Tricky question about IAS 16

[PaulMcDk]

Hi guys,

I' working for an Engineering Company and we have to decide how to depreciate our Assets.
IAS 16 says "A variety of depreciation methods can be used to allocate the depreciable amount
of an asset on a systematic basis over its useful life. These methods include the
straight-line method, the diminishing balance method and the units of
production method. Straight-line depreciation results in a constant charge over
the useful life if the asset’s residual value does not change. The diminishing
balance method results in a decreasing charge over the useful life. The units of
production method results in a charge based on the expected use or output."

Specifically, our assets are not used daily. In fact, they can be in a idle status for a while (2-3 months). Given that, we don't want to use the straight-line method or the diminishing balance method. In fact, the best method we think we should use is the last one, the units of production method.

The questions are :
1. Because of the company uses its assets not regularly (they are boats, ship, vessel..etc), is it correct to use that method?
2. effectively , does anybody know how to use the method ?

Thank you so much

[comsdev]

Dear units of production method can only be used if your assets are of such nature that you can estimate at the time when asset is brought into use
1. about the number of hours it will work
2. Its value will only be decrreasd by the working of the asset only. It means when asset is not used, its value will not be decreased.

For detailed study of IAS 16I would recommend you to read its summary on the following link. Its written in very easy language.

Summary of IAS 16 (Property, Plant and Equipment) - Articles