Depreciation-FixedAssets

Connection: Fixed Assets & Depreciation (ADMN 201) ↔ PPE / Depreciation / Impairment (ACC 926)

The Link

ADMN 201’s balance sheet line on “fixed assets” gets a one-sentence treatment: “Subject to depreciation = spreading an asset’s cost over its useful life.” That’s the whole intro version. ACC 926 turns this single sentence into three modules:

• Module 10 — what costs go into the PPE balance to begin with (capitalization decision).
• Module 11 — depreciation methods, impairment, disposition.
• Cross-cutting — IFRS revaluation model and impairment-reversal rules absent under ASPE.

graph TD
    A[ADMN 201:<br/>"Fixed assets are depreciated<br/>over their useful life"]
    A -.deepens.-> B[ACC 926 Module 10 PPE]
    A -.deepens.-> C[ACC 926 Module 11<br/>Depreciation, Impairment, Disposition]

    B --> B1[Capitalization:<br/>What costs go in?]
    B --> B2[Cost vs. Revaluation Model<br/>IFRS choice]

    C --> C1[Methods:<br/>SL · DB · SYD · Units]
    C --> C2[Impairment:<br/>Cost Recovery ASPE<br/>Rational Entity IFRS]
    C --> C3[Disposal:<br/>Gain/Loss = Proceeds − NBV]

(diagram saved)

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From ADMN 201

“Fixed Assets — long-term use or value: Land, buildings, equipment, machinery. Subject to depreciation = spreading an asset’s cost over its useful life.” — AccountingEquation-FinancialStatements

The page raises depreciation as a label; doesn’t address methods, impairment, or disposition.

From ACC 926

The mechanics live in two pages:

PPE

• Capitalization rule: include all costs to bring the asset to the location and condition necessary for its intended use (purchase price, freight, install, professional fees, decommissioning estimate, capitalized borrowing under IFRS).
• Cost model (both IFRS and ASPE) vs. Revaluation model (IFRS only).
• Subsequent costs: capitalize if they extend life, increase capacity, or improve quality; expense routine maintenance.

Depreciation

• Four common methods: straight-line, declining balance, sum-of-years-digits, units of production.
• Estimates of useful life and residual value are revised prospectively.
• Impairment models differ: ASPE uses Cost Recovery Model (undiscounted CF screen → FV); IFRS uses Rational Entity Model (recoverable amount = max FV-less-costs-to-sell, value-in-use). Reversal allowed under IFRS (except goodwill); never under ASPE.

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Why This Matters

The ADMN 201 framing is fine if the question is: “Why isn’t all of the equipment cost expensed in the year of purchase?” (Answer: matching principle.) The same framing fails on:

• “Should this $50,000 of replacement parts be capitalized or expensed?” → ACC 926 capitalization rules.
• “How much depreciation does the company recognize this year?” → choice of method changes the answer.
• “Has this asset’s value been impaired?” → ACC 926 impairment models, IFRS vs. ASPE divergence.
• “How is the gain/loss on selling old equipment computed?” → ACC 926 disposition mechanics.

A common ADMN-level intuition that ACC 926 corrects: depreciation is not “loss of market value.” It is the systematic allocation of historical cost. The asset’s market value can rise while the company depreciates it — and revaluation (IFRS only) is the separate mechanism that responds to FV changes.

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Mapping Table

ADMN 201 phrase	ACC 926 mechanism
”Fixed assets”	PPE under IAS 16 / ASPE 3061
”Spreading the cost”	Allocation per chosen depreciation method
”Useful life”	Estimate, reviewed each period, applied prospectively
(not addressed)	Residual value — also reviewed prospectively
(not addressed)	Component approach — depreciate parts with different lives separately
(not addressed)	Impairment trigger and measurement
(not addressed)	Capitalize-or-expense decision for subsequent costs
(not addressed)	Disposal: Gain/Loss = Proceeds − NBV (after final-period depreciation)

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Related Concepts

• AccountingEquation-FinancialStatements
• PPE
• Depreciation
• IntangiblesAndGoodwill — same impairment logic; goodwill never reverses
• IFRSvsASPE