Differences in Accounting
Topic:
Fixed Assets
Overview Fixed Assets
Depreciation: straight-line method or declining-balance method.
Low value asset: 400€ / item, can be written down in the first year.
Depreciation: By the straight-line method or reducing balance method.
Low value asset: DKK 6,700 (ca. 900 €), can be written down in the first year.
Depreciation: no specific requirements in tax law and vountary instruction.
Low value asset: depends on enterprise.
By the direct, straight-line method or reducing balance method.
Low value asset: 410€ / item, activation on a special account, are written down in the
first year.
Depreciation: straight-line method or reducing balance method.
Low value asset: 850 €, can be written down in the first year.
Depreciation: only straight-line method
Low value asset: 100.000 HUF (ca.395 €), can be written down in the first year.
Depreciation: straight-line method or reducing balance method
Low value asset: depends on enterprise
IFRS IAS 16. Property, Plant and Equipment.
Details Austria
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Depreciation: straight-line method, sometimes reducing balance
method
The minimum expected useful life is mostly given by law, a change
of useful life is impossible.
Depreciation starts when the asset is ready for usage and is
calculated for half a year.
Low value asset: 400€/item
– Must be activiated on a special account and can be written down in the first
year.
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Treatment of intangible assets and the goodwill:
– Are written down within 15 years
Treatment of a hidden reserve if you sell a fixed asset (market price
> book value)?
– Profit (or loss) must be added (deducted) to taxable income.
– Special instructions for private companies
Details Denmark
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Depreciation: By the direct, straight-line method.
– Calculation: (cost – scrap value)/ lifetime
The expected useful life: No rules according to law of accounting –
realistic approach.
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Depreciation starts with purchase date
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Low value asset: 11000 Dkr. (ca. 1400€) /item
– Must be activated on a special account and can be written down in the first
year.
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Treatment of intangible assets and the goodwill:
– Are written down by straight line method.
Treatment of a hidden reserve if you sell a fixed asset (market price >
book value)?
– Profit is added to income.
Details Estonia
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Depreciation: There are no specific requirements in tax law and is a
voluntary instruction: Revaluation is prohibited by Estonian GAAP
No lawful, minimum expected useful life, and it is legal to change the
expected useful life.
Depreciation starts when the asset is ready for usage and is
calculated by month (small companies by year)
Low value asset: the limit depends on the size of the enterprise
– low-cost assets are written down in the moment of using them
Treatment of intangible assets and the goodwill:
– Intangible assets are amortised during useful life.
– Goodwill is not amortised, but an impairment test for determining
the value shall be performed at each balance sheet date and if their
recoverable amount is smaller than their carrying amount, their
carrying amount shall be written down
Treatment of a hidden reserve if you sell a fixed asset (market price
> book value)?
– If the fixed asset is sold the gain or loss is showed immediately
Details Estonia 1
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Which amount is the basis for the depreciation?
In Estonia the acquisition cost is. It consists of purchase price and any costs
directly attributable to its acquisition. Directly attributable costs are those
that are necessary for bringing the asset to its operating condition and
location.
If an item of property, plant and equipment consists of separate identifiable
parts with different useful lives, these parts shall be recognised initially as
separate items of property, plant and equipment and separate depreciation
rates shall be assigned to them depending on their useful lives.
How do you calculate the cost of manufacture?
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a) designing fees and other similar fees of an asset;
b) wages and salaries and related taxes paid to the employees in connection with
the construction of an asset;
c)materials and tools used in the construction of an asset (incl. depreciation of noncurrent assets used in the construction);
Details Germany
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Depreciation: By the direct, straight-line method or reducing balance
method, a one time change to straight-line method is possible.
The expected useful life is sometimes given by law, a change must be
well grounded.
Depreciation starts when the asset is ready for usage and is calculated
by on a monthly basis.
Low value asset: 410€/item
– Must be activated on a special account and can be written down in the first
year.
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Treatment of intangible assets and the goodwill:
– Are written down within 15 years
Treatment of a hidden reserve if you sell a fixed asset (market price >
book value)?
– Special instructions for immovables
Details Finland 1
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Depreciation: By the straight-line method or declining-balance method.
– Calculation: straight-line:
(cost – scrap value)/ lifetime
Reducing balance: Cost x depreciation rate
The expected useful life: No rules according to law of accounting – realistic
approach.
– a change must be well grounded. Additional information must be given.
Depreciation starts when the asset is ready for usage and is calculated on
monthly basis.
Low value asset: € 850,- or below, it can be deducted from the taxable income.
Another limit is for the equipments, machines etc., which have expected useful
life 3 years or less.
Treatment of intangible assets and the goodwill:
– Are written down by Straight-line depreciation in ten years
Treatment of a hidden reserve if you sell a fixed asset (market price > book
value)?
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We book the difference between market price and book value to a special account .
