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PPE – Depreciation – ACCA Financial Reporting (FR)

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      • correct, Depn is expense in a year so it goes to P&L(only current year dep’n), whereas to show how much asset was Depreciated so far this can be seen on the Balance Sheet ie SFP ( lets say 5 years worth)

      • Accumulated depreciation doesn’t go to liability. It’s recorded within assets section on a balance sheet but it has a credit balance to reduce the book value of an asset.

    • Depreciation is the depreciation charged for that particular financial year. whereas accumulated depreciation refers to the total depreciations that has been charged to that asset over the asset’s useful life.

  6. Hi sir.
    I have gone through bpp and Kaplan study text to get understand the logic behind excess depreciation, but unfortunately I could not find reason behind we deducting excess depreciation from revaluation surplus and added back to retained earning, bpp and Kaplan only providing the treatment that’s where shobd be added and deducted.

    Please give the reason behind do such calculation

    • Revaluation upward would give a higher depreciation which would reduce the profit for the period which in turn will reduce the dividend given to shareholders.
      So in order to be fair to the shareholders we make the transfer from revaluation surplus to retained earning.

  8. Hi,
    I have a question please..
    The estimated useful life was changed to 5 years on 31 Dec 2014. So the useful life on 1 Jan 2014 was 6 years. Why don’t we calculate the depreciation for 2014 based on CV 20,000/6y=3,333. As we are still in the Financial Year 2014 and we did not submitt the FSs?
    Thanks

  9. Hi,
    Please i need help. The third bullet point ‘Separate the cost into its component parts and depreciate separately if a complex asset’, this was not discussed in the depreciation video.
    I cant find a video that talks about it.

    • Where you are considering depreciation on, for example, a ship, the various separate elements within the overall asset will likely have very different life expectancies

      The hull – 50 years?
      The engines – 10,000 hours?
      Paintwork – 3 years?
      Hard furnishings – 5 years?
      Soft furnishings – 2 years?

      Clearly it would be inappropriate to depreciate soft furnishings straight line at 2% over 50 years and equally it would be inappropriate to depreciation the hull of the ship over just 2 years

      So we need to separate out the component elements that have different life expectancies and depreciate those separate elements according to their estimated useful lives

      OK?

  10. I am very happy so far how the course is going, thanks to you. You make the course fun and easy to understand. The layout of calculating depreciation its very easy, hope will be also easy for me when i start doing questions in revision kit.

  11. Goo evening,
    I watched the video and I would have a questionregarding to it.

    If the estimated useful life at 31.12.2014 is of 5 years why do we still charge 2,5M of depreciation and not 4M?
    At 31.12.2014 I would apply (carrying value 20M : 5 years = 4M depreciation).

    Thank you in advnace.

    BR

    Serena

    • Hi,
      I have a question please..
      The estimated useful life was changed to 5 years on 31 Dec 2014. So the useful life on 1 Jan 2014 was 6 years. Why don’t we calculate the depreciation for 2014 based on CV 20,000/6y=3,333. As we are still in the Financial Year 2014 and we did not submitt the FSs?
      Thanks

  12. Hi how do I know which depreciation method to use if same hasn’t been specified. Been attempting some examples from different sources and same varies.
    Thanks
    Maria

    • Hi,

      You will either be told in the question or you have to use the information given to help you decide. So if you are told the useful life then it will be straight line depreciation for example.

      Thanks

    • Hi,

      Following on from your previous question, if we charge no depreciation in the year of disposal then the carrying value used in the calculation of the profit or loss on disposal is based upon the carrying value at the start of the reporting period.

      Thanks

    • Hi,

      It is quite literal in that if you have a December year-end and acquire the asset in say June then you charge a full twelve months depreciation on it (“full depreciation of an asset in the year of acquisition”).

      If we then dispose of it in a future year and the disposal date is say November then we don’t charge any depreciation at all for that year, even though we’ve used it for 11 months of the year (“none in the year of disposal”).

      Thanks

  16. I’ve been struggling with this paper. Would you recommend doing it with your notes and lectures only? or do i need to read through the chapters of a text? the volume of information is alot. I really want to write exam in Decemeber.

    • Hi,

      You can use the notes and lectures but you will need a practice and revision kit too so that you can work through all the different exam style questions.

      The good thing is that you have plenty of time to be able work through all the materials in advance of December’s exam and ask any questions if you get stuck. If you are stuck and want a quicker reply then can you please post your questions on the ask the tutor forum on the website.

      Thanks

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