Accounting Depreciation ? Why do, What Impact on the Result?
You have just acquired a new property and you have decided to register it for your professional asset . The time has come to open your accounting journals and look into the question of its accounting depreciation . But by the way, what is an accounting depreciation? Indeed, which goods can be depreciated? Dougs helps you find your way around and optimize the management of your professional assets.
The principle of accounting depreciation
Depreciation recognizes the permanent loss of value of a good. It is related to its use, the passage of time or the evolution of technology. To conclude, depreciation allows you to offset this depreciation by imputing it to your results each year.
Accounting depreciation: What are the items you can write off?
Before embarking on the calculations, can the property you have just acquired be depreciated? Indeed, depreciation is subject to two conditions:
1. the good must be bodily
First, it must be a tangible element that depreciates over time: premises, equipment, furniture, vehicles or certain development work that extends the life of another property.
Intangible assets such as customer acquisition can not be written off even if they are recorded in the capital assets register. The land is not depreciable.
2. the value of the property must be greater than 500 € HT
The lower value items are deducted in the year of their acquisition in the “small tools” item of your 2035 return.
Except furniture “furniture” such as chairs or desks that must be depreciated even if they were purchased for less than € 500 excluding tax.
If the asset has multiple components, you will depreciate separately each component that has a significant value , ie:
- greater than 500 € HT;
- greater than 15% of the cost price of the property (or 1% of a building);
- with a lifespan of less than 80% of that of the entire asset;
Components that do not meet one of these characteristics do not have to be separated from the asset.
How to choose the best accounting depreciation?
Above all, it is a trap question because it depends on the performance of the company. Even though we know that each company must make sure to respect the rules and that it must not change its method from one year to the next, there are differences. For example, a company with significant profits will tend to favor:
- degressive write- downs whenever possible,
- the shortest amortization period.
On the contrary, companies in difficulty will favor:
- linear depreciation,
- the longest accounting amortization periods.
Amortizing your fixed assets can track their depreciation in time and when it comes time to get them out of your wealth at a lower cost. Provided of course that they actually suffer this loss of value, so they must be tangible property acquired for a significant amount. If your asset does not fall into this category, you can still immobilize it but you will not practice depreciation accounting. To go further, Dougs now offers you to discover how to evaluate the depreciable base of a good .