why land is not depreciated.....???
Answers
Answer:
Land is not depreciated because land is assumed to have an unlimited useful life. Other long-lived assets such as land improvements, buildings, furnishings, equipment, etc. have limited useful lives. Therefore, the costs of those assets must be allocated to those limited accounting periods.
As per AS 10 (revised)
Property, plant and equipment are tangible items that:
(a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and
(b) are expected to be used during more than a period of twelve months.
Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value.
Useful life is:
(a) the period over which an asset is expected to be available for use by an enterprise ; or
(b) the number of production or similar units expected to be obtained from the asset by an enterprise.
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.
On analysis of we can identify certain criteria for charging depreciatiom. They are:
Fixed asset
Depreciable amount
Useful libe
As per the above definitions, land qualifies to be a property, plant and equipment.
The depreciable amount can also be easily be determined.
The issue lies in useful life, land does not have a limited useful life.
Let us consider the useful life of the land to be infinity.
One of the simplest formulae to allocate depreciation is Depreciable amount/infinity.
Let us assume the depreciable amount to be X
Substituting we get,
X/Infinity=0 (As any number divided by infinity is zero)
Hence, it is not possible to charge depreciation on land in terms of accouting, mathematically or otherwise.
Hope your query is resolved by this