional factors to consider
• Depreciation starts when the asset is ready for its intended use and not from when it starts to be used, until the asset is derecognized, even if it is idle.
• The useful life of assets and depreciation method should be reviewed at least at each financial year end, and when necessary, revised. (IAS 8)
• Separate component of PPE should be capitalized as separate assets and depreciated over their useful lives
• No depreciation for land