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I am not clear on the significance of making a depooling election. Based on Chapter 5 lecture part 3 – when we dispose of an asset, we deduct the sale proceeds from the WDV of that pool. It seems like the asset that is depooled is treated in the same way. I am not clear on what the difference is between how we treat disposal of depooled asset and another asset as both treatments seem the same to me. Kindly assist me in understanding this concept.
When a de-pooling election is made in respect of a short life asset it is done as the asset is also likely to have a low residual value such that a balancing allowance will arise upon its disposal – no such balancing allowance arises when an asset is disposed of from a pool, it merely reduces the pool balance upon which then the WDA is taken.
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