Organizations independently choose the method of depreciation of their fixed assets.
One of the most commonly used is the reducing balance method. Its use in accounting enterprises due to a number of features and specific destination.
The annual amount of deductions here is calculated on the basis of three indicators:
The feature of the technique is uneven write-off of the residual value during the whole period of operation funds. Most of the costs are attributed to products in the first half of the period of use of the equipment.
The application of the method has one significant nuance that causes difficulties for many accountants. Due to the peculiarities of accrual, the residual value of the object will constantly tend to zero, but will never be equal to it. This means that even when the useful life ends, the amount of depreciation will not be identical to the original cost of the asset.
To calculate depreciation in full, an accountant can do this:
The calculation rules for this method are regulated by RAS 6.
You can learn the differences and nuances of all wear calculation methods from the following video:
Any method of calculating depreciation has its advantages and disadvantages. Their presence is due to the specifics of the application of each of them.
The positive aspects of using this method include:
The disadvantages are the following points:
The method is most appropriate to apply in the accounting of fixed assets, the efficiency of which decreases every year. These assets include production equipment.
After working for a certain time, the mechanism may become unsuitable for further use, expensive repairs may be required. This situation may occur even before the end of the service life. At the same time, the efficiency of this equipment is reduced, and the amount of investments in ensuring its functioning is growing.
Over time, the profit from this asset begins to decrease significantly.
The application of the diminishing balance method allows the enterprise to write off most of the costs associated with the acquisition of this property for finished products in the first half of the operating life. When the performance of the mechanisms decreases, the organization can replace them without incurring losses.
Depreciation by this method is carried out using the depreciation rate, residual value and a special coefficient.
The formula looks like this:
Depreciation rate formula:
The acceleration factor of the enterprise is chosen independently. The legislation defines its limit value:
Most often this coefficient is equal to 2. This is the standard value used by most organizations. 
Let Kolokol LLC acquire an asset worth 102 thousand rubles. Useful life - 5 years. Acceleration factor - 2.
Depreciation rate:
The calculations look like this:
| Year | Cost at the beginning of the year (thousand rubles) | Depreciation for the year (thousand rubles) | Depreciation per month (thousand rubles) | Cost at the end of the year (thousand rubles) |
|---|---|---|---|---|
| 1 | 102 | 102*20/100*2 = 40,8 | 40,8/12 = 3,4 | 102-40,8 = 61,2 |
| 2 | 61.2 | 61,2*20/100*2 = 24,48 | 24,48/12 = 2,04 | 61,2-24,48 = 36,72 |
| 3 | 36.72 | 36,72*20/100*2 = 14,69 | 14,69/12 = 1,224 | 36,72-14,69 = 22,03 |
| 4 | 22.03 | 22,03*20/100*2 = 8,812 | 8,812/12 = 0,734 | 22,03-8,812 = 13,218 |
| 5 | 13.218 | 13,218*20/100*2 = 5,287 | 5,287/12 = 0,441 | 13,218-5,287 = 7,931 |
The example shows that the residual value at the end of the term is not fully written off. In order not to leave the amount outstanding, the calculation procedure should be changed during the last year.
According to tax code, at the moment when the value of the book value will be equal to 20% of the original, it follows write off the balance in full. To do this, it is necessary to evenly distribute the amount over the number of months.
The calculation will look like this:
In accounting, the accumulated depreciation is recorded in the credit of account 02. The entries look like this:
| Operation | Debit | Credit |
|---|---|---|
| Depreciation on own assets | 20 (23, 25, 26, 29, 44) | 02 |
| Depreciation on leased equipment | 91 | 02 |
| Written off depreciation upon disposal of fixed assets | 02 | 01.2 |
Organizations can choose how to calculate depreciation. The established method should be described and fixed in . When analyzing options, it should be taken into account that this method is one of those recommended in the RF Tax Code. Its application will facilitate tax accounting.
» Depreciation using the declining balance method
Already from the name of the method - “diminishing balance” - it becomes clear that the basis for the calculations will be the residual value of the object, equal to the initial costs for its acquisition and commissioning minus the accruals already paid off at the beginning of the reporting period.
