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Dec 06, 2021 at 04:09 PM

Effects of IAS 8 on Asset Accounting - Depreciation Calculations.

91 Views Last edit Dec 06, 2021 at 11:47 PM 3 rev

Hi Experts,

Kindly assist with answering the below and please refer to the attached for visualized examples.

Requirement:

If the useful life of an asset changes during it’s lifespan, the depreciation must be calculated based on the Residual Value of the asset at that point in time and spread over the remaining useful life

Example:

We have a laptop that was purchased for R30,000 .At the time of acquisition the useful life was determined to be 3 years. In year 1 depreciation of R10,0000 was posted based on the straight line method. At the beginning of year 2 the useful life was revised to 4 years.

The desired system behavior is indicated in the To-be section of the table

ias-81.png

Challenge:

Depreciation based on the new useful life is calculated based on the Original Cost instead of the Residual Value. As a result an adjustment for Year 1 is posted in month 1 of year 2. The system re-determines the depreciation to R7,500 per year and results in the following

ias-82.png

Your assistance would be greatly appreciation.

Kind regards,

Ntokozo.

Attachments

ias-81.png (67.8 kB)
ias-82.png (25.3 kB)