IAS 16Chapter 8Lesson 3
Depreciation methods, start and cessation, annual review
Step 1 of 8Learning objectives
Go deeper+1 deeper insight · +2 calculations · +1 journal entry · +1 point of attention
How to allocate the depreciable amount: a method (straight-line, diminishing balance, units of production) that reflects the pattern of consumption of benefits, never a revenue-based method; when to start (asset available for use) and when to stop (IFRS 5 classification or derecognition, not during mere idleness); and how to treat, prospectively, the annual review of life, residual value and method.
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Learning objectives
- Calculate a charge under the straight-line, diminishing balance and units of production methods, and record it.
- Choose the method that best reflects the pattern of consumption and explain why a revenue-based method is excluded.
- Determine the start and end dates of depreciation, including during idle periods.
- Treat a revision of life, residual value or method as a change in estimate and recalculate the charge prospectively.