Chapter 11, Problem 9CPA

To determine

Depreciation:

Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life.

Straight-line method:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.

$\text{Depreciation expense=}\frac{\left(\text{Cost of the asset}-\text{Salvage value}\right)}{\text{Estimated useful life of the asset}}$

IFRS treatment of depreciating machinery:

International Financial Reporting Standards (IFRS) refers to the common set of rules and regulations (standards) of accounting which are followed at global level for the preparation of the financial statements.

Under IFRS, if a machine contains any component with identifiable value and estimated life, then such component should be depreciated separately.

To Determine: The depreciation for the year 2016 under IFRS.