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3.4 Depreciation

FRS-3 requires that depreciation of a PPE asset be charged over the asset’s useful life (paragraph 8.1). The underpinning rationale is that the economic benefits embodied in an asset are consumed by the entity, therefore the carrying amount of the item should be reduced to reflect this consumption (paragraph 8.2).

Depreciation should be regularly reassessed. For example, if the library’s policy moves towards making increasing use of electronic resources to which the libraries lease access, this may signal a shortening of the useful life of the ‘hard copy’ resources.

Some assets such as art works and museum collections have very long useful lives. For such collections, the rate of deterioration is reduced to such an extent through proper care and conservation that it may be regarded as negligible. Therefore no depreciation (or zero depreciation) should be charged, as for practical purposes, there has been no consumption of the asset in the reporting period. Assets that fall into such a category would need to have their useful life assessed and that life would need to be sufficiently long to render depreciation negligible, and be revalued regularly. However, this should not be construed as allowing a blanket exemption from depreciation. Library current use collections and museum working models do get consumed and must be depreciated.

3.5 Revaluation Frequency

The frequency of revaluations will need to be determined by the reporting entity. FRS-3 requires that where assets are revalued, such revaluations occur on a systematic basis, at a minimum of every five years.

It should be noted that there is an override to the five-year maximum revaluation frequency - i.e. that revaluations are undertaken with sufficient regularity to ensure that no cultural and heritage item is included at a valuation materially different to its fair value.

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