Abstract: The depreciation of fixed assets refers to the systematic distribution of depreciation amount according to certain methods within the service life of fixed assets. As a tangible asset serving for producing goods, providing labor services, leasing or management for a long time, its value will inevitably be lost with the passage of time and the use of assets. Because there are many depreciation methods for fixed assets, and the use process is also very different, as an enterprise, it involves the comparison of various depreciation methods when choosing the depreciation method suitable for its fixed assets according to their advantages and disadvantages. Therefore, the comparison and analysis of depreciation methods of fixed assets is an indispensable work.
Taking the depreciation method of fixed assets as the research object, this paper expounds that fixed assets have the potential ability to seek benefits for enterprises. With the transfer of the value of fixed assets, this ability is compensated in the form of depreciation, and gradually fades until it disappears. The loss of fixed assets includes tangible loss and intangible loss. Depreciation accrual is also a systematic and reasonable allocation process of fixed assets within the service life of assets. At present, the accelerated depreciation methods adopted in China include average life method, workload method, sum of life method and double declining balance method. These depreciation methods are considered to meet the system requirements. This paper discusses the factors that need to be considered in choosing the depreciation method of fixed assets, and compares and analyzes several depreciation methods of fixed assets. Therefore, the comparative analysis of depreciation methods of fixed assets mainly focuses on their applicability, and compares and analyzes the theoretical basis, advantages and disadvantages and applicable objects of different depreciation methods.
Key words: depreciation method of fixed assets, depreciation characteristics of fixed assets, comparison of depreciation methods, analysis of depreciation methods.
Brief introduction: Fixed assets refer to tangible assets held by enterprises for producing goods, providing services, renting or managing, and their service life exceeds one fiscal year. Fixed assets will wear and tear in the process of use, and their wear and tear value will gradually shift to the cost, which constitutes the operating cost of the enterprise. This part of the value transferred with the loss of fixed assets is the depreciation of fixed assets. The loss of fixed assets can be divided into tangible loss and intangible loss. The former is the loss of use value and value due to the influence of use and natural forces; The latter is due to technological progress, the emergence and promotion of high-efficiency fixed assets, which makes the efficiency of the original fixed assets relatively lower and leads to losses. In order to make enterprises have the financial strength to replace fixed assets in the future and realize the correct proportion of income and expenses during the period, enterprises must allocate the cost of fixed assets reasonably in each benefit period within the effective use period of fixed assets and accrue a certain amount of depreciation expenses. Therefore, it is very important to choose a reasonable depreciation method according to the characteristics of enterprises.
First, the main factors affecting the depreciation of fixed assets
1. 1, depreciation base
When extracting depreciation of fixed assets, the original value or book value of fixed assets and depreciation base should be considered first. Different depreciation methods have different depreciation bases.
1.2, service life
The service life of fixed assets cannot be accurately measured in advance, so it is necessary to estimate the service life of fixed assets in advance. The service life of fixed assets is determined by tangible loss and intangible loss, but in essence, the service life is generally based on the intangible loss of technological progress, that is, the economic life of fixed assets determines the technical life.
1.3, net salvage value
The net residual value of fixed assets refers to the residual income after the expiration of the service life of fixed assets, after deducting the estimated cleaning expenses. Among them, residual income, also known as disposal income, includes the residual income when fixed assets are scrapped and the income generated from transactions such as sale, debt repayment, investment transfer and non-monetary exchange when fixed assets are not scrapped. Clean-up expenses, also known as disposal expenses, correspond to disposal income, that is, expenses such as disassembly and handling when fixed assets are scrapped. It is an addition to the value of fixed assets and should be estimated in advance.
1.4, depreciation method of fixed assets
There are many depreciation methods for fixed assets. According to China's "Accounting Standards for Business Enterprises No.4-Fixed Assets", the depreciation methods adopted are life average method, workload method, double declining balance method and life sum method.
Second, a comparative analysis of several depreciation methods of fixed assets
2. 1, straight line method
Also known as the life average method, this method requires the average depreciation of fixed assets in installments within the service life. Its calculation formula is:
Annual depreciation = total depreciation of fixed assets ÷ estimated service life of fixed assets.
= (original value of fixed assets-estimated net salvage value) ÷ estimated service life of fixed assets
The premise of using this depreciation method is to assume that the depreciation of fixed assets is due to the passage of time, not the tangible loss caused by the use of fixed assets. The straight line method is easy to understand and calculate. According to the characteristics of this method, the depreciation accrued by enterprises during the life of fixed assets is equal, which makes the products of enterprises relatively stable. Suitable for enterprises with relatively stable output.
