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Commission Regulation
(EC) No 1725/2003 of 29 September
2003 amended by
Regulation (EC) No 2238/2004
and
Regulation (EC) No 1910/2005.
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Depreciation Method
60. The depreciation
method used shall reflect the pattern in which the asset’s
future economic benefits are expected to be consumed by the
entity.
61. The depreciation
method applied to an asset shall be reviewed at least
at each financial year-end and, if there has been a
significant change in the expected pattern of
consumption of the future economic benefits
embodied in the asset, the method shall be changed
to reflect the changed pattern. Such a change shall be
accounted for as a change in an accounting estimate in
accordance with IAS 8.
62. A variety of
depreciation methods can be used to allocate the depreciable
amount of an asset on a systematic basis over its useful life.
These methods include the straight-line method, the
diminishing balance method and the units of production method.
Straight-line depreciation results in a constant charge over
the useful life if the asset’s residual value does not
change. The diminishing balance method results in a decreasing
charge over the useful life. The units of production method
results in a charge based on the expected use or output. The
entity selects the method that most closely reflects the
expected pattern of consumption of the future economic
benefits embodied in the asset. That method is applied
consistently from period to period unless there is a change in
the expected pattern of consumption of those future economic
benefits.
Impairment
63. To determine
whether an item of property, plant and equipment is impaired,
an entity applies IAS 36 Impairment of Assets. That
Standard explains how an entity reviews the carrying amount of
its assets, how it determines the recoverable amount of an
asset, and when it recognises, or reverses the recognition of,
an impairment loss.
64. [deleted]
Compensation for
Impairment
65. Compensation
from third parties for items of property, plant and equipment
that were impaired, lost or given up shall be included in
profit or loss when the compensation becomes receivable.
66. Impairments or
losses of items of property, plant and equipment, related
claims for or payments of compensation from third parties and
any subsequent purchase or construction of replacement assets
are separate economic events and are accounted for separately
as follows:
(a) impairments of
items of property, plant and equipment are recognised in
accordance with IAS 36;
(b) derecognition of
items of property, plant and equipment retired or disposed of
is determined in accordance with this Standard;
(c) compensation
from third parties for items of property, plant and equipment
that were impaired, lost or given up is included in
determining profit or loss when it becomes receivable; and
(d) the cost of
items of property, plant and equipment restored, purchased or
constructed as replacements is determined in accordance with
this Standard.
Derecognition
67. The carrying
amount of an item of property, plant and equipment shall
be derecognised:
(a) on disposal; or
(b) when no future
economic benefits are expected from its use or
disposal.
68. The gain or loss
arising from the derecognition of an item of property,
plant and equipment shall be included in profit or loss
when the item is derecognised (unless IAS 17 requires
otherwise on a sale and leaseback). Gains shall
not be classified as revenue.
69. The disposal of
an item of property, plant and equipment may occur in a
variety of ways (eg by sale, by entering into a finance lease
or by donation). In determining the date of disposal of an
item, an entity applies the criteria in IAS 18 Revenue for
recognising revenue from the sale of goods. IAS 17 applies to
disposal by a sale and leaseback.
70. If, under the
recognition principle in paragraph 7, an entity recognises in
the carrying amount of an item of property, plant and
equipment the cost of a replacement for part of the item, then
it derecognises the carrying amount of the replaced part
regardless of whether the replaced part had been depreciated
separately. If it is not practicable for an entity to
determine the carrying amount of the replaced part, it may use
the cost of the replacement as an indication of what the cost
of the replaced part was at the time it was acquired or
constructed.
71. The gain or loss
arising from the derecognition of an item of property,
plant and equipment shall be determined as the difference
between the net disposal proceeds, if any, and the
carrying amount of the item.
72. The
consideration receivable on disposal of an item of property,
plant and equipment is recognised initially at its fair value.
If payment for the item is deferred, the consideration
received is recognised initially at the cash price equivalent.
The difference between the nominal amount of the consideration
and the cash price equivalent is recognised as interest
revenue in accordance with IAS 18 reflecting the effective
yield on the receivable.
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