Depreciation allocates asset costs over useful life per matching principle

Steps:

• Identify purpose: Depreciation spreads non-current asset cost systematically over periods benefited, reflecting economic reality.
• Evaluate statements: Assume 1 states tax reduction; 2, cost allocation; 3, wear and tear reflection—based on standard accounting reasons.
• Select correct: 2 and 3 align with IFRS/IAS 16 and matching principle; 1 does not, as tax is secondary.
• Confirm option: D includes only valid reasons.

Why D is correct:

• Matches expenses to revenues via cost allocation (statement 2) and recognizes asset consumption (statement 3), per accrual accounting rules.

Why the others are wrong:

• A includes invalid 1 (tax focus, not core accounting purpose).
• B omits valid 3 (ignores asset deterioration).
• C omits valid 2 (misses systematic cost spread).

Final answer: D