No matter how modern the production equipment is, its wear and tear will inevitably occur over time, nothing can be done about it. However, this process can be slowed down if planned and major repairs are carried out, as well as reconstruction and modernization. The following documents serve as the basis for such work:
• data and standards on the timing of repairs;
• estimates for the repair work;
• information on the initial and current value of objects related to fixed assets of the enterprise;
• various defective statements.
The very word "depreciation" means a decrease in the
production resource of fixed assets, their natural aging and the gradual
loss of value. To assess it, a number of indicators are used, the main of which is the
depreciation rate of
fixed assets. In addition to it, the expiration rate, the retirement rate and the update rate are also often calculated. Timely periodic calculation of these indicators allows the company to always be on the alert, in time to form a reserve of expenses for repair and updating of its production facilities, to plan the modernization and reconstruction of its equipment.
Let us now consider how these indicators are calculated. The first we will have is a wear factor. The formula of this index is as follows:
To out = Amount of depreciation (amortization) / Carrying (initial) value of fixed assets.
Depreciation coefficient shows the level of deterioration of
fixed assets. The smaller it is, the better the physical condition of the production assets of the enterprise. The depreciation rate is usually calculated on a specific date. Usually, the beginning and end of last year are taken. The source for its calculation is the accounting form No. 20, which reflects the presence and movement of absolutely all fixed assets (PF) of the enterprise.
For clarity, we take this example. Suppose that a certain joint stock company had a fixed assets at the beginning of 2012 amounted to 5200 thousand rubles, at the end of the year - 5550 thousand rubles. The amount of depreciation in this case, respectively, was at the level of 1400 and 1410 thousand rubles. Thus, the depreciation rate at the beginning of 2012 will be equal to 1400/5200 = 0.2692 or 26.92%. At the end of the year, this indicator amounted to 1410/5550 = 0.2541 or 25.41%. What are these numbers talking about?
They indicate a slight improvement in the physical condition of the community base. The wear rate during the year decreased by 0.2692-0.2541 = 0.0151 or 1.51%.
Shelf Life (K year ) is an indicator directly opposite to the indicator considered above. It is defined as follows:
K year = Residual value of PF / Carrying (initial) value of PF.
Like the previous indicator, it is advisable to consider it in dynamics. It shows what percentage is the residual value in the carrying amount at a certain point in time. Shelf life shows the level of suitability of funds for further operation.
The update coefficient (K obn ) is another very important indicator that shows how much of the cost of assets at the end of the period selected for calculation is new production assets. It is calculated as follows:
To update = New OF / The value of all OF at the end of the selected period.
As a rule, the source of information for the calculation is the balance sheet, and the book balance sheet is taken for accounting, i.e. initial cost. It should be noted that the renewal of funds can occur not only as a result of the purchase of modern equipment, but also due to the modernization of those public enterprises that the company has available.