The second indicator that is necessary for calculations is the depreciation rate. It is determined based on the useful life of the property. The depreciation coefficient is calculated as 100% / n (n is the service life in years or months, depending on the period for which the accrual is made).
The third component of the formula is the acceleration factor, which the company sets independently and fixes in accounting policy accounting.
The formula itself looks like this:
A \u003d Co * (K * Ku) / 100, where
A - write-off amount;
Co - the residual value of the object;
K - wear rate;
Ku - acceleration coefficient.
Let's look at an example of how to calculate depreciation using the reducing balance method.
Initial data:
The amount spent on the acquisition of fixed assets is 50,000 rubles;
- useful life – 5 years;
- the acceleration factor established by the accounting department is 2.
There are two ways to calculate the amount of the depreciation contribution: using the monthly rate (translate the service life into months) or by calculating the annual rate, and then dividing the amount received by 12.
For calculations, figures will be needed both for the year and for the month, since depreciation deductions are made monthly, but the annual amount of depreciation is necessary to determine the residual value of the object.
Let's start by defining the depreciation rate. It will be 20% per year (100%/5 years), or 1.67% per month (20%/12 months or 100%/60 months). We take into account the coefficient accelerated depreciation(Ku \u003d 2) and we get the depreciation rate for the year - 40% (3.34% per month).
Depreciation using the reducing balance method is calculated for each year separately:
1. In the first year, the residual value is equal to the original. The write-off amount will be: 50,000 * 40 / 100 = 20,000 rubles. Or 1670 monthly.
2. We start depreciation for the second year of operation by determining the residual value: 50,000 - 20,000 \u003d 30,000 rubles. Using our formula, we calculate the annual amount of depreciation: 30,000 * 40/100 \u003d 12,000 rubles. (1000 per month).
3. We calculate the amount of deductions for the third year in the same way: (30,000–12,000) * 40/100 = 7200 rubles / year or 600 rubles. / month.
4. As of January of the fourth year of use, the balance of the initial costs for the purchase of the object is already 10,800 rubles. (18000–7200). Accordingly, A \u003d 10800 * 40/100 \u003d 4320 rubles. (monthly - 360).
5. At the beginning of the fifth year, the residual value is 10800 - 4320 = 6480 rubles. This amount is 13% of the price of the fixed asset, fixed when it was entered on the balance sheet. It is worth stopping here and tax legislation. According to Art. 259 of the Tax Code of the Russian Federation, at the moment when the book value of the property reaches 20% of the initial amount, the procedure for calculating depreciation changes. In order to maintain a monthly depreciation repayment schedule and write off the incurred costs of the facility in full, the balance is spread over the number of months until the end of its useful life. That is, we divide 6480 by 12 months and get the amount of monthly depreciation in the last year of useful use - 540 rubles.
Thus, throughout the life of the object, its book value decreases by the amount of depreciation until it reaches zero.
It is worth noting that, having chosen the diminishing balance method as a method of writing off depreciation, it must be applied throughout the life of the fixed asset: from the moment the object is received (starting from the 1st day of the next month) and until the end of depreciation charges. The basis for the termination of depreciation is the full repayment of the value of the property or its removal from the balance sheet of the organization.
Under the accelerated depreciation method, relatively large amounts of depreciation are incurred in the early years of the asset's useful life and smaller amounts in later years. This method, which is based on the passage of time, assumes that many types of property, plant and equipment are more efficient when they are new and therefore provide better service at the beginning of their useful lives. Allocating larger amounts of depreciation to early years than to subsequent years is consistent with the matching rule if the benefits or services received in the early years are also greater.
The accelerated depreciation method also recognizes that advances in technology are causing the value of the services of some equipment to rapidly decrease. Accordingly, it is practical to charge more depreciation in early years than in subsequent years. New inventions and products make older equipment obsolete and require equipment to be replaced sooner than if technology changes more slowly.
Another argument in favor of the accelerated depreciation method is that repairs are likely to be more expensive in later periods than in earlier periods. Thus, total amount depreciation and repair costs remain fairly constant over time. This result naturally assumes that the services received from the asset remain approximately the same from year to year.
The declining balance method is the most common accelerated depreciation method. Using this method, depreciation is calculated by multiplying a fixed rate by the carrying amount (decreasing balance) of a non-expendable asset, resulting in higher depreciation charges in the asset's early years. The most commonly used rate is a percentage equal to twice the straight-line depreciation rate. When twice the straight-line depreciation rate is used, the method is called the double declining balance method.
