IAS 16 Query

[muqtader]

The IAS states that if an asset generates economic beneift (be it cost reduction or increase in revenue) and can be measured it should be recongnised as an asset and depriciated over its life..

IN a manufacturing concern where the company holds some service assets like eg coomputers or calculators just for increasing efficiency or quality of work, what treatment would such assets require in the financial statements becuase it does not accrue some financial benefit but has to be included in some way.

please guide me on the correct treatment ) thanks )

Muqtader Abbas Shah

[maani]

Hi,
In this type of matters u can apply "Materiality Principle" to check out whether the item is a depriciable asset or not...
Like a calculator costs about Rs 300...so providing depreciation on such assets will not make a good sense...consider an example

value of calculators at start of the year=1200
purchases of calculators during the year=1000
value of calculators at year end=1800

now "opening value+purchases-closing value" will give u the amount which u have to show in the profit and loss account...

but in the case of computers the cost of 1 computer will be more than 20000 so this is a material amount...and we have to allow depreciation on computers...

loose tools is another example of such assets that is not depreciated in most cases...because calculators and loose tools and stationery ets are such assets whose wear and tear cannot be estimated appropriately...
if u buy two calculators of same quality and brand...u cannot estimate how long it will be in working condition...one might work for over ten years and the other might work only for a month or a weak...
if u buy a screw driver (loose tool)...how long will it remain in business...i think for ever...until it ll lost...

if the matter is still not clear u can ask further...

Ace