DEPRECIATION

Accounting Standard of Depreciation

Accounting Standard of Depreciation

This paper intends to explore the IASB framework. Mainly it focuses on the potential problems in the depreciation methods that need to be addressed by the accounting standard. Further, it proposes the possible solutions to those problems.

Depreciation is the accounting allocation of the depreciable amount of an asset according to the rate of consumption of economic benefits expected in terms of its probable use. Depreciation to be deductible, must:

• be recognized

• Non deductible expenses excluded by a specific tax provision.

In London the International Accounting Standards Board (IASB) is a self-governing board for financial statements standard-setting, overseen and appointed by a professionally and geographically diverse group of Trustees of the IASC (International Accounting Standards Committee) Foundation who are responsible to the public interest. In the UK, financial statements regulated with the assistance and contribution of the IASB described principles, rules, standards etc. (Mirza, A. et.al, 2011). It is a considerable reality that the board make it mandatory for lusted companies to adopt IFRSs basically the broad objective of the board is to harmonize accounting standard across the globe, the board co-operates with national accounting board to set standards. Hence, the fundamental aims of IASB to bring in practice the best accounting and auditing rules to manage the financial of the world at large

In IASB framework, to be useful, information must be both relevant and faithfully represented. The cost constraint is needed to normalize: it must consider whether the benefits of particular information justify the costs of its production and use. It will be necessarily subjectivity in the appreciation of both qualitative and quantitative (Sandretto, M. 2011).

The objective of this Standard is to prescribe the accounting treatment for property, plant and equipment. The main problems in accounting for property, plant and equipment are: when to recognize the assets, the determination of the carrying amounts and the depreciation charges to be recognized in relation to them and the determination and accounting treatment of other decreases the book value. This Standard requires an item of property, plant and equipment is recognized as an asset when the reign definition and recognition criteria for an asset under Section Framework for the Preparation and Presentation of Financial Statements.

Main modern problem of fixed assets is the same as it was centuries ago is a huge gap between the objective implementation of the cost of obtaining and renewal of fixed assets and the receipt of benefits from their use. Objective information about the facts of economic life, recorded in the primary documents, makes no apparent connection between these two events. But the accountant should establish such communication and not just install and do it in such a way as to get a real economic impact on the financial performance of the organization. It is to solve this problem invented by "amazing" the mechanism of depreciation, which is the basic method of accounting, plant and equipment (Sandretto, M. 2011). The aim of the international standard governing the accounting of fixed assets, expressed ...