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ACCA Applied Knowledge · Financial Accounting · Tangible non-current assets

Which statement about the presentation of property, plant and equipment under IAS 16 and IAS 1 is correct?

Depreciation is an expense in profit or loss, while accumulated depreciation is deducted from cost so that property, plant and equipment appears at carrying amount within non-current assets. It is not a liability or an equity adjustment.

  1. ADepreciation is charged to profit or loss, and the accumulated depreciation reduces the carrying amount in the statement of financial positionCorrect
  2. BAccumulated depreciation is shown as a liability in the statement of financial position
  3. CDepreciation expense is shown in other comprehensive income
  4. DDepreciation is deducted directly from retained earnings

Explanation

The depreciation charge is an expense in profit or loss, and accumulated depreciation is netted against cost to give the carrying amount within non-current assets. It is not a liability, nor an item of other comprehensive income, nor charged directly to equity.

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