Page 167 - F1 Integrated Workbook STUDENT 2018
P. 167
Non-current assets – Acquisition, Depreciation and Subsequent
Recognition
Depreciation
IAS 16 Property, Plant and Equipment defines depreciation as 'the systematic
allocation of the depreciable amount of an asset over its useful life' (IAS 16,
para 6).
Depreciable amount is the cost/valuation less residual value.
The depreciation charge should be recognised in the statement of profit or loss
unless it is included in the carrying amount of an asset, e.g. depreciation on
equipment used for development activities. Land will not be depreciated since it has
an unlimited life. Buildings, however, do have a limited life and so should be
depreciated.
All assets with a limited life should be depreciated so that the cost of the asset is
matched against the economic benefits generated.
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