IAS 16
This query is : Resolved
20 October 2009
Dear Friend,
Is there is any Deprciation Rates available under IFRS Like companies act.
Is there is any Deprciation Rates available under IFRS Like companies act.
22 October 2009
Hi,
In my opinion IFRS is only standards as AS,so there will be no depreciation rates under IFRS .
Thanks
In my opinion IFRS is only standards as AS,so there will be no depreciation rates under IFRS .
Thanks
28 July 2024
Under International Financial Reporting Standards (IFRS), depreciation is addressed primarily through **IAS 16: Property, Plant and Equipment** and **IAS 38: Intangible Assets**. Unlike the Companies Act in India, which provides specific depreciation rates for different categories of assets, IFRS does not prescribe fixed depreciation rates or schedules. Instead, IFRS provides guidelines on how to determine the depreciation rate based on the asset's useful life, residual value, and the method used.
### **Key Points on Depreciation Under IFRS:**
#### **1. **Determining Depreciation**
- **Depreciation Method**: IFRS allows the use of various depreciation methods such as straight-line, diminishing balance, and units of production. The method chosen should reflect the pattern in which the asset’s future economic benefits are expected to be consumed.
- **Useful Life**: The useful life of an asset is the period over which the asset is expected to be used by the entity. It is not prescribed but must be estimated based on historical data, industry standards, and other relevant factors.
- **Residual Value**: This is the estimated amount that an entity would currently obtain from the asset if it were already in the condition expected at the end of its useful life. It should be reviewed at least annually and adjusted if necessary.
#### **2. **IAS 16: Property, Plant and Equipment**
- **Depreciation Calculation**: The depreciation charge for each period is determined based on the depreciable amount of the asset, which is its cost less its residual value. The depreciable amount is allocated over the asset’s useful life.
- **Review**: The depreciation method and useful life should be reviewed at least at each financial year-end and adjusted if there are significant changes in the expected pattern of economic benefits.
#### **3. **IAS 38: Intangible Assets**
- **Amortization**: For intangible assets, the concept similar to depreciation is amortization. It is applied systematically over the asset’s useful life, which should be reviewed annually.
- **Indefinite Life**: If an intangible asset is deemed to have an indefinite useful life, it is not amortized but is tested for impairment annually.
### **4. **Guidance on Depreciation Methods**
- **Straight-Line Method**: Spreads the cost of the asset evenly over its useful life.
- **Diminishing Balance Method**: Allocates higher depreciation charges in the earlier years of the asset's life.
- **Units of Production Method**: Based on the asset’s usage or output.
### **5. **Disclosure Requirements**
- **IAS 16**: Requires disclosure of the depreciation methods used, the useful lives or depreciation rates, the carrying amount of each class of asset, and changes in the estimated useful life and residual value.
### **Summary**
Under IFRS:
- **No Prescribed Rates**: IFRS does not specify depreciation rates or schedules.
- **Determined Based on Useful Life and Residual Value**: Depreciation is calculated based on the asset's useful life, residual value, and chosen method.
- **Methods**: Straight-line, diminishing balance, and units of production methods can be used.
- **Review and Disclosure**: Depreciation methods and useful lives should be reviewed annually and disclosed in the financial statements.
For detailed guidance, refer to **IAS 16** and **IAS 38** on the official [IFRS website](https://www.ifrs.org).
### **Key Points on Depreciation Under IFRS:**
#### **1. **Determining Depreciation**
- **Depreciation Method**: IFRS allows the use of various depreciation methods such as straight-line, diminishing balance, and units of production. The method chosen should reflect the pattern in which the asset’s future economic benefits are expected to be consumed.
- **Useful Life**: The useful life of an asset is the period over which the asset is expected to be used by the entity. It is not prescribed but must be estimated based on historical data, industry standards, and other relevant factors.
- **Residual Value**: This is the estimated amount that an entity would currently obtain from the asset if it were already in the condition expected at the end of its useful life. It should be reviewed at least annually and adjusted if necessary.
#### **2. **IAS 16: Property, Plant and Equipment**
- **Depreciation Calculation**: The depreciation charge for each period is determined based on the depreciable amount of the asset, which is its cost less its residual value. The depreciable amount is allocated over the asset’s useful life.
- **Review**: The depreciation method and useful life should be reviewed at least at each financial year-end and adjusted if there are significant changes in the expected pattern of economic benefits.
#### **3. **IAS 38: Intangible Assets**
- **Amortization**: For intangible assets, the concept similar to depreciation is amortization. It is applied systematically over the asset’s useful life, which should be reviewed annually.
- **Indefinite Life**: If an intangible asset is deemed to have an indefinite useful life, it is not amortized but is tested for impairment annually.
### **4. **Guidance on Depreciation Methods**
- **Straight-Line Method**: Spreads the cost of the asset evenly over its useful life.
- **Diminishing Balance Method**: Allocates higher depreciation charges in the earlier years of the asset's life.
- **Units of Production Method**: Based on the asset’s usage or output.
### **5. **Disclosure Requirements**
- **IAS 16**: Requires disclosure of the depreciation methods used, the useful lives or depreciation rates, the carrying amount of each class of asset, and changes in the estimated useful life and residual value.
### **Summary**
Under IFRS:
- **No Prescribed Rates**: IFRS does not specify depreciation rates or schedules.
- **Determined Based on Useful Life and Residual Value**: Depreciation is calculated based on the asset's useful life, residual value, and chosen method.
- **Methods**: Straight-line, diminishing balance, and units of production methods can be used.
- **Review and Disclosure**: Depreciation methods and useful lives should be reviewed annually and disclosed in the financial statements.
For detailed guidance, refer to **IAS 16** and **IAS 38** on the official [IFRS website](https://www.ifrs.org).
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Applicability
- Where to show the RCM on Rent paid to unregistered landlord
- Is Aadhar PAN linking required for opening bank account?
- CPC Processing IT Return for AY 2023-24 without recognizing the Taxation Option under New Regime
- TDS NUMBER SURRENDER
- Gst Sales of FY 2023-24
- Offsetting interest income against derivative trading losses
- Application of 115BAC
- Legal heir raised refund , but refund issued to the closed account of deceased.
- RCM - commercial rent paid to URP under GST
- Whether still royalty
- 20% OF DEMAND PAYMENT IN APPEAL
- Issue of gst e invoice
- Interchangeable words in accounts
- Adjusted profit/Loss in the case of LLP and Pvt. Ltd.company
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
- Query for dubts
- Regarding Resignation by Auditor from Pvt. Ltd.
Trending Online Classes
-
Excel Mastery Program
CA Rishabh Pugalia
CAclubindia