Because the straight-line method is relatively simple, it is correct only under the following conditions: (1) The interest factor can be ignored, or the investment cost is assumed to be zero; (2) The cost of repair and maintenance is fixed during the whole service life of the asset; (3) The asset efficiency in the latest year is the same as that in the first year; (4) The income (or cash flow) obtained from the use of assets is fixed throughout the service life; (5) All necessary estimates (including expected service life) can be predicted with considerable certainty.
Due to the uncertainty of the above factors, it is difficult to make any depreciation method take all factors into account. If some factors can be properly offset, it is generally considered that the straight line method is the most suitable. For example, the decrease in operating efficiency and the increase in maintenance costs are just offset by the increase in income and the decrease in insurance premiums and property taxes. In addition, because the straight-line method is easy to understand and calculate, and the depreciation extracted in each year or month during the effective use period of fixed assets calculated by this method is equal, the product cost of enterprises is stable and comparable.
At the same time, the straight-line method also has some shortcomings, which ignores the discount factor. The net profit calculated by the straight-line method will give people the illusion that the rate of return on total invested capital is increasing.
With the loss of fixed assets, the cost of repair and maintenance increases gradually, and the depreciation accrued in the next period of linear development is equal, which makes the annual depreciation of fixed assets unbalanced from the perspective of total cost. Instead, the straight-line method does not pay attention to the use of assets, but only looks at their use time.
2.2, workload method
The workload method is a method to calculate depreciation according to the expected workload of fixed assets within their service life. Its calculation formula is:
Annual depreciation amount = depreciation amount accrued by unit workload × annual actual workload
= (original value-net salvage value) ÷ Estimated total workload × actual annual workload
According to the formula, it can be seen that the greater the workload, the greater the depreciation accrued, so this method can truly reflect the value loss of fixed assets. Applicable to those fixed assets with large value and uneven use.
The workload method is essentially a supplement and extension of the average life method. According to the regulations, passengers, trucks, large-scale equipment and large-scale construction machinery of professional fleets can be depreciated by workload method. Due to the different workload indicators of various professional equipment, the workload method can be divided into mileage depreciation method and working hours depreciation method. The workload method assumes that depreciation is a variable, not a fixed cost, that is, it assumes that the decrease in asset value is not due to the passage of time, but to use.
For many kinds of assets, the assumption of workload method is reasonable, especially when tangible wear and tear is more important than depreciation.
Therefore, if an asset is not used within one year, it should not be counted as depreciation expense, because the use value of the asset has not decreased. Even though depreciation is an important factor to determine the expected service life of assets, if its depreciation is foreseeable and the general use of assets can be estimated, the depreciation method based on business activities can be adopted. The main purpose of using this depreciation method is to allocate input value according to each service unit, and the measurement of service value reduction is secondary.
Although the workload method looks very ideal when the use value of assets decreases with the use, there are often some serious shortcomings in the use: (1) Even though the depreciation expense changes every year, the workload method is still similar to the straight-line method. Because it assumes that each service unit is allocated an equal amount of depreciation expense, but it is unfounded to assume that the cost of each service unit is equal. In addition, because some service units are not used in the future, unless the interest rate is assumed to be zero, the reduction of the whole service value is actually uneven. (2) the workload method does not take into account the increase in repair and maintenance costs, as well as the decline in operating efficiency or income.
2.3, double declining balance method
Double declining balance method is a depreciation method that multiplies the initial book value of fixed assets in each accounting period by double straight-line depreciation rate without considering the residual value of fixed assets.
The calculation formula is: annual depreciation = opening book balance of fixed assets × double straight-line depreciation rate.
The conditions for adopting the accelerated depreciation method are as follows: (1) The annual service contribution will be reduced without considering the interest or cost of funds; (2) The decrease of operating efficiency will lead to the increase of other business expenses; (3) The value of assets decreased more in the early stage and less in the later stage; (4) Even if the service value consumed in the early stage and the later stage is the same, the discounted value is different, so the cost of the service value in the early stage is higher than that in the later stage; (5) increase the cost of repair and maintenance; (6) Cash income is decreasing year by year; (7) The uncertainty of future annual income caused by the possibility of depreciation.
One of the main arguments of adopting accelerated depreciation method is that the decreasing contribution of net income of assets is related to operating efficiency, and the depreciation expenses payable in each period are the same. The decrease in net income of assets may be due to the need for more repair time and repair costs in the later period of assets, or the excessive use of assets is prone to accidents, thus reducing the use, or it may be due to the decrease in operational efficiency and output. The decrease of operation efficiency will also lead to the increase of fuel cost and labor cost, or cause great waste of raw materials. All these show that the net income of assets in the later period is less than that in the previous period. Therefore, even if the interest cost is not included, the reduction of net income of assets proves the rationality of accelerated depreciation method.
