Part 5 – Old but not cold
During every audit cycle we receive questions about what to do with fully depreciated assets.
If an entity has fully depreciated assets or “R1 assets” at the reporting date that it continues using, adjustments may be required to the financial statements if these adjustments are material.
GRAP 17 on Property, Plant and Equipment requires entities to assess the useful lives, residual values and depreciation methods of assets at every reporting date. This is done by assessing whether there is any indication that the entity’s expectations about the useful lives and residual values of an asset have changed since the last reporting date. Indications that there has been a change in the expected useful life or residual value of an asset are included in GRAP 17.57 and 17.58. An entity revises the expected useful life and/or residual values when the indicators are triggered.
In deciding whether any adjustments are required and the nature of the adjustments, an entity considers whether the existence of fully depreciated assets results from a change in estimate or an error in the application of the Standards.
FAQ 2.2 on What is the treatment of fully depreciated assets still in use (other than on the initial adoption of the Standards of GRAP)? provides a detailed explanation of an entity’s considerations. Access the FAQs here.
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This content has been prepared by the Secretariat of the ASB for information purposes only. It has not been reviewed, approved or otherwise acted on by the Board.