Do assets held for sale require depreciation?

Do assets held for sale require depreciation?

• A. Yes
• B. No
• C. Only if impairment has occurred
• D. Depreciation continues until disposal

Answer: (B)

When an asset is classified as held for sale, depreciation stops. From that date, the asset is not being used in the ordinary course, so there’s no ongoing consumption of economic benefits to allocate as depreciation. Instead, the asset is carried at the lower of its carrying amount and its fair value less costs to dispose, with any write-down recognized as an impairment. If impairment occurs, it’s accounted for in that reduced measure, not as depreciation. So, the asset does not continue to depreciate once it’s held for sale.

When an asset is classified as held for sale, depreciation stops. From that date, the asset is not being used in the ordinary course, so there’s no ongoing consumption of economic benefits to allocate as depreciation. Instead, the asset is carried at the lower of its carrying amount and its fair value less costs to dispose, with any write-down recognized as an impairment. If impairment occurs, it’s accounted for in that reduced measure, not as depreciation. So, the asset does not continue to depreciate once it’s held for sale.