Preferred method for depreciation.

[Schuaeb]

Thanks Kamran sb for the reply.

Now what if it is claimed that reducing balance method is closer to the reality especially for such assets that are not designed to produce a fixed number of units evenly over a fixed period of time. For assets that are more productive in the initial year (generally it is the case) reducing balance method better matches the depreciation expense with the revenue. IAS 16 does not specify any of the methods as benchmark however the best possible estimate it requires.

In my view reducing balance method is more in practice. I never thought of the reasons until I was asked the same. May be it's due to in addition to the reason provided by you, to avoid deferred tax implications (if tax rates used, however, it's not often the case)

Kindly elaborate the following lines also.

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br /> This may provide an impetus for resreving funds in order to finance the due replacements and BMR etc with a better vision. <hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Thanks