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(36)-APPLYING A DEPRECIATION METHOD CONSISTENTLY

Saturday, November 28, 2009

Applying a depreciation method consistently

It is up to the business concerned to decide which method of depreciation to apply to its fixed assets. Once that decision has been made, however it should not be charged the chosen method of depreciation should be applied consistently from year to year.

Similarly it is up to the business to decide what a sensible life span for a fixed asset should be. Again once that life span has been chosen, it should be charged unless something unexpected happens to the fixed asset.

It is permissible for a business to depreciate different categories of fixed assets in different ways. For example, if a business owns three cars, then each car would normally be depreciated in the same way; but another category of fixed asset, say, photocopiers can be depreciating using a different method.

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