Items of property, plant, and equipment should be recognized as assets when
- It is probable that the future economic benefits associated with the asset will flow to the entity, and
- the cost of the asset can be measured reliably.
For all depreciable assets:
Depreciation begins when the asset is available for use and continues until the asset is de-recognized, even if it is idle, as opposed to the common notion that depreciation being charged only once the asset has been put to use.
The depreciable amount (cost less residual value) should be allocated on a systematic basis over the asset’s useful life
The residual value and the useful life of an asset should be reviewed at least at each financial year-end and, if expectations differ from previous estimates, any change is accounted for prospectively as a change in estimate under IAS 8.
The depreciation method should be reviewed at least annually and, if the pattern of consumption of benefits has changed, the depreciation method should be changed prospectively as a change in estimate under IAS 8. Expected future reductions in selling prices could be indicative of a higher rate of consumption of the future economic benefits embodied in an asset.
Depreciation should be charged to profit or loss unless it is included in the carrying amount of another asset.