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Mar 3, 2015 · The depreciation of freehold buildings not held for investment purposes is a requirement of accounting standards. However the land element should not be depreciated. Yes they can revalue the property if they want, but that is not an alternative to charging depreciation on the building.
Depreciation. The depreciable amount of an item of property, plant and equipment should be allocated on a systematic basis over its useful life. The depreciation method used should reflect the pattern in which the asset's economic benefits are consumed by the enterprise.
Option 1: Property is measured at cost and presented under Property, Plant and Equipment in the statement of financial position. Depreciation is required. Option 2: Property is measured at fair value with change being posted to equity and presented under Property, Plant and Equipment in the statement of financial position.
5.13 Depreciation is charged on a straight-line basis at rates calculated to allocate the cost of an item of property, plant and equipment measured at cost less any estimated residual value, over its remaining useful life. For freehold land, it is not necessary to depreciate but for leasehold land, it shall be amortized over the lease period.
the depreciation charge of freehold buildings include: (a) Inability to determine the useful life of freehold buildings given the nature of the tenure; and (b) Inability to determine the cost of freehold buildings in situations where land and buildings are acquired together and classified as a single class of property, plant and equipment.
1. INTRODUCTION. MFRS 140 requires all entities to determine the fair value of investment property, for the purpose of either measurement (if the entity uses the fair value model) or disclosure (if it uses the cost model). 1.1 Definition of terms. a.
The asset has two depreciable components: (i) the lining element (allocated cost $50,000 with a useful life of five years), and. (ii) the balance of the cost (allocated cost $150,000 with a useful life of 10 years). Therefore, the annual depreciation is $25,000 ( ($50,000 x 1/5) + ($150,000 x 1/10)).
