[Iceman]

I’ve seen a question during Ninja review (and possibly on the CPA – I will not confirm or deny…) regarding IFRS component depreciation – it goes like:
Company bought a jet with 10 year useful life. Costs are:
Airframe -$10M – 10 years
Engine – $6M – 8 years
Systems – $5M – 5 years
Interior – $3M – 5 years
Shipping and Delivery – $100K

The question asks for first year depreciation using SL. My question is whether the Shipping and Delivery charge has to get allocated pro rata to each component and deprecated across the various lifespans matrix style, or do you apply the total useful life of 10 years specified in the header of the question to the delivery charge? My Wiley FAR book covers Component depreciation on page 342 and doesn’t go into the split of Delivery charges at ALL.

[Recked]

Good question. I can't seem to find a definitive answer though.
I've looked at both the Roger and Gleim books, and I don't see an answer.
My gut instinct would be to allocate the S&H proportionally to each class of asset.
That seems rather cumbersome, and not an easily answered question.

[Bobsacajawillie]

Iceman, was this a sim or a mcq?

[Iceman]

SIM

[Anonymous]

@Iceman, I would go with 10 years on all S&H. Shipping & Delivery (for the whole airplane) is a one-time fee that the benefit is realized on over the life of the asset (10 years). In purest form, we take the whole cost of the asset and break out the portions that will not last as long as the entire asset. Since we don't expect to replace S&H or incur it again in the life of the asset, we want to leave it in the original depreciation base. New shipping & handling charges for replacement components will be included in those components depreciation base.

[Bobsacajawillie]

@chandler, so by that logic then year 1 depreciation is 10,110,000? Thanks, Also Iceman- this was the whole sim? Or was there more to it

[Bobsacajawillie]

Oops I did 7,500,000 instead of 750,000. So I meant to put 3,360,000

[haj]

can anyone tell me how to tackle the subsidiary ledger question when preparing for the cpa exam? where can I find a sample question?

[SuperAccountingGod]

This SIM looks way too familiar….

[CPAHOPE]

Can anyone answer this question? Thanks

[CPAHOPE]

How would you depreciate them all under IFRS? Please help!

[CPAHOPE]

😨😰😥😱

[Author]

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