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IAS 16 Depreciation Audit Working Paper Template — free PDF
Practical audit guide covering all four depreciation methods with worked examples, component depreciation checklist, change-in-estimate documentation template, and useful life benchmarks by asset class.
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IAS 16 Depreciation in Canada — IAS 16 (as adopted in Canada under Part I of the CPA Canada Handbook)
Canada adopted IFRS (including IAS 16) for publicly accountable enterprises effective 1 January 2011. IAS 16 is incorporated into Part I of the CPA Canada Handbook — Accounting. Private enterprises may choose to apply ASPE (Accounting Standards for Private Enterprises) under Part II, where Section 3061 Property, Plant and Equipment provides broadly similar depreciation guidance. Canadian tax depreciation follows the Capital Cost Allowance (CCA) system, which uses prescribed CCA classes and rates that are entirely independent of accounting depreciation.
Regulatory Context — Canadian Securities Administrators (CSA) / CPA Canada
The Canadian Securities Administrators (CSA) have included PP&E depreciation in their continuous disclosure review programme. Key observations include: entities using CCA rates as the basis for accounting useful lives, insufficient component depreciation for material assets, and inadequate disclosure of depreciation methods and useful lives. The Canadian Public Accountability Board (CPAB) has also flagged PP&E estimates as an area where audit quality can be improved, particularly for mining and natural resource entities where PP&E is the dominant balance sheet item.
Practical Guidance for Canada
The Canadian CCA system categorises assets into classes with prescribed declining balance rates (e.g., Class 1 buildings at 4%, Class 10 vehicles at 30%, Class 43 manufacturing equipment at 30%). These CCA rates are for tax purposes only and should not determine IAS 16 useful lives. However, the Accelerated Investment Incentive Property (AIIP) rules provide enhanced first-year CCA deductions (effectively 1.5× the normal rate in the first year), which creates a larger gap between tax and accounting depreciation in the acquisition year.
Audit Expectations
Canadian auditors follow Canadian Auditing Standards (CAS), which are equivalent to ISA. The audit of PP&E depreciation requires: verification that IAS 16 useful lives are independent of CCA rates, assessment of component depreciation for material assets (particularly in mining, oil & gas, and real estate), evaluation of residual value estimates, and documentation of annual review of estimates. CPAB inspection findings have noted insufficient auditor challenge of management's depreciation assumptions.
Canada-Specific Considerations
Canadian-specific considerations include: the Accelerated Investment Incentive Property rules that provide enhanced first-year CCA — this has no impact on IAS 16 depreciation. The mining sector in Canada (gold, potash, base metals) requires extensive units-of-production depreciation and decommissioning asset accounting. Oil sands operations have unique very long-lived infrastructure (30–50 years) with significant decommissioning obligations. The Canadian climate creates specific maintenance and useful life considerations — extreme cold, freeze-thaw cycles, and remoteness of operations in northern Canada may justify shorter useful lives than temperate-climate benchmarks.
Common Inspection Findings
CCA class rates used as proxy for IAS 16 useful lives without entity-specific assessment
Component depreciation not applied to material mining and infrastructure assets
Residual values defaulted to zero without market data assessment
Annual review of depreciation estimates not documented
Decommissioning asset components not separately tracked for depreciation purposes