AASB 116 (Section 48 & 49) states that:
- The depreciation charge for each period shall be recognised in profit or loss unless it is included in the carrying amount of another asset.
- The depreciation charge for a period is usually recognised in profit or loss. However, sometimes, the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the depreciation charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the depreciation of manufacturing plant and equipment is included in the costs of conversion of inventories (see AASB 102). Similarly, depreciation of property, plant and equipment used for development activities may be included in the cost of an intangible asset recognised in accordance with AASB 138 - Intangible Assets.
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