Tangible assets depreciation issues

Abstract

Buildings, machinery, equipment, furniture, computers, parking lots, cars, and trucks are examples of tangible assets that will not last indefinitely, but more than one year. During each accounting period, a portion of the cost of these assets is being used up. Each company, due its establishment, procures tangible assets as the base for its operation. If you are responsible person (CEO) in the production company, it is not unusual if you find out that some of your production assets are still in operation, but they were completely depreciated. By this way, main accounting principles for reporting on tangible assets (cost and revenue matching principle) are not respected. The way the CEO solve this problem can have big impact on costing price and profit or loss at the end of the year. Problem is that useful life of asset was not properly assessed or revised. As result, carrying amount and income in financial statements are not correct. Solving these problems is very important for creating consolidation statements and representing financial statements due to International Financial Reporting Standards, especially if large audit firms audit financial statements. The aim of this work is to help understanding theoretical and practical issues on tangible assets , especially depreciation, trough analyzing available literature, scientific works written world abroad and practical research made by author.