Recognition of the depreciation charge

Learning objectives

• Determine whether a depreciation charge is recognised as an expense or included in the cost of another asset.L2, L3
• Record a depreciation charge included in the cost of inventories.L3

Normative references

• IAS 16 §48The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.
• IAS 16 §49The depreciation charge is included in the cost of another asset when the benefits of the item are absorbed in producing it (e.g. costs of conversion of inventories).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• The depreciation charge for a machine used exclusively to manufacture finished goods held for sale should be:L2