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Fixed assets and depreciation

In: UK Gaap

Author

Listed:
  • Mike Davies

    (Ernst & Young)

  • Ron Paterson

    (Ernst & Young)

  • Allister Wilson

    (Ernst & Young)

Abstract

The broad principles for accounting for fixed assets are generally well understood in the UK. The cost of fixed assets should be capitalised when they are acquired and subsequently depreciated through the profit and loss account over their working lives, and written down if at any time the carrying value is seen not to be fully recoverable. When a fixed asset is sold or scrapped, the difference between the written down value and any proceeds is recorded as the gain or loss on disposal. But there are many complications in applying these simple principles in practice; When should a fixed asset initially be recognised? How should its cost be measured? How should it be depreciated? When should it be regarded as not fully recoverable? Worse, a new and confusing dimension is added to these and other problems if management decides to revalue the asset rather than continuing to carry it on the basis of its historical cost.

Suggested Citation

  • Mike Davies & Ron Paterson & Allister Wilson, 1992. "Fixed assets and depreciation," Palgrave Macmillan Books, in: UK Gaap, edition 0, chapter 0, pages 437-523, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-12998-0_6
    DOI: 10.1007/978-1-349-12998-0_6
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