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In IAS-40 Fair Value model we do not charge depreciation but in IAS-16 Revaluation model we do charge depreciation.
Can you please tell why?The two properties are being used for entirely different purposes. The PPE is being used within the business to generate revenue and so we need to match the cost of the PPE to this revenue generated, hence we we depreciate the asset.
The IP is an investment and the value of an investment goes up and down, like we would have with investments in debt and equity. The accounting treatment is therefore reflective of the investment nature of the property and hence we do not need to depreciate.
Thanks
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