Compare depreciation and amortisation.

Banking & FinanceManagementCompanies/Organisations

The major differences between depreciation and amortization are as follows −

Depreciation

  • It determines asset useful life.

  • Charged on tangible assets.

  • Annual depreciation = (cost of tangible asset – salvage value)/useful life.

  • Have salvage value.

  • International accounting standard (IAS-16)/accounting standard (AS-6).

  • Residual value is considered.

  • Straight line method, reducing balance method, units of production method.

Amortisation

  • Determined on the basis of its legal or economic life.

  • Charged on intangible assets.

  • Annual amortisation = (cost of intangible asset)/useful life.

  • Don’t have salvage value.

  • International accounting standards (IAS-38)/accounting standard (AS-26).

  • Doesn’t considered residual value.

  • Straight line method.

raja
Published on 24-Jul-2020 07:04:28
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