is less an estimated amount of depreciation from fixed asset on the balance sheet at their original cost the b

Question

is less an estimated amount of depreciation from fixed asset on the balance sheet at their original cost the best way of accounting for fixed asset?

Answer 1

There is no best way to account for fixed assets. A method needs to be found which is effective for the company.

Some such as cars, trucks or machinery are very effectively depreciated based upon the miles driven or the hours used.

Buildings and structures are usually depreciated over a certain number of years.

Oil, gas or coal reserves are probably recorded using a percentage depletion formula.

Goodwill, patents and other intangible assets are usually taken over a period of time which may represent their life, or may be almost arbitrary.

When you start looking at taxes these same assets are usually given specific formulas on how they are to be depreciated which are even more complicated and make even less sense sometimes.

Answer 2

To summarise IAS 16 Property, Plant & equipment,

Initial Measurement -
They should be initially recorded at cost. [IAS 16.15]

Measurement Subsequent to Initial Recognition -
IAS 16 permits two accounting models:
- Cost Model. The asset is carried at cost less accumulated depreciation and impairment. [IAS 16.30]
- Revaluation Model. The asset is carried at a revalued amount, being its fair value at the date of revaluation less subsequent depreciation, provided that fair value can be measured reliably. [IAS 16.31]

Depreciation (Cost and Revaluation Models)

For all depreciable assets:
The depreciable amount (cost less prior depreciation, impairment, and residual value) should be allocated on a systematic basis over the asset's useful life [IAS 16.50].

Then don't forget to apply IAS 36 Impairment of Assets
At each balance sheet date, review all assets to look for any indication that an asset may be impaired (its carrying amount may be in excess of the greater of its net selling price and its value in use). IAS 36 has a list of external and internal indicators of impairment. If there is an indication that an asset may be impaired, then you must recognise the impairment thru the income statement.

To sum up, PPE are stated at cost or revalued amount less accumulated depreciation and accumulated impairment losses.

Answer 3

Yes: Gross Fixed Assets....$10,000 Less: Accum Depr....... (2,000) Net Fixed Assets............8,000 You can always schedule out each asset separately (on a note to your balance sheet) if you want to show more detail.