What are the three methods of depreciation recognized in IAS 16?

In IAS 16, which covers the accounting for property, plant, and equipment, the three recognized methods of depreciation are the straight-line method, the declining balance method, and the units of production method.

The straight-line method allocates an equal amount of depreciation expense over the useful life of the asset, making it straightforward for financial reporting and budgeting. The declining balance method, often referred to as an accelerated method, allows for higher depreciation expenses in the earlier years of an asset's life, which can better match the asset's usage and economic benefits. The units of production method ties depreciation to the actual usage or production levels of the asset, making it particularly useful for assets whose wear and tear varies significantly with usage.

Recognizing these three methods aligns with the standards set forth in IAS 16, which provide flexibility for entities to select a method that accurately reflects the pattern of consumption of the asset's economic benefits. This approach ensures that financial statements provide a true and fair view of the entity's financial position and performance.