Answer to Question #62556 in Accounting for Asif

Question

The Accounting principle of Consistency require a company to use the same rate of depreciation for all of its assets. is it true or false? please explain with justification

Answer 1

It is not true that Accounting principle of Consistency requires a company to use the same rate of depreciation for all of its assets. The idea of Consistency principle is that once an accounting method is adopted, it should be followed consistently from one accounting period to the next. If, for any reason, the accounting method is changed, a full disclosure of the change and an explanation of its effects on the items of the financial statements must be given.
However different assets require using different rates and types of depreciation (for example, unit-of-production depreciation, straight-line depreciation, etc). And here we could see the Consistency principle in using the same depreciation rates for the corresponding assets, through many periods of time. But the company does not use the same depreciation rate for all its assets.