In our previous example, the estimated useful life of a truck was five years. Therefore, under the straight-line method, the depreciation rate would be 20 percent (100/5 years).
Using the double declining balance method, the fixed rate is 40 percent (2 * 20%). This fixed rate of 40% will be applied to the remaining book value at the end of each year. Estimated salvage value is not taken into account in calculating depreciation, except in the last year of the asset's useful life, when depreciation is limited to the amount that must be deducted from the carrying amount to bring it to the estimated salvage value. The depreciation scheme for this method is as follows:
Depreciation scheme, double declining balance method
|
Cost price |
Annual depreciation |
Accumulated depreciation |
balance sheet |
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|
Date of purchase |
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|
End of first year |
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|
End of second year |
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|
End of the third year |
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|
End fourth year |
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|
end of year five |
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* Depreciation is limited to the amount that must be deducted from the book value to bring it to salvage value: 296 = 1,296 (previous book value) - 1,000 ( salvage value)
Note that the fixed rate applies to the book value at the end previous year. The amount of depreciation is highest in the first year and decreases every year. Finally, in the last year, depreciation is limited to the amount that must be deducted from the book value to bring it to a salvage value.
By Russian legislation organizations have the right to choose the method by which they will account for the depreciation of fixed assets. Linear is considered the simplest, but it is more profitable and convenient for many enterprises to write off most of the equipment costs in the first years of its operation. This allows you to do linear methods, in particular, depreciation using the reducing balance method.
The non-linear method of writing off the depreciation of property assumes uneven repayment of its value over the entire useful life. The reducing balance method makes it possible to implement accelerated depreciation by applying an acceleration factor. The owner of the object has the right to set this indicator in the range of 1–2.5, and for property leased, the depreciation rate can be increased by 3 times. In practice, this means that the organization recovers the bulk of the cost of acquiring equipment while it is still relatively new.
It is most expedient to keep records and make contributions to the depreciation fund in this order when it comes to property, which significantly loses its productivity every year. Having developed a certain resource, the equipment requires more and more investments in maintenance and repair, its efficiency decreases, despite the fact that formally the service life of the fixed asset has not yet expired. In other words, the profit from the operation of this property begins to decrease. In such cases, it is in the interests of the owner to write off the purchase costs as soon as possible and be able to renew fixed assets from the depreciation fund.
However, non-linear repayment of value is not always possible. This method cannot be applied to property related to:
Already from the name of the method - “diminishing balance” - it becomes clear that the basis for the calculations will be the residual value of the object, equal to the initial costs for its acquisition and commissioning minus the accruals already paid off at the beginning of the reporting period.
The second indicator that is necessary for calculations is the depreciation rate. It is determined based on the useful life of the property. The depreciation coefficient is calculated as 100% / n (n is the service life in years or months, depending on the period for which the accrual is made).
The third component of the formula is the acceleration factor, which the company sets independently and fixes in the accounting policy of the accounting department.
The formula itself looks like this:
A \u003d Co * (K * Ku) / 100, where
A - write-off amount;
Co - the residual value of the object;
K - wear rate;
Ku - acceleration coefficient.
Let's look at an example of how to calculate depreciation using the reducing balance method.
Initial data:
There are two ways to calculate the amount of the depreciation contribution: using the monthly rate (translate the service life into months) or by calculating the annual rate, and then dividing the amount received by 12.
For calculations, figures will be needed both for the year and for the month, since depreciation deductions are made monthly, but the annual amount of depreciation is necessary to determine the residual value of the object.
Let's start by defining the depreciation rate. It will be 20% per year (100%/5 years), or 1.67% per month (20%/12 months or 100%/60 months). We take into account the accelerated depreciation coefficient (Ku \u003d 2) and get the depreciation rate for the year - 40% (3.34% per month).
Depreciation using the reducing balance method is calculated for each year separately:
Thus, throughout the life of the object, its book value decreases by the amount of depreciation until it reaches zero.
