When we think \u201cdepreciation\u201d, we define it as reflecting on consuming future economic benefits arising from the asset. However, depreciation of an asset nonetheless begins when it\u2019s available for use, that is, it is in the condition and location which are necessary for the asset to operate as intended. If you think about it, we cannot talk about economic benefits if the asset is still in store, can we?\u00a0<\/p>\n
A prepayment for an asset means that we have made a plan to invest into a machinery or equipment and our prepayment is a reflection on that. This prepayment is essentially part of a future asset so as such, it is part of property, plant and equipment, but regardless it\u2019s shown under separate line that is called \u201cPrepayments\u201d for an example. Prepayments for PPE items do not depreciate.<\/p>\n
Construction in progress is usually a bit trickier. There is obviously the measurement of whether can use the asset or not, is it making any profits or economic benefits to us? However, there may be times where we are using part of the asset and the other part is still in progress. It\u2019s a question of whether can measure this part in use. First and foremost, if we cannot measure the cost reliably, we cannot depreciate the part since we don\u2019t have the depreciable amount. It is important to stress the definition of when an asset is started with depreciation. According to IAS 16 it is \u201cwhen the asset is available for use, i.e. it is in the location and condition necessary for it to be capable of operating in the manner intended by management\u201d. Surely the management assumed the condition to be \u201cready entirely\u201d.<\/p>\n","protected":false},"excerpt":{"rendered":"
When we think \u201cdepreciation\u201d, we define it as reflecting on consuming future economic benefits arising from the asset. However, depreciation of an asset nonetheless begins when it\u2019s available for use, that is, it is in the condition and location which are necessary for the asset to operate as intended. If you think about it, we […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[55],"tags":[],"class_list":["post-5064","post","type-post","status-publish","format-standard","hentry","category-1-5-3-subsequent-measurement"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t