What is Group and composite depreciation?
In short
Group depreciation depreciates a pool of similar assets, and composite depreciation a pool of dissimilar assets, as a single unit using one average rate instead of depreciating each asset separately.
Key takeaways
- When an asset in the pool is retired, no gain or loss is recognized.
- Its cost is removed from the asset account, and the cost less any proceeds is charged to accumulated depreciation.
- The approach suits large numbers of low-cost assets.
Where it's tested
FAR: Property, Plant & Equipment — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under US GAAP, a long-lived asset held for use is tested for impairment. The carrying value is $500,000, undiscounted future net cash flows are $520,000, and fair value is $460,000. What impairment loss, if any, should be recognized?