The quality of financial and business management of a company depends on an effectively organized management and the degree of information support for its services. Today, a small number of domestic enterprises are distinguished by the set accounting system and organized management, which ensures the suitability of information for analysis and operational management. Moreover, it must be accurate and objective.
Information accounting services should have a small number of indicators that will satisfy the maximum number of users. Credentials should be formed to make the right decisions aimed at effectively managing the processes of the enterprise.
The management of each enterprise takes care of the effectiveness of the use of property for the rational development of the business, since fixed assets have a considerable cost. To update its active part, you can use special methods, for example, a method of accelerated depreciation.
What is depreciation?
Depreciation of fixed capital as a category of economy is part of the cost, which will be included in the cost of production. In addition, it is an accumulated financial source of income used to restore capital investments.
Fixed assets for a long time involved in various activities of the organization. However, they gradually wear out and share their own value between the costs of circulation and production. Depreciation will be charged on the fixed assets of the company, regardless of whether they are valid or not.
How is depreciation calculated?
Depreciation is only allowed in the ways provided by law. To date, in Russia this procedure is performed by one of the following options:
- the method of reducing residue ;
- linear way;
- write off the value of the period of application, expressed in years;
- performing write-offs of the price in proportion to the volume of work
- accelerated depreciation.
The use of one of the available methods of depreciation is carried out during the entire useful life.
What is accelerated depreciation?
Accelerated depreciation is the rapid transfer of the price of fixed assets to the cost of production produced with their help. Basically, domestic literature, which is devoted to tax and accounting, excludes the presence of a clearly defined boundary in deciphering the concepts of accelerated depreciation mechanism and methods of accrual thereof.
The essence of the mechanism is that at the beginning of the application, the amounts will significantly exceed the depreciation charges, which are usually accrued at the end of the useful life of the fixed asset.
When is the accelerated depreciation method used?
Accelerated depreciation is applied in the following cases:
- for assets that are characterized by a decrease in the volume of products with a useful life;
- asset depreciation is fast;
- intensively increase repair costs during operation.
This method applies to the active part of fixed capital, which was put into effect for the release of funds, aimed at acquiring the latest equipment and materials, as well as expanding the export of goods. This is done in cases where a massive replacement of old equipment with new one with a higher level of productivity is necessary.
The accelerated depreciation method also applies to various vehicles and equipment, if the normative period of their operation does not exceed three years. Aircraft and motor equipment is also subjected to this procedure, but at the same time, their life is determined by the hours of operation. In addition, buildings and new enterprises that have an increased load on fixed assets are subject to accelerated depreciation.
The purpose of accelerated depreciation
Accelerated depreciation allows you to write off the value of the capital fund much faster than provided by established standards. The purpose of its use is to stimulate investment. This is due to the fact that the investment of capital entails the receipt by the enterprise of the right to defer payment of fees and taxes.
If accelerated depreciation is used, tax liabilities will be reduced, as the company's profit will not include the amount of depreciation. After the value of assets will be fully amortized, the organization’s profit will increase, and consequently, the amount of taxes will increase.
Accelerated Depreciation Calculation
In the case of using the non-linear method, the depreciation amount for one month will be determined as the product of the residual value of the object. It is calculated using the formula:
- K = Koef: n x 100%, where
K - depreciation rate to the initial price of an item, which is expressed as a percentage;
Koef - acceleration coefficient, which depends on legislative norms;
n is the useful life of the facility, expressed in months.
Once the residual price of the equipment is equal to 20% of the original amount, it will be accepted as the base for subsequent calculations. In this case, the depreciation amount for the month will be determined by dividing the base price by the number of months remaining until the end of the useful life of the object.
This procedure allows you to accelerate depreciation or reduce the balance. If applied, depreciation is reduced over the useful life of the assets.
For paying taxes, this method is of particular benefit. For current activities, a large amount of capital funds and deferred taxes will be available if assets are written off.
The method of reducing deductions has the following benefits: the depreciable cost and asset efficiency are reduced, and low depreciation deductions will offset the large costs of servicing and repairing obsolete equipment. To do this, accelerate depreciation, but at first it would be better to increase the deductions in order to compensate for the uncertainty regarding the aging of equipment.
Depreciation ratio of fixed capital
The accelerated depreciation ratio is an indicator that is equal to the ratio of the amount of depreciation received to the initial price of fixed capital. To calculate it, you must use the data of the balance sheet. The depreciation coefficient shows the degree of depreciation of fixed assets, that is, the measure of financing their future replacement as depreciation occurs.
The considered indicators are often used to indicate the state of fixed capital. It is also worth noting that the coefficient of this type does not reflect the actual depreciation of the equipment and does not allow to accurately assess its current state. That is, these indicators are rather arbitrary.
Despite their conventionality, they have a certain analytical value. Generally considered undesirable if the wear rate does not exceed 50%, and the shelf life is not less than 50%. An objective assessment of the indicator is achieved by comparing it with the value of the indicator of the company's competitors or its average value in this industry. The accelerated depreciation ratio is equal to the division of the depreciation rate by the initial cost of fixed capital.
Accelerated depreciation on leasing
Using the accelerated depreciation method for a finance lease, you can achieve profit. However, potential customers of companies providing leasing services doubt the advantages of this method and its mechanism of action.
When used in relation to the leased asset, accelerated depreciation allows you to reduce income tax throughout the term of the leasing agreement. In addition, you can reduce the amount of property tax on the object of the contract. At the same time, the accelerated depreciation policy allows you to redeem the subject of a leasing agreement at the end of its lease at the lowest residual value. Of course, these are favorable conditions.
How is the accelerated depreciation rate calculated on leasing?
The legislation established that in calculating the depreciation of property that is the subject of a lease, the taxpayer has the right to use special ratios. If a citizen is going to apply this right, he needs to fix this condition in his accounting policy for tax accounting of the enterprise.
Based on legislative provisions, taxpayers can apply the accelerated depreciation coefficient for leasing if it does not exceed 3. It can be applied to depreciable fixed assets that are the subject of a leasing agreement.
Redemption of leased asset
During the lease through leasing, it is beneficial not only to accelerate depreciation, but also to redeem the property at the minimum residual value. Contracts of this type allow you to purchase an item after the specified rental period expires. In this case, the accelerated depreciation method can be applied. Equipment in this case belongs to the fifth depreciation group, it can be written off after 28 months of operation. This can be done if you accelerate depreciation and the item will have a minimum residual value. Then it can be profitably redeemed.