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CSEET · Fundamentals of Accounting · Depreciation and Amortization

According to AS 10, which basis should an enterprise use to select a depreciation method?

An enterprise should select the depreciation method that most closely reflects the expected pattern of consumption of the asset's future economic benefits, and apply it consistently from period to period unless that pattern changes. Profit levels or competitor practice are not the test.

  1. AThe method that most closely reflects the expected pattern of consumption of the asset's future economic benefitsCorrect
  2. BThe method giving the lowest depreciation in the first year
  3. CThe method that gives the highest reported profit
  4. DThe method used by the largest competitor in the industry

Explanation

AS 10 requires the enterprise to select the method that most closely reflects the expected pattern of consumption of future economic benefits, and to apply it consistently unless that pattern changes. Profit-based or competitor-based choices are not the criteria.

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