IAS 4
Withdrawn
Depreciation Accounting
Established the original principle that depreciable assets should be depreciated systematically over their useful lives. Withdrawn in 1999 as its content was absorbed into and refined by IAS 16 and IAS 38.
Withdrawn Standard
IAS 4 (issued 1976) established the original principle that depreciable assets should be depreciated systematically over their useful lives. It was effectively superseded as its content was absorbed into and refined by IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets, and formally withdrawn in 1999 upon IAS 16's revision.
It is retained here for historical reference and because its core systematic allocation principle survives essentially unchanged as the foundation of IAS 16 and IAS 38 today. For current depreciation/amortisation requirements, always apply IAS 16 or IAS 38.
Current Standard
IAS 16 Property, Plant and Equipment 1
Conceptual Framework Linkage
Matching cost to the economic benefit consumed
Even in 1976, the fundamental Framework idea was clear: as a long-lived asset is used up over time, an expense should be recognised reflecting that consumption of economic benefit – rather than expensing the full cost at purchase (overstating early losses) or never expensing it at all (overstating asset values indefinitely). IAS 4 was the IASC's first codification of this systematic allocation principle.
HOW IAS 4 MAPPED TO THE FRAMEWORK
Matching / systematic allocation – depreciation expense should be recognised on a systematic basis over an asset's useful life, matching cost to the periods benefiting from the asset's use Faithful representation – failing to depreciate a wasting asset would overstate its carrying amount relative to its true remaining service potential An early, less prescriptive standard – IAS 4 established the principle but left significant detail (component depreciation, residual value review frequency, etc.) to be developed much later by IAS 16
IAS 4's core principle – systematic depreciation over useful life – has never been abandoned; it survives essentially unchanged as the foundation of IAS 16 and IAS 38's own depreciation/amortisation requirements today.
What IAS 4 established vs what came later
ConceptStatus
Systematic depreciation over useful lifeEstablished by IAS 4; unchanged today
Component depreciation (separate parts)Not addressed by IAS 4; introduced later by IAS 16
Revaluation model interactionNot addressed by IAS 4; developed later by IAS 16
IAS 4 established the principle; IAS 16 later supplied the far more detailed mechanics.
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Scope & Applicability (Historical)
What IAS 4 covered
IAS 4 applied to depreciation accounting generally, establishing that depreciable assets should be depreciated systematically over their useful economic lives, applicable across all types of depreciable assets an entity held.
This general, asset-type-agnostic scope was later split – IAS 16 now governs tangible PPE depreciation specifically, and IAS 38 governs intangible asset amortisation specifically.
Key definitions you must know (historical)
Depreciation (original)
The allocation of the depreciable amount of an asset over its estimated useful life.
Useful life (original)
The period over which a depreciable asset is expected to be used by the entity.
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The Systematic Allocation Principle
The core requirement, largely unchanged today
Depreciation expense = Depreciable amount ÷ Useful life, allocated on a systematic basis reflecting the pattern of economic benefit consumption
IAS 4 required depreciation to be recognised even if an asset's fair value exceeded its carrying amount – a principle that survives, essentially unchanged, in IAS 16 today (depreciation continues regardless of value increases, unless the asset is idle and specific circumstances apply).
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Depreciation Methods Recognised
Straight-line, diminishing balance, and units of production
Straight-line method – equal expense each period over the useful life Diminishing (reducing) balance method – a constant percentage applied to a declining carrying amount, front-loading expense Units of production method – depreciation based on actual usage/output in the period
These three methods, first codified by IAS 4, remain the same three core methods permitted under IAS 16 today – a striking example of a nearly 50-year-old principle surviving completely intact.
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Reviewing Useful Life and Method
Periodic review – a principle established early, refined later
IAS 4 recognised that useful life and depreciation method estimates should be reviewed periodically, and revised if expectations differ significantly from previous estimates – though it did not specify the annual review requirement IAS 16 later mandated explicitly.
