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TMI BlogDepreciationX X X X Extracts X X X X X X X X Extracts X X X X ..... ion charge for each period shall be recognised in profit or loss unless it is included in the carrying amount of another asset. The depreciation charge for a period is usually recognised in profit or loss. However, sometimes, the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the depreciation charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the depreciation of manufacturing plant and equipment is included in the costs of conversion of inventories (see Ind AS 2 ). Similarly, depreciation of property, plant and equipment used for development activities may be included in the cost of an intangible asset recognised in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear and tear, which depends on operational factors such as the number of shifts for which the asset is to be used and the repair and maintenance programme, and the care and maintenance of the asset while idle. technical or commercial obsolescence arising from changes or improvements in production, or from a change in the market demand for the product or service output of the asset. Expected future reductions in the selling price of an item that was produced using an asset could indicate the expectation of technical or commercial obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset. legal or similar limits on the use of the asset, such as the expiry dates of related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expected pattern of consumption of those future economic benefits. A depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate. The revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits of the asset. For example, revenue is affected by other inputs and processes, selling activities and changes in sales volumes and prices. The price component of revenue may be affected by inflation, which has no bearing upon the way in which an asset is consumed. The standard does not prescribe any specific method to be followed by the entity. While selecting the depreciation method, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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