09-09-2009, 02:28 AM
In diminishing balance method, this situation will not occur frequently.
Any way, it depends on the company policy regarding measurement of property, plant and equipment (tangible fixed property, plant and equipments) i.e. revaluation or cost model.
If the company is using cost model then the property, plant and equipment shall be shown in the balance sheet at zero value. i.e. cost less accumulated depreciation <u>because according to IAS-16 "The carrying amount of an item of property, plant and equipment shall be derecognized
(a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal."</u>
But this situation should be solved by revising the estimate of useful life of property, plant and equipment, (if it is still in use) before the value of property, plant and equipment reaches zero.
Fully depreciated property, plant and equipment can be revalued. But for that purpose, the company must change its policy from cost model to revaluation model and if an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which that asset belongs shall be revalued.
I hope this serves the purpose.
Any way, it depends on the company policy regarding measurement of property, plant and equipment (tangible fixed property, plant and equipments) i.e. revaluation or cost model.
If the company is using cost model then the property, plant and equipment shall be shown in the balance sheet at zero value. i.e. cost less accumulated depreciation <u>because according to IAS-16 "The carrying amount of an item of property, plant and equipment shall be derecognized
(a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal."</u>
But this situation should be solved by revising the estimate of useful life of property, plant and equipment, (if it is still in use) before the value of property, plant and equipment reaches zero.
Fully depreciated property, plant and equipment can be revalued. But for that purpose, the company must change its policy from cost model to revaluation model and if an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which that asset belongs shall be revalued.
I hope this serves the purpose.