Details Finland 2
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What about lawful, minimum expected useful life? Do you have lawful,
minimum expected useful life?
No. But according to a Good Accounting Practise there are common “rules”, which are
normally used. E.g. we have suggestions for expected useful life, they aren´t obligatory.
Accounting Bureau in Finland has given these suggestions for expected useful life.
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cars
4 years
lorries
4 years
buildings
20 – 40 years
office furniture
3 – 6 years
Is it legal to change the expected useful life?
It´s possible to change it, if you´ve a good reason. Additional information must be given:
Details Hungary
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Depreciation: By the straight-line method
The expected useful life: No rules according to material assets – realistic
approach
immaterial assets: please look at „Treatment of intangible assets and the
goodwill“
It´s possible to change useful lifetime if substantial change occurred in the
following cases:
– in service life of the plant property
– in the value of the given plant
– in the due residual value
Depreciation starts in the following month.
Low value asset: 100.000 HUF (ca.395 €), can be written down in the first year.
Details Hungary 1
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Treatment of intangible assets and the goodwill (periods are given by law)
– Activation value of the establishment and restructuring 1-5 years
– activation value of the development 1-5 years
– Business or goodwill at least 5 years
Treatment of a hidden reserve if you sell a fixed asset (market price > book
value)?
– It´s not regulated and must be shown in the notes of the accounts.
Purchase of Assets in UK
Assets and Expenses
What is an asset ?
An asset is usually defined as premises, machinery or equipment that is owned
by the business, used for the purpose of carrying out the business, and likely to
remain in use by the business for a period of time.
Assets are recorded in an asset register.
Assets are depreciated according a straight line method or a reducing balance
method.
The materiality concept should be used to decide if an item represents capital or
revenue expenditure.
In an office, a computer would be regarded as an asset, but a stapler or paper bin
would probably be regarded as revenue expenditure.
Capital and Revenue Expenditure
The purchase of an asset is capital expenditure. The purchase of smaller items
is treated as revenue expenditure.
For example:
A computer and printer are purchased by a small business. These are treated as
capital expenditure.
Any delivery cost and installation cost (such as connecting to a network) are
treated as capital expenditure.
The cost of printer ink, paper and computer discs would be treated as revenue
expenditure.
Purchase of a vehicle
The following are capital expenditure:
Net cost of vehicle
Number plates
Delivery costs
The following are revenue expenditure.
Fuel
Vehicle excise duty / road fund licence
Insurance
Servicing
Depreciation
The provision for depreciation is calculated each year for nearly all fixed
assets. The provision is recorded as a credit in the Accumulated Depreciation
Account (a balance sheet account) and as a debit in the Depreciation Expense
Account (an expense account).
The method by which depreciation is calculated for each asset is determined
when the asset is first purchased. Under normal circumstances this method of
depreciation should not change.
Details IFRS
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What about lawful, minimum expected useful life?
IFRS does not have
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Is it legal to change the expected useful life?
In accordance with IAS 16: The useful life of an asset and the depreciation
method applied must be reviewed at least at each annual reporting date. A
change in the useful life or depreciation method is accounted for prospectively
as a change in accounting estimate.
Which amount is the basis for the depreciation?
In accordance with IAS 16: Property, plant and equipment is recognised initially
at cost. Cost includes all expenditure directly attributable to bringing the asset to
the location and working condition for its intended use. Property, plant and
equipment is depreciated over its useful life. An asset’s depreciable amount is its
cost less its residual value. An item of property, plant and equipment is
depreciated even if it is idle. However, an item of property, plant and equipment
that is held for sale is not depreciated. When an item of property, plant and
equipment comprises individual components for which different depreciation
methods or rates are appropriate, each component is depreciated separately.
Details IFRS 1
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When does depreciation start?
In accordance with IAS 16: Subsequent to initial recognition property, plant and equipment
is depreciated on a systematic basis over its useful life. The depreciation starts when the
asset is available for use (i.e., when it is in the location and conditions necessary for it to be
capable of operating in the manner intended by management).
How do you treat the intangible assets and the goodwill?
In accordance with IAS 38: Intangible assets with finite useful lives are amortised over their
expected useful lives.
The following costs cannot be capitalised as intangible assets: internally generated goodwill,
internal research costs, costs to develop customer lists, start-up costs, and expenditure
incurred on training, advertising and promotional activities or on relocation or reorganisation.
The method of amortisation of an intangible asset with finite useful life should reflect the
pattern of consumption of the economic benefits. The method used should be reviewed at
least at each annual reporting date and a change in the method applied should be
accounted for prospectively as a change in estimate. The amortisation of intangible assets a
finite useful life begins when the asset is available for use (i.e., when it is in the location and
conditions necessary for it to be capable of operating in the manner intended by
mananagement).
Acquired goodwill and other intangible assets with indefinite useful lives are not amortised
but must be tested for impairment at least annually.