Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Typical base depreciation principles include:
- Each part of an item of Property, Plant & Equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
- The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.
- The depreciation method used reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the entity.