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Why is it so that when IP is carried under cost model, depreciation is charged and when it is carried under fair value model depreciation is not charged ?
Hi,
The treatment of IP under the fair value method is so that it is similar to the accounting treatment of FVTPL financial assets. If you have surplus cash and wish to invest, then the treatment of what you invest in, i.e. property or shares, should be the same, hence gains and losses to profit or loss. We wouldn’t depreciate a financial asset, so we won’t depreciate IP.
Thanks
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