1. Profile photo of saqib says

    I have a question that if we purchase an asset and we know that its value will increase instead of decrease with the passage of time(e g, we purchase a building and we know that its value will increase with time).Should we depreciate such an asset or not??

    • Profile photo of John Moffat says

      Yes – you have to depreciate per IAS 16 (if it is an asset with a limited life).
      The purpose is not to show a true value, but to spread the cost over the useful life.

      (If the value does increase substantially, then you are allowed to revalue – but this is a separate issue.)

  2. avatar says

    if the question says charge a full years depreciation charge on the year of purchase , and the asset was purchased on 31dec and the year end is on that day do we still charge a full years charge?

    • Profile photo of MikeLittle says

      Ask yourself “What does it mean when it says “a full years depreciation in the year of purchase””?

      Was it bought during the year? YES? Then charge a full year’s depreciation! It’s as simple as that.

      The same (apparently) illogical thinking goes into “and none in the year of sale” If we sell on 31 December, is it there as at the end of the year? NO? Then no depreciation.

    • Profile photo of John Moffat says

      It means that in the year that you bought the asset you charge depreciation for the whole year – even if you only had the asset for part of the year.

      (The alternative is proportionate depreciation, in which case if you only bought the asset (say) 9 months through the year, then you only charge depreciation for the 3 months that you owned it. With ‘a full years charge in the year of purchase’ you would calculate depreciation as though you had owned it for the whole year.)

  3. avatar says

    Beautifully explained :) :)
    I loved all of you’re lectures, Simple and easy to understand the topic. From the basic to the most difficult areas were well explained with examples :):)

    Thanks so much!

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