Property, Plant &

Equipment
DEPRECIATION METHODS DEPRECIATION METHODS
EQUAL CHARGES ACTIVITY METHODS
Methods Computation of Depreciation Methods Computation of Depreciation
Straight Depreciable Cost Working Hours Depreciable Cost
Line Estimated Useful Life (EUL) Estimated Service Hours

Composite Output Depreciable Cost

Dissimilar production Estimated Capacity (in units)
Group Method
Similar
DEPRECIATION METHODS
DECLINING METHODS
Methods Computation of Depreciation
Sum of the Years' Remaining EUL
X Depreciable Cost
Digit Sum of the Year's Digit

Sum of the Half Remaining EUL (semi-annual)

X Depreciable Cost
Years' Digit Sum of the Half Year's Digit

Double Declining Depreciation Rate = SLM x 2

Balance Method Annual Depreciation Book value x Depreciation rate

150% Declining Depreciation Rate = SLM x 1.50

Balance Method Annual Depreciation Book value x Depreciation rate
DEPRECIATION METHODS
OTHER METHODS
Inventory Retirement Replacement
Method Method Method
Beginning xxxx Beginning xxxx Beginning xxxx
Cost of new acquisition xxxx Cost of new acquisition xxxx Cost of new acquisition xxxx
Ending balance (xxxx) Tools retired Tools retired
Cost of tools retired xxxx (at cost of tools retired) (xxxx) (at replacement cost) (xxxx)
Ending balance xxxx Ending balance xxxx

Cash (Salvage value) xxxx Cash (Salvage value) xxxx Cash (Salvage value) xxxx
Depreciation expense xxxx Depreciation expense xxxx Depreciation expense xxxx
Tools (squeezed) xxxx Tools (@ original cost) xxxx Tools (@ replacem ent) xxxx
CHANGES IN DEPRECIATION
 Changes in the following are considered to be changes in accounting estimate:
• Residual value
• Estimated useful life
• Depreciation method
 Change in accounting estimate is accounted for prospectively.
ACCOUNTING POLICIES ON PPE
SUBSEQUENT MEASUREMENT
COST MODEL  PPE is carried at cost less accumulated depreciation and
accumulated impairment losses
REVALUATION  PPE is carried similar to cost model but revalued in case its fair value
MODEL is significantly different from its carrying value.
 PPE is revalued at least every year-end
• Elimination Approach
~ The balance of accumulated depreciation before revaluation
is eliminated.
• Proportional Approach
~ Both the asset and contra asset accounts are adjusted
proportionately.
Note: Regardless of the approach used, the revaluation
surplus, carrying value, and the depreciation charges after the
revaluation REMAINS THE SAME.
REVALUATION MODEL
COMPUTATION OF REVALUATION SURPLUS
Before After Difference
Cost/Replacement Cost/Appreciation xxxx xxxx xxxx
Less: Revised Residual Value (xxxx) (xxxx) (xxxx)
Balance xxxx xxxx xxxx
Less: Accumulated Depreciation
(based on the expired years over old EUL) (xxxx) (xxxx) (xxxx)
Remaining Depreciable Amount xxxx xxxx xxxx
Add: Revised Residual Value xxxx xxxx xxxx
Book Value/Fair Value or Sound Value/Revaluation Surplus xxxx xxxx xxxx

Revaluation Surplus is transferred to Retained Earnings as follows:

 Piecemeal - Same pattern of depreciation
 Lumpsum - Upon sale of PPE
ACCOUNTING POLICIES ON PPE
SUBSEQUENT MEASUREMENT
Increase Decrease
without prior without prior Increase with prior Decrease with prior
decrease increase decrease increase
Cost Model N/A Impairment Recovery of impairment Impairment Loss
Loss loss previously
recognized but not
exceeding the original
carrying value had it
been no impairment.
Revaluation Revaluation Impairment Recovery of Impairment Deduction from
Model Surplus Loss Loss in P&L, any excess Revaluation Surplus, any
An OCI Account is Revaluation Surplus excess is Impairment
Loss