What are Acceptable Methods of Depreciation and Amortisation

What are Acceptable Methods of Depreciation and Amortisation?Welcome to Pitcher Partners’ Financial Reporting and Accounting newsletter. In this month’s newsletter, we consider the following two related issues: which methods of depreciation of property, plant and equipment are acceptable; and which methods of amortisation of intangible assets are acceptable. The AASB has recently amended AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets to: establish the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset; clarify that the use of revenue-based methods to calculate the depreciation of an item of property, plant and equipment is not appropriate; and clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. To view the latest Financial Reporting newsletter please click here.