Acca financial Accounting (FA) Study Text ac ca (FA)

does not 

require depreciation

, but buildings should be depreciated. 

Depreciation of an asset begins when it is available for use. 

 

 

 

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Chapter 7 

KAPLAN PUBLISHING

 

129 

7 

Methods of calculating depreciation 

 

 

IAS 16 says that 

'the depreciation method applied to an asset should 

reflect the pattern in which the assets future economic benefits are 

expected to be consumed' 

(IAS 16 para 60). 

Straight-line method 

Depreciation charge = (Cost – Residual value)/Useful life  

Alternatively it can simply be given as a simple percentage of cost. 

Residual value: the estimated disposal value of the asset at the end of its useful 

life. 

Useful life: the estimated number of years during which the business will use 

the asset. 

The straight line method results in the same charge every year and is used 

wherever the pattern of usage of an asset is consistent throughout its life. 

Buildings are commonly depreciated using this method because businesses will 

commonly get the same usage out of a building every year. 

 

 

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