We can talk about depreciation as a gradual process of transferring the cost of fixed assets to manufactured products. According to depreciation standards, the enterprise makes contributions to compensate for the moral and physical aging of fixed assets. The depreciation deductions made relate to the cost of production and are made monthly from the cost of (fixed) fixed assets for inventory objects or individual groups.
Depreciation rates for fixed assets represent the annual interest rate set by government agencies to pay off the value of production fixed assets and show the amount of annual deductions in value terms. In other words, depreciation rates are expressed as a percentage of the ratio of depreciation made during the year to the cost of the balance of fixed production capital.
In general, this factor is established and periodically reviewed by government bodies, depreciation rates are the same for organizations and companies of all forms of management and ownership.
The depreciation policy of the state is part of the country's overall scientific and technical policy. The state, setting the depreciation rate for calculation, the procedure for their use and accrual, regulates the nature and rate of reproduction in all sectors of the economy, and with the help of this coefficient sets the rate of depreciation and then renewal of fixed capital.
The current depreciation system in the country has the following characteristics: depreciation rates are the same, the uniform straight-line method is used for charging, deductions are included in the cost, made during the period of the actual use of the means of labor.
Today, there are new depreciation rates and rules for its calculation.
There are no deductions for capital repairs. Any repair work is carried out at the cost of production, and, if necessary, a reserve fund of deductions for repairs is created.
After the expiration of the service life (normative) for vehicles, equipment or machinery, depreciation is terminated. Although before the accruals were made during the entire period of use of fixed assets, regardless of service life. For constructions, buildings and other fixed assets, the previous procedure for calculating depreciation for the entire actual life cycle remains.
To increase the interest of companies in the renewal of fixed assets, it is allowed to apply accelerated depreciation of active fixed capital (equipment, machinery, transport). The bottom line is the complete transfer of the cost (balance sheet) of these funds to costs in a shorter time, while the depreciation rates increase, but not more than twice.
In addition, small enterprises and organizations in the first year of operation can additionally write off half the cost of their fixed assets for costs, the service life of the facilities should be more than three years.
Due to the fact that the accelerated annual depreciation rate is used, it is possible to quickly renew active fixed capital, to accumulate sufficient depreciation amounts for updating and reconstruction of production with the help of depreciation, and reduce income tax. In addition, this measure allows us to avoid the physical and moral depreciation of active production assets, to maintain them at a sufficiently high level, which will allow us to increase the volume of production and produce better products with a lower cost.
A positive phenomenon is that depreciation charges remain completely at the disposal of the company.