Depreciation - an ordered decrease in the initial cost of fixed assets during the period of service. This is a depreciation of property that is wholly owned by the organization in monetary terms. One of the fundamental stages of accounting for fixed assets is depreciation. The methods for calculating depreciation of fixed assets under IFRS are divided into 4 types, each of which will be considered in detail.
Accrual rules
The deduction of a part of the depreciation cost begins the next month after the adoption of fixed assets for accounting. The termination of depreciation deductions occurs after the accumulation of the full cost of fixed assets from the first day of the new month.
The total depreciation charge depends on:
- operational period;
- premature liquidation of the OS;
- full accumulation of funds before the end of the deduction period.
Usually depreciation payments last the entire life of the property. With the termination of deductions, the OS can be decommissioned, sold for spare parts / materials or remain in use.
Depreciation deductions are terminated in case of:
- sale, liquidation of an object;
- conservation for a period of more than one quarter;
- reconstruction or modernization for a period of more than a year;
- loss of property due to emergency, natural disasters;
- providing OS of another organization for temporary possession or for use.
Regardless of the financial result of the economic activity of the company, depreciation is charged monthly.
OS without depreciation
Recall that fixed assets - this is the property of the organization, which has been used for more than a year to carry out economic, administrative, industrial and sales activities. In the list of operating systems there are also those for which depreciation is not provided. These include:
- natural resources;
- securities;
- construction in progress, derivatives transactions;
- property acquired from targeted financing;
- means of road, forestry;
- livestock kept for agricultural products;
- purchased buildings;
- museum exhibits and works of art;
- OS received free of charge.
Non-profit organizations are not subject to depreciation, regardless of their type.
Determination of useful life
Taking into account the period of possible operation of the facility, depreciation is determined. The methods for calculating depreciation of fixed assets do not depend on the period of service: for each method, determining the duration of operation will be the first step in calculating the amounts of depreciation to a monthly write-off.
The useful life of the operating system is considered to be that period of time of the object’s service that brings the company’s income. Determine the operational life of the property is necessary at the time of acceptance of the OS for accounting. The accountant concludes the useful service time based on:
- expected life, based on the specifications declared by the manufacturer;
- expected wear during use;
- OS usage restrictions.
The operational period should be determined by the time the facility is put into operation.
Depreciation: methods of calculating depreciation of fixed assets
According to IFRS, there are two main ways to calculate depreciation: linearly and nonlinearly. The linear way of depreciation of fixed assets involves a gradual and uniform accumulation of depreciation over the entire period of use. It looks like this: every month the organization transfers the same amount to the credit of account 02.
The non-linear method of calculating depreciation of fixed assets is divided into 3 methods:
- reduced balance;
- cumulative;
- industrial.
The amount for depreciation according to non-linear methods will vary in each new month.
The linear method of depreciation of fixed assets is universal for any type of property of the organization and is used both in production and in trading companies. Typically, the linear method is preferred in cases where those OS are used that bring benefits gradually and evenly.
Characterization of uneven depreciation
More specialized are non-linear depreciation methods. On the objects of fixed assets determine the most suitable:
- The reduced balance is relevant in those cases when it is known that the maximum load on the OS will be in the first years of use, or the equipment was purchased for the purpose of releasing new products. Situations suggest getting the maximum benefit in the first time of operation, when it will be more rational to pay the largest part of depreciation.
- The cumulative method is very similar to the residual reduction method. It directly depends on the sum of the numerical value of the years of use of the property and allows you to pay the bulk of depreciation at the initial stages of use of the object. Both methods are most often used in production and for those operating systems whose service life, as a rule, exceeds one decade.
- The production method involves writing off the depreciation value in proportion to the output, work performed, services. The amount of deductions depends on the intensity of the OS in the production process. This is a more complex, but the best way to calculate depreciation to achieve a balance of income and expenses of the enterprise.
The use of certain methods of calculating depreciation is regulated by the organization.
Equal depreciation
The method of uniformly writing off the total amount of depreciation is the easiest to calculate. Characterizes the linear method of calculating depreciation of fixed assets, the formula:
A = (C OS × N a ) ÷ 100%, Where:
- And - the amount of depreciation.
- C OS - the carrying amount of the OS.
- N a - depreciation rate in years.
The amount received shows the depreciation of fixed assets in monetary terms for one operational year. For convenience, the resulting value is divided by the number of months, determining the amount of deductions for each of them.
Consider an example: in February, an enterprise commissioned a lathe worth 200 thousand rubles, whose service life is estimated at 15 years. The accountant made the calculations:
- It is determined N a = 1 ÷ 20 × 100% = 5%.
- The amount of annual depreciation in rubles was calculated: A year = (200,000 × 5%) ÷ 100% = 10,000.
- The amount of monthly depreciation in rubles was calculated: A month = 10,000 ÷ 12 = 833.
The organization will make deductions in the amount of 833 rubles from March 1. on credit of account 02 (depreciation of fixed assets in a linear manner). The example in an accessible way shows the order of use of the method and the simplicity of its use.
Method for reducing residue
Using this method, the organization will pay the same monthly payment, which will decrease every year. The method is designed to pay most of the amount at the beginning of the operating life of the asset.
Depreciation using the reduced balance method is calculated using the formula:
A = (C ost × N a × K mustache ) ÷ 100%, Where:
- With ost - the difference between the initial cost and the accumulated amount of depreciation, that is, the residual price of fixed assets.
- N a - depreciation rate.
- To us - an accelerating coefficient set by the organization (but not more than 3).