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Land – The Non-Depreciable Exception
An exception established from the very beginning
IAS 4 recognised that land normally has an unlimited useful life and is therefore not depreciated (unless subject to depletion, e.g. quarries, or specific circumstances reduce its useful life) – a principle carried forward identically into IAS 16 today, including the requirement to depreciate any building on the land separately from the land itself.
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Change in Estimate – Prospective Treatment
An early ancestor of IAS 8's prospective treatment
IAS 4 indicated that a revised estimate of useful life should be applied prospectively – spreading the remaining depreciable amount over the revised remaining useful life, rather than restating prior periods. This principle is identical to IAS 8's current treatment of changes in accounting estimates, decades before IAS 8 itself formalised the general rule.
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Why IAS 4 Was Absorbed into IAS 16
Consolidation into a comprehensive PPE standard
As the IASC (and later IASB) developed a far more comprehensive standard for property, plant and equipment overall (IAS 16), it made sense to fold depreciation guidance directly into that single standard, rather than maintaining a separate, freestanding "depreciation accounting" standard – IAS 4 was formally withdrawn once IAS 16's 1998 revision comprehensively covered the same ground, with intangible asset amortisation later addressed separately by IAS 38.
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Disclosure Requirements (Historical)
Required disclosures under IAS 4
Depreciation methods used, and the depreciation charge for the period Useful lives or depreciation rates used, by asset class Accumulated depreciation at the reporting date
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Critical Judgments & Estimates (Historical)
Where management judgement mattered most
SIGNIFICANT JUDGEMENTS
Selecting the depreciation method best reflecting the pattern of economic benefit consumption Whether land was subject to depletion, requiring depreciation as an exception to the general rule
SIGNIFICANT ESTIMATES
Useful life and residual value of depreciable assets
IAS 4 lacked IAS 16's later, far more granular component depreciation requirement – under IAS 4, entities more commonly depreciated an asset as a single unit rather than splitting it into significant parts with different useful lives.
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IAS 4 vs Modern IAS 16/38
Comparison – IAS 4 (1976) vs current IAS 16/38
FeatureIAS 4 (withdrawn)Current (IAS 16/38)
Core principleSystematic allocation over useful lifeSame principle, essentially unchanged
Component depreciationNot addressedMandatory for significant parts with different useful lives (IAS 16)
Review frequencyPeriodic, not specified as annualExplicit annual review requirement (IAS 16)
Coverage of intangiblesNot separately addressedDedicated IAS 38, including indefinite-life intangibles (no amortisation, annual impairment test instead)
IAS 4's core principle proved remarkably durable – the main evolution has been in detail and rigour (component depreciation, mandatory annual review), not in the fundamental concept itself.
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Statement Mapping (Historical, Under IAS 4)
Comprehensive event-to-statement mapping table
Event / transactionStatement(s) affectedNotes
Periodic depreciation chargeSOPL SOFPSystematic allocation, per the chosen method
Change in useful life estimateSOPLProspective adjustment, spread over remaining useful life
Land held (non-depreciable)–No depreciation, unless subject to depletion
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Related Standards – Cross-Reference Map
How IAS 4's legacy connects across the IFRS body of literature
StandardNature of the connection
IAS 16The direct successor for tangible asset depreciation, with far greater detail
IAS 38Successor for intangible asset amortisation
IAS 8Governs the prospective treatment of changes in useful life/method estimates, a principle IAS 4 anticipated
IAS 36Supplies impairment testing, complementing depreciation as the two mechanisms limiting an asset's carrying amount
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Quick-Reference Glossary
Depreciable amount
Cost (or revalued amount) less residual value – the amount systematically allocated over useful life.
Diminishing balance method
A depreciation method applying a constant rate to a declining carrying amount, front-loading expense recognition.
Residual value
The estimated amount an entity would currently obtain from disposal of an asset, net of estimated costs of disposal, if the asset were already at the age and condition expected at the end of its useful life.
Useful life
The period over which a depreciable asset is expected to be used by the entity, or the number of production units expected to be obtained from the asset.
Depletion
The allocation of the cost of a natural resource over the period it is extracted and consumed – an exception to the general rule that land is not depreciated.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows