Asset Details
€1.000.000
€50.000
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.
No spam. Unsubscribe anytime.
IAS 16 Depreciation for Government
Government and public sector entities hold the most extensive and long-lived PP&E portfolios of any sector. Roads, bridges, water infrastructure, public buildings, emergency vehicles, and defence assets represent national-scale investment. While IAS 16 applies to government entities reporting under IFRS, many public sector entities apply IPSAS (International Public Sector Accounting Standards), where IPSAS 17 Property, Plant and Equipment closely mirrors IAS 16 with additional guidance specific to the public sector context.
Infrastructure assets are the defining PP&E category for government. A road network, water distribution system, or bridge portfolio may have useful lives of 30 to 100 years. These assets require extensive component depreciation: a road comprises the sub-base (60–100 years), surface course (10–20 years), kerbs and drainage (30–50 years), and lighting (15–25 years). The surface course is resurfaced periodically — each resurfacing is capitalised and the old surface derecognised. This renewal approach means that the overall road asset is maintained at a relatively constant carrying amount through a combination of depreciation and periodic renewal investment.
Public accountability creates additional requirements for government PP&E depreciation. Government entities must demonstrate that they are managing public assets responsibly. This means more detailed asset registers, more rigorous useful life justifications, and more comprehensive reporting than is typical in the private sector. Heritage assets (historic buildings, monuments, cultural collections) present the same challenges as for nonprofits: indefinite useful lives, difficulty in valuation, and the question of whether depreciation is meaningful for assets that are maintained in perpetuity.
Typical Asset Classes — Government
| Asset | Useful Life | Method | Notes |
|---|---|---|---|
| Infrastructure (roads, bridges) | 30–100 years | Straight-line with components | Very long lives; renewal accounting may apply |
| Public buildings | 30–60 years | Straight-line with components | Component depreciation as for any building; heritage considerations |
| Fleet vehicles (emergency, utility) | 5–10 years | Straight-line | Standardised depreciation across fleet |
| IT infrastructure | 3–5 years | Straight-line | Same as commercial sector |
| Specialised assets (military, scientific) | 10–30 years | Straight-line | No active market for residual value |
Key IAS 16 Considerations — Government
IPSAS 17 mirrors IAS 16 with additional public sector guidance
Infrastructure assets require extensive component depreciation
Heritage assets: indefinite life (no depreciation) or very long life (minimal depreciation)
Renewal accounting for infrastructure maintains service potential
Public accountability requires detailed asset registers and reporting
Worked Example: Public Office Building
A government entity constructs a public office building completed in March 2025 for €10,000,000 (excluding land at €3,000,000). Component split: structure €7,000,000 (50 years), roof €1,200,000 (25 years), HVAC €1,000,000 (15 years), electrical €500,000 (20 years), lift €300,000 (20 years). Residual values set at zero for all components.
Cost: €10,000,000 (building components only — land excluded)
Residual value: €0 (across all components)
Depreciable amount: €10,000,000
Annual depreciation: €278,500 (aggregate of all components)
First year depreciation: €232,083 (pro-rata: 10 months — March to December)
Audit Considerations
Government entity auditors should consider IPSAS 17 requirements if applicable, the adequacy of infrastructure component depreciation, heritage asset accounting treatment, and public accountability obligations for asset management. National audit offices often have specific expectations for PP&E reporting.