Depreciation Calculation Using the Balance Reduction Method
Consider the methods of calculating depreciation of fixed assets. Examples of the reduced balance are calculated using the following data:
The company took into operation a computer worth 200 thousand rubles, whose service life is estimated at 8 years. The organization speeds up payment by 2 times. It is required to find out the amount of annual depreciation for the first 4 years. We carry out the calculations:
- The value of N a = (1 ÷ 8) × 100% = 12.5% is determined.
- For the first year, the organization will pay: A = (200,000 × 12.5% × 2) ÷ 100% = 50,000.
- The residual value for the second year will be: 200,000 - 50,000 = 150,000. Depreciation for the second year: A = (150,000 × 12.5% × 2) ÷ 100% = 37,500.
- The residual value for the third year will be: 150 000 - 37 500 = 112 500. Depreciation for the third year: A = (112 500 × 12.5% × 2) ÷ 100% = 28 125.
- The residual value for the fourth year will be: 112 500 - 28 125 = 84 375. Depreciation for the fourth year: A = (84 375 × 12.5% × 2) ÷ 100% = 21 094.
The company will continue settlements until the last, eighth year, in which it can pay monthly the depreciation amount until the depreciation value is fully written off or divide the residual value in equal parts by the last year of repayment.
Cumulative depreciation calculation
The amount of annual depreciation, as with the method of reducing the balance, will be different. The cumulative method is used for rapidly aging and wearing out equipment and in those cases when it is planned to get the greatest benefit at the initial stage of operation. But, unlike the method of reducing the remainder, it is impossible to establish a certain acceleration coefficient.
In the calculation, nonlinear methods for calculating depreciation of fixed assets are very similar to each other. Formulas differ only in the use of specific values, but in general they contain all the same data. The cumulative annual depreciation is calculated using the formula:
A = (C first × N l ) ÷ N s.l , where
- From the first - the carrying value of the OS.
- N l - the number of years until the end of the operational period.
- N C. l - the sum of the numbers of years of the entire period.
The calculation is based on the lifetime: the remaining period for the calculated year and the total number of years. It is worth paying attention that the denominator of the formula will not change. For example, if you need to calculate the depreciation for 6 years, the sum of the numbers will be 21 (each of the numbers from 1 to 6 is added in turn).
Cumulative calculation using an example
We calculate the annual depreciation using the source data: the company took into operation equipment worth 140 thousand rubles. The service life is 5 years. Calculate annual depreciation for the first 3 years. We carry out actions:
- In the first year, the company will pay: A = (140,000 × 5) ÷ 15 = 46,667 rubles.
- Depreciation for the second year will be: A = (140,000 × 4) ÷ 15 = 37,333 rubles.
- Depreciation for the third year will be: A = (140,000 × 3) ÷ 15 = 28,000 rubles.
The calculation of the remaining years is carried out according to the same principle. To calculate the amount of monthly deductions, annual depreciation is divided by the number of months.
Production Depreciation Method
The application of the calculation method is possible only for property directly used in the production process or when performing work (services). Deductions and the rest of the value of fixed assets directly depend on the production process, which helps to minimize the formation of accounting loss.
To determine the amount of depreciation apply the following formula:
A = (About pr.f. × C first ) ÷ About, where:
- About pr. - the actual volume of products.
- From the first - OS price in balance.
- About - the estimated volume of products for the entire specified operational period.
Consider an example with the following data: a car for the distribution of products purchased a car worth 200 thousand rubles. Estimated mileage will be 400 thousand km. The actual mileage for January is 4 thousand km., February - 9 thousand km, March - 2 thousand km. Calculate depreciation for the specified three months.
We carry out the calculations:
- We find the initial cost of the OS in terms of one kilometer traveled: A = 200,000 ÷ 400,000 = 0.5 rubles / km.
- Depreciation for January will be: A = 4000 × 0.5 = 2000 p.
- Depreciation for February will be: A = 9000 × 0.5 = 4500 p.
- Depreciation in March will be: A = 2000 × 0.5 = 1000 p.
Similarly, depreciation for the remaining months will be calculated. Due to the fact that the service life is expressed in the estimated volume of production, it is necessary to revise and adjust the value in time.
Depreciation and accounting
No matter what methods of depreciation of fixed assets are used at the enterprise, they use account 02 in accounting. It is credited every time the amounts are transferred. At the same time, the accounts for the accounting of production costs and account are debited. 44.
After the end of depreciation deductions or as a result of liquidation, sales of fixed assets the amount of disposal is reflected on the account "Fixed assets" by posting Amortization of fixed assets "Ct" fixed assets ". Subaccount 02, collecting information on deductions of this property, is closed.
Differs from methods boo. accounting tax accounting depreciation of fixed assets. The depreciation methods are limited to two - linear and non-linear, and do not have a deep economic meaning. The linear method is identical to the accounting method of the same name and is charged separately for each OS.
The non-linear method involves the depreciation of a group or subgroup of similar fixed assets. The amount is calculated by the formula:
A = (B sum × N a ) ÷ 100%, where
- B sum - the total balance of the OS group at the beginning of the month.
- N a - depreciation rate (established by the Tax Code of the Russian Federation for each group of fixed assets).
Existing depreciation groups are indicated in the Tax Code.
The most important characteristic of the property of the organization is depreciation. Methods of depreciation of fixed assets allow the company to choose the most appropriate method. Balance indicators of fixed assets (which includes depreciation) - the basis of financial reporting and the result of the company.