DEPRECIATION UL

Depreciable Amount and Depreciation 2. Sum of the Year’s Digit (SYD)

Period
o The depreciable amount of an asset shall UL x (UL + 1 / 2)
be allocated on a systematic basis over its
useful life. 3. Declining Balance
o The residual value and the useful life of
an asset shall be reviewed at least at each
financial year-end and, if expectations differ -Double Declining:
from previous estimates, the change(s) shall
2 / UL x CA
be accounted for as a change in an
accounting estimate. -150%

o Depreciation is recognized even if the fair 1.5 / UL x CA

value of the asset exceeds its carrying
amount; as long as the asset’s residual value
does not exceed its carrying amount. Repair
and maintenance of an asset do not negate
the need to depreciate it.
DEPLETION
o The residual value of an asset may
increase to an amount equal to or greater
than the asset’s carrying amount. If it does, -It refers to the systematic and rational
allocation of the depletion base of a natural
the asset’s depreciation charge is zero unless resource over its useful life.
and until its residual value subsequently
Depletion Method
decreases to an amount below the asset’s Units of Output Method (UOP) is often used
carrying amount. in computing the depletion base of a natural
resource. The formula is:
o Depreciation of an asset begins when it is
Depletion =
available for use. Depreciation of an asset Total cost of the wasting asset - Units
ceases at the earlier of the date that the asset extracted – residual value
is classified as held for sale and the date that _________________________
the asset is derecognized.
Units estimated to be extracted
FORMULAS: units extracted

1. STRAIGHT LINE x during the

year
Cost-RV
Change in the units estimated to be
extracted and additional development
costs:

When there is a charge in the units estimated

to be extracted or when the company incurs
additional costs, these are regarded as
change in accounting estimate to be
handled currently and prospectively. The
company needs to compute for the new
depletion rate per unit using this formula:
New depletion rate/unit

Remaining depletion cost

___________________________
Remaining revised estimate of the
productive output

Depletion

Depletion Rate per Unit

Units of Extracted during the Year