It is worth noting that, having chosen the diminishing balance method as a method of writing off depreciation, it must be applied throughout the life of the fixed asset: from the moment the object is received (starting from the 1st day of the next month) and until the end of depreciation charges. The basis for the termination of depreciation is the full repayment of the value of the property or its removal from the balance sheet of the organization.
Any the entrepreneur himself can choose how depreciation is calculated on fixed assets. This right is enshrined directly in the legislation. The linear method is considered as simple as possible.
But often there are situations when it is more profitable to write off most of the costs associated with equipment in the first years of the operating life. This procedure is also possible due to the fact that there are linear methods. This includes and use of a diminishing balance.
In this case, it is assumed that the cost is extinguished unevenly as long as the entire period from which the useful operation is made up passes. It is possible to implement accelerated depreciation.
To do this, it is sufficient to use the coefficient with acceleration. If the entrepreneur owns the object, then the coefficient level can reach 1-2.5.
The depreciation rate will increase threefold if we are talking about property taken on lease.
In practice, this relationship is easy to understand. Most of the costs associated with the purchase of equipment will be refunded as long as the equipment itself remains fairly new.
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The use of this method becomes relevant not for everyone. Only in case that, when every year equipment loses performance.
Equipment requires more and more investment as the resource is developed.
Although formally expiration date may not have expired. Because of this, the profit that could be made during the operation is reduced.
It is beneficial for the owner to make sure that the purchase costs are written off as quickly as possible. But not in all cases, non-linear repayment of funds is possible.
Such method cannot be applied., For example, if the property is:
Already from the name you can guess what it will be main mechanism in the method. For the basis not the entire cost of the object is taken, but only the residual. It is equal to the initial costs associated with two phenomena:
From this amount subtract accruals that have already been paid off.
All calculations are only at the beginning of the reporting period.
But calculations will be impossible without one more indicator - it becomes the depreciation rate. It is determined based on the operational life of the equipment with maximum benefit.
Its own calculation formula also applies to the wear factor - 100% / n. The letter N denotes the service life. It doesn't matter if it's years or months. Everything is determined by the period in which the organization is engaged in accruals.
Formula there is also component number three. She becomes acceleration factor. It is installed separately, at each of the operating enterprises.
When compiling various reports, you may need to you will find a time log, sample and information.
The accounting department should fix it in the accounting policy.
Each of the methods of calculation has advantages and disadvantages, determined by specifics of the sphere applications. The declining balance method is no exception. What are his shortcomings?
But the method also has positive aspects for those who are interested in resolving the issue:
The state of affairs of the company actually depends on the competent work of the accountant in order to find out about changes in - click on the link.
The main thing that the organization has developed its own approach to solving problems, and then fixed it in the accounting policy.
There are several options.
For example, in the credit of account 02, the residual value of the objects is written off in full, over the last 30 days of the useful life.
In this case it is important to follow certain rules:
At the same time, the legislation does not establish the criterion itself, according to which expenses are recognized or not recognized as significant. The organization has the right to independently establish these criteria. And register them in your accounting policy.
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PBU 6\01, in paragraphs 21-22, says that depreciation type accruals are relevant until the price is fully extinguished. Or until it is deducted from the account.
Therefore, it is possible to depreciate an object using the reducing balance method until it is written off due to the fact that it is out of order. This may be due to the sale, obsolescence, physical deterioration.
The advantage of such a solution is that at first, property is depreciated faster than when using a linear version of the calculation.
The calculation by the method of double declining the remainder is denoted as DDOB or DDB - Double-Declining Balance. The main thing is making up the wiring and when drawing up documents, take into account the use of a special coefficient .
Depreciation of fixed assets, its accrual, is usually reflected in account 02, which is called "Depreciation of fixed assets".
To organize the accounting of fixed assets, sub-accounts are recommended:
The debit numbers, depending on the operation, will be: 20, 23, 25, 26, 29, 44, 91, 2. And the credit is indicated as follows - 02.
Benefits and advantages of the reducing balance method recognized by many, regardless of how useful life a particular equipment has. The amount of the accrued tax is reduced by one and a half percent or more. The main thing is that the plans of the organization (future strategy), as well as the parameters by which depreciation is carried out for fixed assets, are carefully coordinated. If they have already been installed once, then it is forbidden to change them.
To learn more about depreciation of fixed assets, watch this video:
