Page 115 - Finac1 Test 1 slides

INCOME TAXES

Capital Allowances

• IAS 16 governs property, plant and equipment, and requires

assets to be depreciated at a rate based on the expected

useful life.

• However, tax legislation requires assets to be depreciated

based on the standard rates of depreciation set out in the

legislation, irrespective of the actual expected rate of usage

by the entity.

• The depreciation calculated by the tax authorities is often

referred to as a capital allowance or tax allowance.

115