Depreciation of fixed assets, we often fail to distinguish between tax depreciation from the depreciation of assets. Does running only one register of fixed assets is sufficient?

While the tax law for depreciation does not raise major concerns, whereas these dilemmas arise in accounting law as it defines the term "economic life", which is influenced by factors such as:

• the number of changes that can run the asset

• the rate of technical progress - economic

• asset performance measured by the number of hours of work or the number of products manufactured or another appropriate measure

• legal or other restrictions on duration of use of the asset

• the anticipated liquidation of the net selling price of the asset remains significant.

For example, let's look at a car depreciation, which is used for driving (so-called "L-car").
L-car is a special vehicle. Because it is designed to perform a specific function, which makes it necessary to adapt the body or have a special equipment, so in accordance with Corporate Income Tax rate of depreciation is for instance 20%.

Consider two companies specializing in the study of travel: the first one (company A) is a reputable company with a lot of students, the second (company B), while the unit without a good reputation, so the driver came reluctantly sticking with it for driving course . Both companies have cars of the same make and model, with the same parameters, with the proviso that the company A car is used by different instructors in size to work for an average of 12 hours per day, while in the company B - only eight hours a day . On a scale of one year gives a difference of more than 1.4 thousand. hours of operation.

Are these two cars will be characterized by the same period of economic usefulness? Of course not - the first of them, "consume" more quickly, so the depreciation rate should be much higher than that of the other vehicle.

That is the difference in tax depreciation and balance sheet. Tax both cars are amortized over a period of 5 years (for instance), subject to the balance sheet is a variety of factors.

To most accurately determine the useful life of the Company's management in this regard may consult with the direct users of a given asset, because it is the direct users have the best knowledge about the performance of the measure.

Main page Other posts