Ion assisted physical vapour deposited (IAPVD) films typically have a high state of residual stress. This residual stress comprises two components: a thermal stress, which forms as the system cools to room temperature; and an intrinsic stress which is caused by the processes of deposition. Much work has been published on the tribology of surface coatings without consideration of the residual stress. It was therefore considered desirable to develop a finite element (FE) simulation to be used either as a precursor to any realistic mechanical study of the behaviour of such surface coatings, or to be used as a tool to study the effects of varying the deposition parameters. The FE package chosen was ABAQUS. IAPVD is a process of simultaneous ion bombardment and material condensation. Previous experimental work has shown that the residual stress is related to deposition parameters, such as incident ion and atom fluxes and energies, and recent molecular dynamics studies have indicated that trapped inert gas species play a major role in the mechanism for creation of the intrinsic stress. The FE simulation assumes that the processes of ion bombardment and material deposition are consecutive, but as the analysis time step tends to zero this assumption approximates the simultaneity of the processes. Suitable mathematical descriptions are employed in the bombarded region of the growing coating to simulate the macroscopic effects of the microscopic atomic collision phenomena and diffusion processes. The predicted trends of mean stress and its distribution are similar to those observed in published experimental work.