Accounting and Tax Depreciation. Depreciation Schemes

Abstract

Depreciation is the systematic allocation of the depreciable value of an asset over its useful life. In practice it is used both in terms of accounting depreciation and tax legally. Accounting depreciation is calculated based on an amortization plan, prepared for the period from the date of service of its tangible assets and full recovery of the value of their input. Tax depreciation is calculated from the month following the depreciable tangible asset is put into operation, until full recovery of input values, as useful life established in the “Catalogue of the classification and useful life of fixed assets”. Entities depreciated tangible assets using one of these schemes depreciation: Linear depreciation, diminishing depreciation and accelerated depreciation. Theory and practice recommend that depreciation regime used to be logically and systematically. Practicing one depreciation method or another, by a society, is made in the manner permitted by law, the tax benefits that can be recovered, the investment policy of the company etc. Choosing diminishing or accelerated system is suitable for businesses who want to obtain benefits or to obtain investment in early years because depreciation is diminishing rapidly may defer payment of part of tax and take advantage of such depreciation. Depreciation regime chosen should reflect the reduced ability to service the property. Existence of several accounting methods for finding and recording depreciation requires of the enterprise an accounting option. Given that an enterprise has a choice regarding amortization, the interest is investment; interest competes with the state tax.