How to accelerate depreciation? Accelerated Depreciation Method

From effectively organized management anddegree of information support of its services depends on the quality of financial and economic management of the company. To date, a small number of domestic enterprises are distinguished by the established accounting system and organized management, ensuring the suitability of information for analysis and operational management. In doing so, it must be accurate and objective.

Accounting services should havea small number of indicators that will satisfy the maximum number of users. Accounting data should be formed to make the right decisions aimed at the effective management of enterprise activities.

The management of each enterprise takes care ofeffectiveness of the application of property for the rational development of business, since fixed assets have a rather high cost. To update its active part, you can use special methods, for example, the method of accelerated depreciation.

What is depreciation?

Depreciation of fixed capital as a categoryeconomy is part of the costs that will be included in production costs. In addition, it is a cumulative financial source of income used to restore capital investments.

Fixed assets over a long periodtime involved in various activities of the organization. However, they gradually wear out and share their own cost between the costs of circulation and production. Depreciation will be accrued on the company's fixed assets, regardless of whether they are operating or not.

How is depreciation charged?

Accrual of depreciation is allowed only in the ways provided for by law. To date, in Russia, this procedure is performed by one of the following options:

• by the method of decreasing balance;
• linear method;
• write-off of cost on the sum of the term of application, expressed in years;
• execution of write-off of the price in proportion to the scope of work;
• acceleration of depreciation.

Use of one of the available methods for calculating depreciation is carried out during the entire period of useful use.

What is accelerated depreciation?

Accelerated depreciation is a fasttransferring the price of fixed capital objects to the cost of products produced with their help. In general, domestic literature, which is devoted to tax and accounting, excludes the existence of a clearly defined boundary in the interpretation of the concept of the mechanism of accelerated depreciation and the ways in which it is charged.

The essence of the mechanism is that in the beginningthe application of the amount will substantially exceed the depreciation charges that are normally accrued at the end of the useful life of the fixed capital object.

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 output with a period of use;
• The depreciation of assets occurs quickly;
• the expenses for repair are increasing rapidly during operation.

This method applies to the active partfixed capital, which was put into effect for the release of funds, is aimed at acquiring the latest equipment and materials, as well as expanding the export of goods. This is done in cases where a mass replacement of old equipment with a new level of performance is necessary.

The method of accelerated depreciation is alsoapplies to various vehicles and equipment, if the regulatory period of their operation does not exceed three years. The aircraft and motor technology is also subjected to this procedure, but the life of the aircraft is determined by the hours of operation. In addition, buildings and new enterprises are subject to accelerated depreciation, which have an increased burden on fixed assets.

The purpose of accelerated depreciation

Accelerated depreciation allows you to write offthe value of the capital stock is much faster than stipulated by the established norms. The purpose of its use is to stimulate the flow of 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.

In case of using accelerated depreciationtax liabilities will be reduced, as the company's profit will not include the amount of depreciation. Once the asset value has been fully amortized, the profit of the organization will increase, and consequently, the amount of taxes will increase.

Calculation of accelerated depreciation

If a non-linear method is used, 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 is the depreciation rate to the initial price of the item, which is expressed as a percentage;
  Koef - the acceleration coefficient, which depends on the legal norms;
  n is the useful life of the object, expressed in months.

After the residual price of the equipment will beequal to 20% of the original amount, it will be accepted as the base for the subsequent calculations. In this case, the amount of depreciation for the month will be determined by dividing the base price by the number of months that remained 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 the payment of taxes, this method is particularly useful. For current activities, a large amount of capital funds and deferred taxes will be available if the assets are written off.

The method of reducing deductions has the following benefits: The depreciated value and efficiency of assets is reduced, and low depreciation charges will compensate for the high costs of servicing and repairing obsolete equipment. To do this, it is necessary to accelerate depreciation, but in the first time deductions are better to increase in order to compensate for the uncertainty in the matter of aging equipment.

Coefficient of depreciation of fixed capital

The coefficient of accelerated depreciation isan indicator that is equal to the ratio of the amount of depreciation received to the initial price of fixed capital. To calculate it, you need to use the balance sheet data. The depreciation coefficient shows the degree of depreciation of fixed assets, that is, a measure of financing their future replacement as they wear out.

The indicators considered are often used fornotation of the state of fixed capital. It is also worth noting that the coefficient of this type does not reflect the actual deterioration of the equipment and does not allow for an accurate assessment of its current state. That is, these indicators are rather conditional.

Despite their conventionality, they possessspecific analytical value. It is generally considered undesirable if the wear rate does not exceed 50%, and the expiration factor is not less than 50%. An objective assessment of the indicator is achieved by comparing it with the indicator value of the competitors of the enterprise or its average value in this industry. The coefficient of accelerated depreciation is equal to the division of the depreciation rate by the initial cost of fixed capital.

Accelerated depreciation for leasing

Using the accelerated depreciation methodin respect of the subject of a financial lease, you can achieve a profit. However, potential customers of companies providing leasing services doubt the advantages of this method and the mechanism of its operation.

When used in relation to the leased assetAccelerated depreciation allows you to reduce the income tax throughout the term of the lease agreement. In addition, you can reduce the amount of property tax on the object of the contract. At the same time, the policy of accelerated depreciation allows you to buy out 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 coefficient for leasing calculated?

Legislation establishes that when calculatingdepreciation of property that is the object of leasing, the taxpayer has the right to use special factors. If a citizen is going to apply this right, he needs to fix this condition in his accounting policy for the tax accounting of the company.

Based on statutory provisions,Taxpayers can apply the rate of accelerated depreciation when leasing, if it does not exceed 3. It can be applied to depreciable fixed assets that are subject to a leasing agreement.

Redemption of the leased asset

During the lease by leasing is not profitableonly accelerate the depreciation, but also to redeem the object at a minimum residual value. Contracts of this type allow you to purchase an item after the specified rental period expires. You can use the method of accelerated depreciation. The 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 the depreciation is accelerated and the item will have a minimum residual value. Then it will be possible to redeem it profitably.