Improving the methods of depreciation

Abstract

Subject. The article deals with justification and development of a new method for calculating depreciation of fixed assets. Objectives. The purpose is to devise a universal method of depreciation, enabling to correctly assess the participation of fixed assets in the production process and reliably form production costs. Methods. The study employs general scientific methods of analysis. Results. We reviewed existing methods for calculating depreciation of fixed assets that are prescribed by laws and regulations on accounting and taxation, substantiated the need for improving the methods for calculating depreciation of fixed assets of commercial enterprises to form correct cost of production, reflect the real participation of fixed assets in the production process, obtain adequate information for analyzing the efficiency of use of fixed assets. The paper presents a new method to accrue depreciation of fixed assets from the perspective of the time the fixed asset reaches its ultimate limit state. The proposed method is not yet approved by legislative authorities and cannot be used for tax and accounting purposes. Enterprises can accrue depreciation under our method for the purposes of management accounting and analysis. Conclusions. Calculation of depreciation based on the useful life of fixed assets will permit to assess the degree of real participation of instruments of labor in the production process, to obtain objective information about depreciation of fixed assets.