I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

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4.2 Requirements of IAS 16 for depreciation 

Depreciation accounting is governed by IAS 16. Below are some of the important definitions you need to 

be aware of. 

 

'

Depreciation

 is the systematic allocation of the depreciable amount of an asset over its useful 

life.    

 

'

Depreciable amount 

is the cost of an asset or other amount substituted for historical cost, less 

its estimated residual value'. 

             (IAS 16, para. 6) 

 

An 'amount substituted for cost' will normally be a current market value after a revaluation has taken 

place.  

4.3 Useful life 

IAS 16 requires the depreciable amount to be allocated on a systematic basis to each accounting period 

during the useful life of the asset. 

'

Useful life 

is either: 

 

the period over which an asset is expected to be available for use by an entity; or 

 

the number of production or similar units expected to be obtained from the asset by an 

entity.' 

(IAS 16, para. 6) 

 

The following factors should be considered when estimating the useful life of a depreciable asset. 

 Expected