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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 for Nonprofits
Nonprofit and charitable organisations face unique depreciation challenges that commercial entities do not encounter. Assets may be donated rather than purchased, heritage buildings may have indefinite useful lives, grant funding may impose conditions on asset use and disposal, and the capitalisation threshold is typically lower given the smaller scale of operations. While IAS 16 applies equally to nonprofits (if they report under IFRS), the practical application requires sensitivity to the nonprofit context.
Donated assets present the most distinctive IAS 16 challenge for nonprofits. When a nonprofit receives a donated asset, it is recognised at fair value at the date of receipt. For government grants of assets, IAS 20 provides that the asset can be measured at fair value or at a nominal amount. The asset is then depreciated over its useful life in the normal way — the fact that it was donated does not change the depreciation method or period. However, if the donation has conditions attached (e.g., must be used for a specific programme for 5 years), these conditions do not affect the IAS 16 depreciation calculation but may affect grant income recognition.
Heritage assets — historical buildings, artworks, collections — pose a fundamental challenge for depreciation. Some heritage assets have indefinite useful lives: a 500-year-old building that is maintained in its current condition may continue to provide benefits indefinitely. If the useful life is genuinely indefinite, no depreciation is charged, but the asset must still be tested for impairment annually under IAS 36. Many nonprofit accounting frameworks (such as Charities SORP in the UK or RJ 640 in the Netherlands) provide specific guidance on heritage assets that may supplement or modify IAS 16 requirements.
Typical Asset Classes — Nonprofits
| Asset | Useful Life | Method | Notes |
|---|---|---|---|
| Office equipment | 3–7 years | Straight-line | Lower capitalisation thresholds typical for nonprofits |
| Vehicles (programme delivery) | 4–7 years | Straight-line | Used for charitable programme delivery |
| Buildings (charitable purpose) | 30–50 years | Straight-line with components | May be donated; heritage buildings may have indefinite useful life considerations |
| IT systems | 3–5 years | Straight-line | Often grant-funded with specific conditions |
| Programme-specific equipment | 3–10 years | Straight-line | Equipment used directly for charitable activities |
Key IAS 16 Considerations — Nonprofits
Donated assets recognised at fair value on receipt, then depreciated normally
Heritage assets may have indefinite useful life (no depreciation, annual impairment test)
Grant conditions don't affect depreciation but affect income recognition (IAS 20)
Lower capitalisation thresholds typical for nonprofit scale
Local nonprofit frameworks (Charities SORP, RJ 640) may supplement IAS 16
Worked Example: Programme Delivery Vehicle (Donated)
A nonprofit receives a donated vehicle valued at €35,000 fair value in February 2025 for programme delivery. Estimated useful life is 5 years, residual value €3,000. The entity uses straight-line depreciation with a December year-end.
Cost: €35,000 (fair value at donation date)
Residual value: €3,000
Depreciable amount: €32,000
Annual depreciation: €6,400 (straight-line)
First year depreciation: €5,867 (pro-rata: 11 months — February to December)
Audit Considerations
Nonprofit auditors should verify fair value of donated assets, compliance with grant conditions, and the appropriateness of heritage asset accounting. Local nonprofit accounting frameworks may have additional requirements beyond IAS 16. Governance requirements for asset management and disposal are typically higher for nonprofits than commercial entities.