Depreciation of Diagnostic Laboratory Equipment

[Asnake E]

Hi,

Any guidance on the depreciation rates on diagnostic laboratory equipment?
In our country's tax law such assets are depreciated at 15% on the straight line basis or at 20% on the reducing balance basis. These rates seem very accelerated.

[Marek Muc]

I've moved this topic to 'General accounting and financial reporting discussion'. Please don't post general questions under 'IFRS-related topics', thanks!

[Marek Muc]

Tax depreciation rates differ from IFRS depreciation rates in their purpose, so don't depend heavily on tax rates. I doubt that this specific asset class has been analysed in terms of accounting depreciation rates. But you need to estimate an entity-specific useful life anyway. For example, a luxury diagnostic laboratory in Switzerland will replace their equipment more frequently than a comparable laboratory in a developing country. Ask operational managers for their estimates and keep in mind that residual values may be substantial.

[Asnake E]

Thank you. My question was on accounting depreciation rates. As you said, it might be proper to estimate an entity specific in consultation with the entity's personnel who might have some knowledge on the useful life of the specif asset.

[JRSB]

you can easily find some examples/benchmarks in pharma companies

do your own staff not know how long the machines will be used for?

[Asnake E]

Unfortunately, the technical people in my audit client don't have definitive answers on the estimated lives of the equipment.

I tried to google for examples in depreciation policies. They give range of years in the policy notes eg. Useful lives of 3 - 15 years

[JRSB]

if you're the auditor then it's for the client to make that judgement isn't it. We can't really comment as it depends on that specific equipment and the business etc

[Asnake E]

Yes, you are right.

[JRSB]

I worked with a company with diagnostic lab equipment and they used 4-5 years but may not be useful for the reason above.