Depreciation
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IAS 16.62 explicitly mentions three methods: straight-line, diminishing (reducing) balance, and units of production. Any other method that reflects the pattern of consumption of economic benefits is also acceptable, such as sum-of-years-digits. However, IAS 16.62A explicitly prohibits revenue-based depreciation methods, as revenue reflects factors other than the consumption of economic benefits embodied in the asset.

Depreciation begins when the asset is available for use: when it is in the location and condition necessary for it to be capable of operating in the manner intended by management (IAS 16.55). Depreciation ceases at the earlier of the date the asset is classified as held for sale under IFRS 5 or the date the asset is derecognised. Depreciation does not cease when the asset becomes idle or is retired from active use.

IAS 16.43 requires that each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately. This is mandatory, not optional. For example, an aircraft must depreciate the airframe and engines separately because they have significantly different useful lives. A building should separate the structure from the roof, HVAC systems, and elevators.

Changes in useful life, residual value, or depreciation method are changes in accounting estimates under IAS 8 and are applied prospectively from the date of the change (IAS 16.51). The remaining carrying amount (less any updated residual value) is depreciated over the new remaining useful life. No retrospective adjustment or restatement is required.

Under IAS 16.54, if the residual value equals or exceeds the asset's carrying amount, the depreciation charge is zero. Depreciation resumes if the residual value subsequently decreases below the carrying amount, for example after an impairment loss is recognised that reduces the carrying amount below the residual value.

No. IAS 16.58 explicitly states that land has an unlimited useful life and therefore is not depreciated. When land and buildings are acquired together (even as a single transaction), they must be separated for accounting purposes, with only the building component subject to depreciation. Land improvements (fencing, drainage, roads) are separate depreciable assets.

Under reducing (diminishing) balance, the depreciation charge declines each year as the NBV decreases. At some point, the straight-line charge on the remaining depreciable amount over the remaining useful life exceeds the reducing balance charge. Standard practice is to switch to straight-line at that point, ensuring the asset reaches exactly its residual value by the end of the useful life. This calculator implements the switch automatically.

IAS 16 applies to owner-occupied property (property used by the entity in its operations or administration). IAS 40 applies to investment property (property held to earn rentals or for capital appreciation). Under IAS 40, entities can choose the fair value model (no depreciation, with gains and losses in profit or loss) or the cost model (which applies IAS 16 depreciation rules). The classification depends on the entity's use of the property.

No. Tax depreciation rates (capital allowances, AfA-Tabellen, CCA classes) are determined by tax legislation and may not reflect the entity-specific consumption pattern required by IAS 16.60. While tax rates can be a starting point, IAS 16.51 requires entity-specific useful life estimates. Using tax rates without independent justification is a common compliance deficiency identified by regulators.

The calculator supports three pro-rata conventions for mid-year acquisitions: full-month convention (depreciation starts from the first day of the acquisition month), half-month convention (assets acquired before the 16th get a full month, after the 15th get a half month), and exact-day convention (actual days / 365). The default is full-month convention, which is the most common practice.

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