The Depreciation As An Evaluation Statement

1751 WordsJun 5, 20168 Pages
1 The depreciation as an evaluation statement: The depreciation is useful as an evaluation statement using principles as the fair value method. It is the estimated value of the liabilities and assets that a company use to consolidate the financial statement. This method provides advantages because the evidence that this accounting tool provide in the financial statement give a support for the managers to understand the value of the assets. Furthermore, the depreciation as evaluation is often refereed as the depreciated replacement cost (DRC), the carrying amount an adjustment to the value is required, being the rate as a percentage that the enterprise consumes the assets. 2. Depreciation equals physical wear and tear. The wear and…show more content…
It could be represented in an asset replacement reserve (cash) account. 4. There is no point in depreciating buildings because their value increases. A building become older with the run of the time. It is because as well as other physical assets, a building has a limited useful life. Furthermore, as a physical assets the building is affected by the principle of depreciation as “wear and tear”, and the Australian taxation office (ATO) allow that the property being depreciated by deduction. Therefore, the accountants are able to depreciate the building, even if this is brand new. In addition, from the date of construction the Australian Taxation Office allow 40 years as useful life in a building. To sum up, even if the realstate market increase the value of a building, this property is depreciable, according to the norms from the ATO. Question 4 (10 marks) (approximately 500 words) Why would a business choose to make the following entity structure changes? (a) From a proprietorship or partnership to a private company. A partnership company presents advantages, some features as an instance of this kind of company are: that cost less to establish, because a corporation cost more to set up than a partnership with less initial fees. This kind of company has minimum formalities, furthermore, an operative partnership company does not need any formal procedures and nor handwritten agreement. However,
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