The decline in expected cash income is also a reason for adopting the accelerated depreciation method. It can be considered that the original cost of assets in the early stage is greater than that in the later stage, so the depreciation expense in the early stage should be greater than that in the later stage.
The cost of repair and maintenance is increasing year by year. In order to compensate the increasing cost of repair and maintenance, accelerated depreciation method should be adopted. Repair and maintenance costs are related to depreciation and should be included in the calculation of total service cost or net income.
One of the most difficult factors in the allocation of depreciation expenses is uncertainty. Expected service life, expected net income and future maintenance costs are uncertain. In most cases, uncertainty can be transformed into a single definite value according to the adjusted expected value of risk selection. The uncertainty of income provides a certain basis for accelerated depreciation method. Because the early income is more certain than the late income, the late income should be discounted more when making investment decisions, so most of the asset cost should be allocated to the early period. Although these uncertainties are not enough to prove that the accelerated depreciation method is reasonable, compared with other methods, the accelerated depreciation method is the most inclined to cash payment.
It should be noted that the book balance of fixed assets cannot be lower than the net residual value of fixed assets estimated by this method, so enterprises should treat depreciation amount according to the situation when using this method. However, in order to simplify the calculation, in practice, the net value of fixed assets after deducting the estimated net salvage value is generally amortized evenly within two years before the expiration of the depreciation period of fixed assets.
2.4. Annual Sum Method
The sum of years method is a method of multiplying the total depreciation of fixed assets by the decreasing depreciation rate year by year to calculate the depreciation amount of each year. Its calculation formula is:
Annual depreciation amount = (original value-net salvage value) × useful life ÷ sum of years.
= Total depreciation × depreciation rate of fixed assets in the current year
Double declining balance method and sum of years method belong to accelerated depreciation method. Using this method, the expenses before depreciation are always greater than the expenses after depreciation. No matter which specific method is adopted, many factors that affect the operating cost of fixed assets in actual use are considered, which just makes up for the defects of the straight-line method. Its advantages are as follows: (1) Considering the influence of the actual use efficiency or function reduction of fixed assets on the later period of the enterprise. (2) due to the large production capacity of fixed assets in the early stage, many benefits have been achieved, and the accelerated depreciation method has been adopted to make the income-expense ratio appropriate. Today, with the rapid development of science and technology, the use and renewal cycle of fixed assets is obviously shortened. Using accelerated depreciation method can reduce this intangible loss, update and transform fixed assets in time and improve labor productivity.
However, enterprises should consider two points when choosing accelerated depreciation method: first, it can promote the renewal of fixed assets, stimulate technological progress and improve investment efficiency; Second, after the accelerated depreciation method is adopted, due to the large operating expenses in the early stage, the operating profit is reduced, which affects the national fiscal revenue. Therefore, it is suitable for efficient enterprises.
Three, the introduction of foreign (American) fixed assets depreciation method
There are many depreciation methods of fixed assets currently used abroad, which play an important role in economic activities. There are mainly the following depreciation methods: straight-line method, double declining balance method, decreasing method, total depreciation method of service life, annuity method, sinking fund method and so on. If the relationship between annual depreciation and service life is divided into three basic depreciation modes, namely, balanced depreciation mode, decreasing depreciation mode and increasing depreciation mode.
3. 1, balanced depreciation mode
Balanced depreciation mode is a depreciation method with equal annual depreciation, such as straight-line method and annuity depreciation method. Take the straight line method as an example to illustrate. The calculation formula of the straight line method is: dt = (c-s)/n.
In which: dt-depreciation amount in the t year;
C- original value of fixed assets;
S-estimated residual value; N-service life.
3.2. Decreasing depreciation mode
Decreasing depreciation mode is a depreciation method in which the annual depreciation decreases year by year. Such as law decreasing method, double equilibrium decreasing method and so on.
Taking the law of diminishing returns as an example, the formula for calculating depreciation is dt = Bt-1* r.
R= 1-n* (signal to noise ratio) 1/2.
In which: dt-annual depreciation rate;
R- depreciation percentage;
Bt- 1- initial net value of fixed assets;
S- fixed residual value;
C- original value of fixed assets.
3.3. Incremental depreciation mode
Incremental depreciation mode is a depreciation method in which the annual depreciation amount increases year by year. Such as sinking fund method, which is a method to consider the interest factor in foreign depreciation calculation methods.
