12-18-2006, 09:15 PM
International accounting standards do not prefer any method of depreciation i.e. reducing balance or straight line..
IAS gives management to opt for the method that best depicts the realization of economic benefit from an asset...
Normally in industries, the efficiency of machinery is good when it is new and output tends to fall as the machine gets older. So an entity can choose the reducing balance for a plant of such kind. But other assets like vehicle or building give the same benefit over its useful life...
So no method is encouraged or discouraged but opted on the basis of realization of economic benefits...
IAS gives management to opt for the method that best depicts the realization of economic benefit from an asset...
Normally in industries, the efficiency of machinery is good when it is new and output tends to fall as the machine gets older. So an entity can choose the reducing balance for a plant of such kind. But other assets like vehicle or building give the same benefit over its useful life...
So no method is encouraged or discouraged but opted on the basis of realization of economic benefits...
