Depreciation Calculator
for Real Estate
Pre-configured for real estate entities. Critical distinction: owner-occupied property uses IAS 16, investment property uses IAS 40. This calculator handles IAS 16 owner-occupied assets with component depreciation for buildings.
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IAS 16 depreciation for Real Estate
Critical distinction: Investment property — property held to earn rentals or for capital appreciation — is accounted for under IAS 40, not IAS 16. Under IAS 40, entities can choose the fair value model (no depreciation, gains/losses in P&L) or the cost model (which applies IAS 16 depreciation rules by reference). This calculator handles IAS 16 depreciation for owner-occupied property and for investment property measured using the cost model. If you use the IAS 40 fair value model, depreciation is not required.
For owner-occupied property under IAS 16, the most critical requirement is the separation of land and building. IAS 16.58 states explicitly that land has an unlimited useful life and is not depreciated. Even if land and building are acquired as a single purchase, the entity must allocate the purchase price between land and building components. In many jurisdictions, property valuers routinely provide this split. Where a split is not readily available, management must estimate it using market data for comparable land in the same location.
Component depreciation (IAS 16.43) is essential for buildings. A building is not a single asset — it comprises the structural shell, roof, HVAC systems, elevators, plumbing, electrical systems, and external works. Each has a significantly different useful life. The structural shell of a commercial building might last 40–50 years, while the HVAC system needs replacement every 10–15 years and the roof every 15–25 years. Failure to apply component depreciation to buildings is one of the most common IAS 16 deficiencies identified in audit inspections. This calculator's component depreciation mode allows you to define each building component separately and generate an aggregated schedule.
Typical asset classes: Real Estate
| Asset | Useful Life | Method | Notes |
|---|---|---|---|
| Owner-occupied buildings | 25–50 years | Straight-line with components | MUST separate land (IAS 16.58) — land is never depreciated |
| Building structure (shell) | 30–50 years | Straight-line | Primary structural component |
| Roof | 15–25 years | Straight-line | Replaced independently of the structure |
| HVAC systems | 10–15 years | Straight-line | Heating, ventilation, air conditioning — separate component |
| Elevators and lifts | 15–25 years | Straight-line | Mechanical systems with distinct replacement cycle |
Key IAS 16 considerations: Real Estate
Investment property uses IAS 40, NOT IAS 16 (unless cost model elected)
Land MUST be separated and is never depreciated (IAS 16.58)
Component depreciation is essential for buildings (IAS 16.43)
Revaluation model permitted under IAS 16.31 — increases to OCI
Component replacement requires derecognition of old component (IAS 16.70)
Worked Example: Owner-Occupied Office Building
A real estate company acquires an owner-occupied office building on 1 January 2025 for €2,000,000 (excluding land valued at €800,000). The building is split into components: structure €1,400,000 (40 years), roof €250,000 (20 years), HVAC €200,000 (15 years), elevator €150,000 (20 years). Residual values: structure €200,000, roof €0, HVAC €0, elevator €0.
Cost: €2,000,000 (building only — land €800,000 excluded)
Residual value: €200,000 (structure component only)
Depreciable amount: €1,800,000 (total across all components)
Annual depreciation: €55,500 (aggregate: structure €30,000 + roof €12,500 + HVAC €13,333 + elevator €7,500 — rounded: €63,333)
First year depreciation: €63,333 (full year — January acquisition)
Audit considerations
Real estate audit teams must verify the IAS 16 vs IAS 40 classification, land/building separation, and component depreciation application. Property valuations (IAS 40 fair value or IAS 16 revaluation) require assessment under ISA 540 and ISA 620 (using the work of a management's expert). The real estate sector has the highest audit risk for component depreciation non-compliance.