The IASB clarifies the appropriate methods of depreciation, amortization

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New amendments to two international accounting standards released on Monday clarify acceptable methods of depreciation and amortization.

In order to clarify the appropriate methods, the International Accounting Standards Board (IASB) amended IAS 16, Tangible fixed assets, and IAS 38, Intangible assets. Both standards explain that the expected consumption pattern of the future economic benefits of an asset is the basic principle of depreciation.

The IASB clarified that it is not appropriate to use income-based methods to calculate depreciation of an asset. Indeed, the income generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset.

Income is also generally assumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. In certain limited circumstances, however, this presumption may be rebutted, under the new guidelines.

More information is available on the IFRS website.

The changes take effect for annual periods beginning on or after January 1, 2016, and early application is permitted.


Ken tysiac (

[email protected]
) is a JofA senior editor.


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