Componentisation
The breaking of an asset into parts that are recognised, valued and depreciated separately, because they have different useful lives.
Under accrual accounting an asset with parts that wear out at different rates is not depreciated as one item. A building envelope, its mechanical plant and its fit-out have different lives, and componentisation is what allows each to be written down over its own.
It becomes acute during a conversion from cash to accrual accounting, because the componentisation decided at that point fixes how the estate appears on the balance sheet for decades.
Sources
IPSAS 33, first-time adoption of accrual basis IPSAS. ISO 55001:2024, Clause 7.6, data and information, which requires alignment of financial and non-financial terminology and traceability between them. ISO/TS 55010 on the alignment of financial and non-financial functions.
Read the sources
- ISO 55001:2024, asset management system requirementsAbstract and contents free; the requirement text is sold.
- IPSAS 33, first-time adoption of accrual basis IPSAS
Belongs to
Operations & Asset Management
Argued in full
Accrual conversion gave three years. It did not give anyone a register.