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If we have ip can we charge depreciation? And why we do not charge depreciation when subsequently use fv model ? Reasons please
Hi,
The accounting treatment of IP follows that of the rules applied to equity shares. If we have spare cash and decide to invest in shares, the change in the value of the shares goes through profit or loss. We do not depreciate the shares.
If we decided to invest in property as opposed to equity shares then it stands to reason that the accounting treatment should follow the same rules with the change in value going through profit or loss and no depreciation charged.
Hope that clears it up a bit. Don’t worry too much as you’d not be expected to explain it in FR, but it does help to understand the reasoning behind it, so good question.
Thanks
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