Depreciation rates and methods of calculation

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During production use and operation of the fixed assets of the company or companies naturally wear.During this wear is a loss of their technical properties.Such wear is considered in two ways.

obsolescence is understood as a loss of technological properties and value as a result of the development of scientific and technological revolution and the obsolescence of products.

Physical deterioration - is the loss of technological properties as a result of the production of industrial activity of the enterprise or company.

in accounting must produce accounting depreciation, arising only as a result of physical deterioration.

on its rate is affected by such factors as the conditions of use of funds, the intensity of use, quality of equipment, the level of protection from harmful influences, qualified personnel.

mechanism of transfer value and the accumulation of financial resources for the replacement of worn-out equipment items is called amortization, and deductions - depreciation.They are not charged on residential buildings, land improvements, productive livestock used irrespective of the form of ownership of land, horticultural planting, objects of nature, fixed assets of non-profit companies, library holdings and other objects.

Depreciation shall be based on historical cost, time and methods are.

accrual basis in accounting, the following: line, declining balance method of write-off and proportional, methods of calculation of the sum of numbers of years of time in service.

With all the methods of calculation of the key parameter is the rate of depreciation charges, which is a percentage of the value of the total cost of the basic capital of the company or companies to be included in the total cost figures produced and sold by the enterprise.Our notation this option - DR from the English words depreciation rate.In economic sources are also used category-synonyms - depreciation rate, the rate of wear and tear, a rarely used concept - the rate of write-off.

When using the linear method are taken into account such factors as cost, the rate of contributions, the current estimated value.For example, if the company acquired a share of 200 thousand. Rub.and with a duration of 5 years of operation, the annual rate of depreciation is equal to 20% (100% / 5 = 20%).

When using the declining balance method of calculating the rate determined in accordance with taking into account the residual value minus depreciation.on the basis of the useful life.You can give an example: the purchase of the object for 200 thousand. Rub.with a time of 5-year usage rate of depreciation for the third year will be 4o% of the difference between the net book value and the value of the depreciation amount for the second year.

When using the method of writing off the sum of years of use, the amount of deductions to take into account the initial cost and is calculated as shown in the example.For example, the company acquired a facility of 200 thousand. Rub.from the time of its useful life of 5 years.We calculate the sum of the numbers reflecting the operation: 1 + 2 + ... = 15 years.So, in the first year depreciation rate was 33.3% (5/15).The next year - 26.7% (4/15), the third - 20% (3/15).

In applying the method of proportional write-off of the annual amount of contributions is determined by the ratio of the volume of production and cost.

With all the calculation methods used in accounting, depreciation rate as an indicator parameter and is an important tool for planning the development strategy of the company or enterprise.