How to calculate the depreciation of fixed assets?

Depreciation of fixed assets refers to the depreciation of fixed assets that is extracted according to the prescribed depreciation rate in order to make up for the loss of fixed assets in a certain period of time, or the depreciation of fixed assets that is virtually calculated according to the depreciation rate uniformly prescribed by national economic accounting. It reflects the transfer value of fixed assets in current production. The depreciation of fixed assets of various enterprises and enterprise-managed institutions refers to the depreciation expenses actually accrued; The depreciation of fixed assets of government institutions, non-enterprise management institutions and residential houses without depreciation is a virtual depreciation calculated according to the unified depreciation rate and the original value of fixed assets. In principle, the depreciation of fixed assets should be calculated according to the current replacement value of fixed assets, but at present, China does not have the basis for the revaluation of fixed assets in the whole society, so we can only adopt the above method temporarily.

[Edit this paragraph] The historical development of depreciation of fixed assets

The process of systematically allocating the cost of fixed assets during their useful life.

The conceptual basis of depreciation of fixed assets Before the first industrial revolution, there was almost no concept of depreciation in accounting. Since then, due to the development of large machinery and industry, especially the development of railways and the emergence of joint-stock companies, people have produced the concept of long-term assets, demanding a distinction between "capital" and "income", thus establishing that depreciation expenses are inevitable expenses in the production process of enterprises.

The emergence of the concept of depreciation is an important symbol of the transformation of enterprises from cash basis to accrual basis, and its conceptual basis is accrual basis and the matching principle that reflects the requirements of this system. According to the matching principle, the cost of fixed assets is not only the cost of obtaining current income, but also the cost of obtaining various income in the future, that is, the cost of fixed assets is the cost of obtaining income within the effective use period of fixed assets, which naturally matches the income.

[Edit this paragraph] Depreciation analysis of fixed assets

Depreciation is only a cost analysis. Depreciation is not a valuation of assets. It is neither a source of funds nor a purpose of funds. Therefore, the depreciation of fixed assets does not undertake the renewal of fixed assets. However, because the depreciation method will affect the income tax of enterprises, it will also have a certain impact on cash flow.

Not all depreciable fixed assets are depreciated, but the conditions for depreciating fixed assets are: limited service life and reasonable estimation, that is to say, fixed assets will gradually wear and tear during use until their use value is improved, and land is a typical non-depreciable fixed asset.

[Edit this paragraph] Example of depreciation range of fixed assets

The financial system of different industries in China has made different provisions on the scope of depreciation of fixed assets. Taking industrial enterprises as an example, the fixed assets that need to be depreciated include:

(1) building;

(2) Machinery and equipment, food tools, transport tools, tools and appliances in use;

(3) seasonal stop and repair stop equipment;

(4) Fixed assets leased from operating lease and fixed assets leased from financing lease.

Fixed assets that are not depreciated include

(1) Fixed assets that have been fully depreciated and are still applicable;

(two) the land that has been evaluated and filed separately in the previous year.

[Edit this paragraph] Factors and scope to be considered about depreciation of fixed assets

When calculating the depreciation expense of each period, the following four factors should be considered:

1. Depreciation accrual base

The base of depreciation of fixed assets is the original value or book value of fixed assets. According to the enterprise accounting system, the original value of fixed assets is generally used as the depreciation basis, and the enterprise that chooses the double declining balance method uses the book value of fixed assets as the depreciation basis.

2. Depreciation life of fixed assets

Enterprises should consider the following factors when estimating the service life of fixed assets:

(1) Estimated production capacity or physical output of fixed assets.

(2) the tangible loss of fixed assets, such as the loss in the use of equipment, natural erosion of buildings, etc.

(3) the intangible loss of fixed assets, such as the technical level of existing assets is relatively outdated due to the progress of new technologies, and products are outdated due to changes in market demand.

(4) Laws or similar restrictions on the use of fixed assets.

3. Depreciation method

There are many ways for enterprises to accrue depreciation of fixed assets, which can be basically divided into two categories: straight-line method (including straight-line method and workload method) and accelerated depreciation method (including sum of years method and double declining balance method). Enterprises should choose different methods according to the expected realization of economic benefits contained in fixed assets. Different depreciation methods of enterprises vary greatly.

4. Net residual value of fixed assets

The net salvage value of fixed assets refers to the estimated net salvage value that can be recovered when the fixed assets are cleaned and scrapped minus the estimated cleaning cost.

The Accounting System for Enterprises stipulates that enterprises should reasonably determine the expected service life and estimated net value of fixed assets according to the nature and consumption mode of fixed assets, and choose a reasonable depreciation method, that is, a reasonable depreciation policy, according to factors such as scientific and technological development and environment. According to the management authority, the depreciation policy needs to be approved by the shareholders' meeting or the board of directors, the manager (factory director) meeting or similar institutions. At the same time, in accordance with the provisions of laws and administrative regulations, it must be submitted to the relevant parties for the record and placed at the location of the enterprise for investors and other relevant parties to consult. The estimated service life, estimated net salvage value and depreciation method of the fixed assets submitted by the enterprise or stored in the place where the enterprise is located shall not be changed at will once determined. If it is really necessary to change, it should still be submitted to the relevant parties for the record according to the above procedures after approval, and explained in the notes to the accounting statements.

What is the scope of depreciation?

Fixed assets used by enterprises include fixed assets for production and operation, fixed assets for non-production and operation, and rented fixed assets. Generally, depreciation should be accrued. However, houses and buildings, whether used or not, must be accrued. Therefore, the specific scope of fixed assets that need to be depreciated includes: houses and buildings, machinery and equipment in use, instruments and meters, means of transportation, tools and appliances, fixed assets that are out of service in season and out of service for major repairs, and fixed assets that are leased in from financing and operating leases. If the fixed assets that have reached the intended usable state have not been settled for completion, they shall be temporarily accounted for according to the estimated value and depreciated. After going through the formalities of final accounts for completion, the original provisional valuation value and the original depreciation amount shall be adjusted according to the actual cost. The depreciation accrued in the current period and the adjustment of the original depreciation amount are treated as the cost of the current period.

Where an enterprise adjusts the value of functional assets due to renovation and other reasons, it shall accrue depreciation according to the adjusted value, estimated useful life, net salvage value and the selected depreciation method.

Donated old fixed assets shall be depreciated according to the recorded value, estimated service life, estimated net salvage value and depreciation method selected by the enterprise.

Fixed assets leased by financing shall adopt depreciation policies consistent with their own depreciated assets. If it can be reasonably determined that the ownership of the leased asset will be acquired at the expiration of the lease term, depreciation shall be accrued within the service life of the leased asset. If it is impossible to reasonably determine that the ownership of the leased asset can be obtained at the expiration of the lease term, depreciation shall be accrued within the shorter period of the lease term and the service life of the leased asset.

Increasing depreciation will reduce profits, thus reducing income tax. Therefore, if an enterprise raises more depreciation in a certain year, it will see that the profits on the surface decrease, but in fact the enterprise pays less income tax. We call the role of depreciation in tax reduction "depreciation deduction" or "tax baffle".