US CMA Part 1 · Chapter 1 · Question 23 of 23
A company owns an aircraft whose engines have a much shorter useful life than the airframe. How do IFRS and US GAAP treat componentization?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) IFRS requires significant components with different useful lives to be depreciated separately; US GAAP permits but does not require this
Explanation
IAS 16 requires each part of an item of PP&E with a cost that is significant in relation to the total to be depreciated separately. Under US GAAP, component depreciation is allowed but is not mandatory, so many US companies depreciate the asset as a whole.
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