Depreciation, Revision of useful life, Revision of depreciation method, Reimbursement of carrying amount, Disposal and disposal, Disclosure - International Financial Reporting Standards


Depreciation - a systematic reduction in the depreciable value of an asset over its useful life.

Amortized cost - the cost of an asset or other amount reflected in the financial statements instead of cost, less the residual value.

8.16. Depreciation reflects the consumption of economic benefits from the asset and is recognized as an expense, except when it is included in the carrying amount of the self-created asset. The following principles apply:

• the depreciable value is distributed on a systematic basis over the useful life;

• This method reflects the schedule of expected consumption. It includes methods for uniform accrual, declining balance, and the sum-of-years method.

8.17. Land and buildings are separate assets. Buildings are a depreciable asset.

8.18. The amount expected to be recovered from the future use of the asset, including its residual value on disposal, is called the recoverable amount. The book value should be periodically (usually at the end of the year) compared with the recoverable amount. If the latter is lower, the difference is recognized as an expense, unless it recovers the corresponding value in the amount of the additional estimate.

Revision of useful life

Useful life is:

1) the expected (estimated) period of use of the company's assets or

2) the number of products that the company expects to produce using the asset.

8.19. The useful life of an item of property, plant and equipment should be reviewed periodically, and if the assumptions differ significantly from previous estimates, the amount of depreciation charges for the current and future periods is adjusted.

Revision of the depreciation method

8.20. The depreciation method applied to property, plant and equipment should also be reviewed periodically and adjusted in the event of a significant change in the proposed scheme for obtaining economic benefits from these assets.

Reimbursement of book value

Liquidation Value is the net amount that the company expects to receive for an asset at the end of its useful life, less the expected costs of retirement.

Decrease in cost

8.21. If the recoverable amount is below the carrying amount, the carrying amount should be reduced to the recoverable amount. The amount of the reduction is recognized as an expense only if it can not be written off against the results of the previous revaluation, in which case it should be reflected in the capital accounts.

Retirement and Implementation

8.22. An item of property, plant and equipment must be written off from the balance sheet upon its retirement or in the event that a decision is made to discontinue the use of the asset and from its disposal no longer expect any economic benefits.

8.23. Gains or losses arising from the retirement or sale of an item of property, plant and equipment are determined as the difference between the estimated amount of net proceeds from disposal and the carrying amount of the asset and are recognized as income or expense in the income statement.


8.24. The basic requirements for information disclosure are as follows:

1. Accounting policy:

• the basis for the valuation for each type of asset;

• methods and rates of depreciation for each type of asset.

2. Profit and loss account and notes:

• Depreciation for each type of asset;

• the impact of significant changes in the valuation of the corresponding cost of items of property, plant and equipment.

3. Balance sheet and notes:

• gross book value, less accumulated depreciation for each class of assets at the beginning and end of the reporting period;

• a detailed reconciliation of changes in the carrying amount of property, plant and equipment during the reporting period;

• the amount of fixed assets under construction;

• fixed assets pledged as collateral;

• Capital commitments to acquire fixed assets.

8.25. For fixed assets that have been revalued, the following additional information should be disclosed:

• used base and effective revaluation date;

• the balance of the amount of the reappraisal;

• whether an independent appraiser was involved in the reassessment;

• the nature of all indices used to determine the cost of replacing assets;

• the carrying amount of each type of property, plant and equipment that is accounted for in the financial statements based on actual cost.

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