Post 2720: Answer Part 4: Addendum 1
Quote:
Originally Posted by
Snoopy
The journal entry for depreciation is normally:
Debit $d for depreciation expense. Credit $d for accumulated depreciation.
So to answer your question, the credit came from 'accumulated depreciation'. The accumulated depreciation is them offset against the historical cost of the asset reducing the assets book value on the balance sheet by the amount of the depreciation.
Next you ask about the profile of the accumulated depreciation amortisation. From AR2020 Note 1 page 43, I can see there is a crown funding offset to depreciation of $27m. The accompanying explanation is:
"Chorus receives funding from the Crown to finance the capital expenditure associated with the development of the UFB network . Where funding is used to construct assets, it is offset against depreciation over the life of the assets constructed,"
This indicates to me that may 'normal' journal entry for depreciation is wrong in this instance. It should instead read something like:
Debit $d for depreciation expense. Credit $d1 for accumulated depreciation, and Credit $d2 against CIP debt. (where $d1+$d2 =$d)
I wrote the above and during my short evening stroll to the supermarket and back realised the second hypothetical journal entry contained a mistake. The accumulated depreciation of any equipment cannot be affected by how that equipment is funded. If it were my 'car trade in story' (post 2725) would be a reality. However the 'depreciation expense' is simply a journal entry that could be manipulated provided there are other compensating book entries to make the whole scenario add up. So my revised accounting journal entry should have read:
"Debit $d1 for depreciation expense, Debit $d2 for 'Crown Funding Subsidy'. Credit $d for accumulated depreciation. (where $d1+$d2 =$d)
SNOOPY