FAC 3702 UNIT 1 SUMMARY

Each part of PPE-item with a cost that is significant in relation to total cost of the item must be depreciated separately. Entity allocates amount initially recognised in respect of a PPE-item to its significant parts and depreciates separately each part Significant part of PPE-item with same useful life and depreciation methods may be grouped together in order to determine depreciation Depreciation of an asset begins when it is available for use as intended by management. Depreciation ceases at the earlier of the date that asset is classified as held for sale and the date the asset is derecognised. Depreciation method: Depreciation method used must reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. Depreciation method applied shall be reviewed at least at each financial year end 3 depreciation methods: Straight-line method – adopted where income produced by the asset is a function of time, rather than usage. Diminishing balance method – method is usually used where there is unvertainty as to the amount of income that will be derived from the asset Units of production method (or sum of units method) – depreciation is charged over the expected use or output of the asset Depreciation charge is accounted for in profit and loss, unless it is capitalised as part of the cost of