Analysis of Depreciation under AASB 116 for Seal Eagle Ltd.

This report provides an analysis of depreciation of Plant, Property, and Equipment (PPE) in relation to Australian Accounting Standards Board (AASB) 116, focusing on a case study involving Sea Eagle Ltd. It discusses the standards for recognizing lease amounts and the treatment of depreciation during idle periods of assets. The report addresses the impact of a strike at Sea Eagle Ltd. on its plants and the subsequent implications for PPE depreciation under AASB 116. An analysis is conducted from the perspective of an auditing team member, examining factors that influence the depreciation process, including the asset's useful life, wear and tear, and obsolescence. The report concludes that depreciation should be charged even during idle periods, unless the asset is fully depreciated, and emphasizes the importance of considering events like strikes in assessing the asset's estimated useful life and depreciation method.

ACC201

Contents
INTRODUCTION ..........................................................................................................................4
QUESTION 1...................................................................................................................................4
1. Give a brief summary about the depreciation of the Plant, property and equipment in
relation to AASB 116...................................................................................................................4
2. Write a report of an analysis to the supervisor of the Seal Eagle Ltd. by giving the views of
accountant considering that you are in the auditing team. ..........................................................5
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The Australian Accounting Standards Board (AASB) are the policies which are set for the
government and private organisation and are mandatory for them to follow these standards. The
AASB 16 issued for the policies related to the leasing of the assets and the liabilities for
recognising the lease amount which are of more than 12 months. In this the depreciation which
should be charged on the idle time period of the assets or not is discussed at the procedures and
policies used in AASB 116 in relation to the PPE depreciation (McGregor and et.al., 2021). The
report discusses about the strike of the Sea Eagle which influences the ample number of plants.
So, the repost demands about the PPE depreciation which is imposed under AASB 16. Further,
the analysis is performed on the Sea Eagle Ltd by the auditing team.
QUESTION 1
1. Give a brief summary about the depreciation of the Plant, property and equipment in relation
to AASB 116.
The plant, equipment and the machinery (PPE) is used for the supply of the product and
the services in production for the purpose of the administrative work. These are the tangible
assets which are estimated to be utilised for a period of more than 1 year. The cost of these assets
are determined comprising the purchase price and the taxes which are imposed on the items after
the deduction of the rebated and other discounts.
The AASB 116 gives the permission for the revaluation of the models for measuring the
correct amount of the PPE after the initial amount is recognised and is done through the cost
model.
The implications which can incur in the disclosure of the AASB 116 will revalue those assets
will be held for the purpose of sale in the future period.
The financial statement discloses the amount for each of the PPEs –
 The depreciation method is selected and then the life of the assets is estimate and the
depreciable amount is computed (Prasad, 2018). That is the reason, the rates which imply
on the assets for the calculation of depreciation is necessary. The depreciation is the
amount which is deducted from the asset considering its useful life. It is allocated to the
cost of the useful period.

 The asset used in the term reflect the appropriate use of the value of asset. It will
depreciate the correct amount and the waste of the asset’s value be also not being done.
According to the case study of the Sea Eagle Ltd. Specialized or occupational outdated
businesses can incur the monetary benefits which are consumed through the use of the assets. It
is wear and tear when the resources stays inactive. This frequently bring about the decrease of
the financial advantages that may have been gotten from the assets (Rajapakse and Senarath,
2019). Subsequently, every one of the accompanying elements are considered in deciding the
helpful existence of a resource:
 Normal use of the resource. Its use is evaluated by reference to the resource's normal
limit or actual result.
 Expected wear and tear of the assets: It relies upon functional factors, for example, the
quantity of movements for which the resource is to be utilized and the maintenance and
support program, and the consideration and upkeep of the resource while inactive
(Stewart, 2021).
 Technical obsolescence: emerging from changes or upgrades underway, or from an
adjustment of the market interest for the item or administration result of the resource.
Thus, it can be said that the depreciation will be charge on the idle time of the asset, irrespective
of the physical use of asset.
2. Write a report of an analysis to the supervisor of the Seal Eagle Ltd. by giving the views of
accountant considering that you are in the auditing team.
Accordingly, from the above it can be analysed that the depreciation on the asset does not
stop when the resource becomes inactive or is resigned from dynamic utilization except if the
resource is completely devalued. Though, under use techniques for depreciation the devaluation
charge can be zero, when the is full amount of depreciation charged.
According to the AASB 116, The use of the asset might influence the estimated life of the
asset. Assuming that a strike was long sufficient it might change the normal valuable of PPE. In
any case, this may likewise affect anticipated lingering esteem (Johnson, 2018). All in, not set in
stone the strategy for depreciation. For example; straight-line, the valuation of the variables in
that computation will be impacted by financial incidents like strikes. The presence of a monetary
events for instance will be influenced by the strike which does not mean postponement of the

process of allocation. The capacity of depreciation is not an essential for a matching cycle. The
evaluation of it is not a part of the revenue which is gained in the specific year.
CONCLUSION
From the above mentioned report, it can be summarised that the AASB is an asset of the
norms related to the accounting policies. In this the case study in context to the Sea Eagle Ltd. is
gives and the situation of not using the PPE assets in the time of assets is discussed. Through this
a confusion regarding the matching of the expenses of depreciation is created. The repost
demands the AASB 116 abridges with the reference to the depreciation of the PPE assets.
Further, the analysis is done imaging that the auditing teams has prepared a report consisting
about the factors that has been interpreted from the financial statement of the Sea Eagle Ltd.

REFERENCES
Books and Journals
Johnson, G., 2018. An Investigation into Why Not All Net Operating Losses Reported are Net
Operating Losses (Doctoral dissertation, Northcentral University).
McGregor, W. and et.al., 2021. Asbestos Contamination: Governance and Financial Reporting
Issues in the Public, Private and Not‐for‐profit Sectors. Australian Accounting Review.
Prasad, A., 2018. Environmental Performance Auditing in the Public Sector: Enabling
Sustainable Development. Routledge.
Rajapakse, P. and Senarath, S., 2019. Commercial Law Aspects of Residential Mortgage
Securitisation in Australia. Springer.
Stewart, R., 2021. 17 Valuation for financial reporting purposes. Principles and Practice of
Property Valuation in Australia. p.211.