Asset Details
€300.000
€45.000
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.
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IAS 16 Depreciation for Transportation
The transportation sector presents some of the most complex PP&E accounting in any industry. Aircraft, ships, trains, and commercial vehicle fleets involve high-value assets with multiple components, extensive maintenance programmes, and the critical interaction between IAS 16 depreciation and IFRS 16 lease accounting (given that much of the global aircraft and vehicle fleet is leased rather than owned). Component depreciation under IAS 16.43 was essentially designed with aircraft in mind — the textbook example of separating airframes from engines.
Aircraft depreciation is the gold standard for component depreciation. An aircraft comprises the airframe (15–25 years), engines (5–10 years between major overhauls), landing gear (7–12 years between overhauls), and interior cabin configuration (6–12 years). Each component is depreciated separately over its own useful life. When an engine is overhauled, the cost of the overhaul is capitalised and the remaining carrying amount of the previous engine restoration is derecognised. This is explicitly addressed in IAS 16.13–14. Airlines that fail to apply component depreciation systematically risk material misstatement of both depreciation expense and asset carrying amounts.
Fleet vehicles and commercial trucks may suit either reducing balance or units of production depreciation. Reducing balance reflects the reality that vehicles lose value most rapidly in the first 2–3 years, which aligns with the used vehicle market. UOP (using kilometres driven) is appropriate for logistics fleets where wear is directly proportional to mileage. Ships follow a similar component approach to aircraft: hull (20–30 years), propulsion systems (15–20 years), navigation equipment (8–12 years), and accommodation/cargo systems (10–15 years). Dry-docking costs are capitalised as a component and depreciated over the period until the next scheduled dry-dock.
Typical Asset Classes — Transportation
| Asset | Useful Life | Method | Notes |
|---|---|---|---|
| Fleet vehicles | 3–8 years | Reducing balance | Active used vehicle market supports residual values |
| Commercial vehicles (trucks) | 5–10 years | Reducing balance or UOP | UOP (km) appropriate for high-mileage operations |
| Aircraft (airframe) | 15–25 years | Straight-line | Classic component depreciation example — separate airframe from engines |
| Aircraft (engines) | 5–10 years (between overhauls) | Straight-line or UOP (flight hours) | Major overhaul intervals drive useful life |
| Ships and vessels | 15–30 years | Straight-line with components | Hull, propulsion, navigation systems each have different lives |
| Rolling stock (trains) | 20–35 years | Straight-line with components | Body, bogies, traction motors, interiors |
Key IAS 16 Considerations — Transportation
Aircraft component depreciation is the classic IAS 16.43 example
Major overhaul costs capitalised as components (IAS 16.13–14)
Dry-docking costs for ships are separate depreciable components
UOP (km or flight hours) appropriate for usage-linked assets
IFRS 16 interaction critical for leased fleet assets
Worked Example: Commercial Delivery Truck
A transportation company acquires a commercial delivery truck in July 2025 for €300,000. Estimated residual value is €45,000 (15% — reflecting active used truck market), useful life is 8 years. The entity uses double declining balance with a December year-end.
Cost: €300,000
Residual value: €45,000
Depreciable amount: €255,000
Annual depreciation: €75,000 first full year (25% DDB rate × opening NBV)
First year depreciation: €37,500 (pro-rata: 6 months — July to December at DDB rate)
Audit Considerations
Transportation auditors should focus on the adequacy of component depreciation for aircraft, ships, and rolling stock. Major overhaul accounting (capitalise vs expense) is a key judgment area. Fleet depreciation should be consistent with actual disposal patterns. For airlines, the interaction between IAS 16 (owned aircraft) and IFRS 16 (leased aircraft) depreciation policies should be consistent.