Depreciation

Depreciation  is the systematic allocation of the depreciable amount depending on its use.

Outputs

Depreciation accounting has legal function as a fatal and irreversible impairment due to wear and tear or obsolescence. a financial function highlighting the need for capital renewal. function as an economic allocation of cost of holding fixed assets.a tax function.Some items of property (except such as land) are depreciable assets at year end and duration of use is sometimes critical.

Depreciation base

The amount of an asset is its gross value, less its residual value. The residual value must be determined when entering the well capitalized and represents the sale value if known in advance. The residual value must be meaningful and measurable. Every year the current value may be impaired and it is the highest value of the market value (sales less cost of normal exit from financing and tax) and value in use (net cash flow expected). An asset with a value less than 500 euros can be recorded directly as expenses.

                                                                        Duration

It should refer to how the entity will use the property. Duration of use is taken as depreciation.

                                                                Classics depreciations

The depreciation method selected should reflect the best rate of consumption of economic benefits expected. This consumption can be determined:

in units of days of life of the company;
in unit of work when they reflect more accurately the rate of consumption of economic benefits expected.
The depreciation method may be linear, increasing or decreasing in unit time or calculated based on mileage, parts produced, hours of work.

                                                                Other Kinds of depreciations

The accelerated tax depreciation is made ​​for reasons of tax harmonization. It is governed by complex legal principles and jurisprudence.

Depreciation is the national accounts consumption of fixed capital. But the national accounts is the domain of statisticians in the field of macroeconomics.

IFRS, including IAS 36, have introduced the concept of depreciation by component, which consists of the depreciation of each part of property separately. Example: Seats for a bus.

                       TYPES OF  USUALS DEPREIATIONS

VARIABLE

The depreciation schedule is the translation of the distribution of the capital cost of an asset according to the rate of consumption of economic benefits expected in terms of its probable use.

The amortization method is the translation rate of consumption of economic benefits expected from the asset by the entity.

LINEAR

Also called damping constant, it is considered identical throughout the life of the asset. The amount is calculated by applying each to the original value (acquisition value) a linear rate.