- This topic has 5 replies, 2 voices, and was last updated 7 years ago by
MikeLittle.
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josy87
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” IAS 16 states depreciation of an asset begins when it is available for use”, Sir I though depreciation of an asset begins when it brought into use. Sir if a company creates a NCA for it own use, when did the depreciation start? when it finish with the production of the asset or when it actually put it into service?
MikeLittle
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Ask yourself “Why would they produce it and then not start to use it?”
Following the matching concept, depreciation should start when the asset begins to contribute to revenues / profits
josy87
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yes Sir, but sometime the company can decide to start to use it at the beginning of the following year for example. In that case, the depreciation shouldn’t be when the NCA start working?
your answer
“Following the matching concept, depreciation should start when the asset begins to contribute to revenues / profits” with
” IAS 16 states depreciation of an asset begins when it is available for use” seem to diverge. the date that the NCA is available to use and the date that it starts to contribute to rev/profit can be different.
i am confused Sir.MikeLittle
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I agree that it’s confusing. Personally, should I face the problem in real life, I would be inclined to depreciate only as from the date it started to contribute.
That just shows you how easy it is to adopt an approach that is in conflict with Standards
Sorry
🙁
josy87
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not problem at all. thanks a lot Sir
MikeLittle
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You’re welcome
josy87
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