The formula is Dt=R( 1+i)t- 1.
R=(C-S)/Sni
In which: dt- annual depreciation;
C- original value of fixed assets;
S-estimated residual value;
R- annual withdrawal fund;
Sni-the final value coefficient of annuity;
I- interest rate (10%).
The United States mainly relies on the following three:
(1) Market depreciation
This is that the market value of machines decreases with time. If 65,438+0 loading and unloading trucks were purchased for operation with $65,438+005,000 four years ago and sold in the open market for $40,000, the market depreciation for these four years will be $65,000.
(2) Book depreciation
This is a recognized accounting principle, which requires that the amount subtracted from the purchase value of production funds be recognized as the value that has been "used" in business. If we consider that the loading and unloading truck can work for five years, and then it is worthless, we will depreciate the equipment to $265,438+$0,000 for five years, which is a cost of truck operation.
(3) Tax depreciation
This is the amount that the tax system allows to be deducted when calculating taxable income. Tax depreciation recognizes the loss of production funds as the loss of operating costs. If the tax system allows the loading and unloading trucks to depreciate at a straight line rate to zero within seven years, if the trucks are retained and used to generate income, the taxable income can be reduced by15,000 USD every year in the next seven years.
These three forms of depreciation are different, but there is a clear and unchangeable law-market depreciation is the only long-term effective. Book depreciation and tax depreciation are only to meet accounting habits and annual tax estimates. They are necessary to determine the depreciation expense in any year, but when the machine is sold and the actual loss value is known, it should be adjusted to be equal to the market depreciation. Some people think this kind of profit is a good thing. Some people think that the budget of equipment maintenance cost is increased, the operating cost is increased, and the bidding competitiveness is reduced. Like book depreciation, what makes sense is market depreciation-the actual loss of value.
Four. Comparative example of depreciation methods of fixed assets
4. 1. There is a piece of equipment with 65,438+10,000 yuan, the estimated net salvage rate is 5%, and the estimated service life is 10 year.
(1) According to China's policy, what is the annual depreciation?
(2) According to the depreciation policies in Europe and America, what is the annual depreciation?
(3) Calculate the annual depreciation amount year by year according to the double declining balance method and the total number of years method.
(4) Analyze and compare several depreciation methods, and point out which one is the most favorable. Why?
4.2 Solution: (Calculated according to different Chinese and American algorithms)
(1) According to the above calculation method of annual depreciation, we can get:
Annual depreciation amount = purchase price X( 1- residual rate)/depreciation period, that is:
= 10000*( 1-5%)/ 10
=9500
(2) According to the depreciation methods of European and American countries, we can get:
Annual depreciation amount = purchase value/depreciation period
= 100000/ 10
= 10000
(3) Double declining balance method
The depreciation amount of each year is shown in the following table:
Annual depreciation rate (%) depreciation base depreciation amount net book value
1 20% 100000 20000 80000
2 20% 80000 16000 64000
3 20% 64000 12800 5 1200
4 20% 5 1200 10240 40960
5 20% 40960 8 192 38 182
6 20% 32768 6554 262 14
7 20% 262 14 5243 2097 1
8 20% 2097 1 4 194 16777
9 50% 16777 8388.5 8388.5
10 50% 16777 8388.5 0
(4) Total years method
Depreciation base is 100000 yuan. According to the calculation, the annual depreciation amount is shown in the following table:
Use annual depreciation rate (%) depreciation amount accumulated depreciation amount depreciation value
1 18. 18% 18 182 18 182 8 18 18
2 16.36% 16364 34546 65454
3 14.55% 14545 4909 1 50909
4 12.73% 12727 6 18 18 38 182
5 10.9 1% 10909 72727 27273
6 9.09% 909 1 8 18 18 18 182
7 7.27% 7273 8909 1 10909
8 5.45% 5455 94546 5454
9 3.64% 3636 98 182 18 18
10 1.82% 18 18 100000 0
Verb (abbreviation of verb) Suggestions on Perfecting Depreciation of Fixed Assets
All the above depreciation methods are arbitrary, and the data they are based on, such as cash flow or net income, are quite difficult to measure. Therefore, depreciation methods need to be constantly updated and improved. Options that can be considered are:
(1) The value of the remaining assets is measured by the market price at the end of each period, and there is no distribution method;
(2) Replace the income statement with cash flow statement and capital flow statement to avoid depreciation distribution;
(3) Pay attention to the use of predictable unified depreciation method, regardless of its logic;
(4) Try to adopt a compromise distribution method.
In essence, depreciation is also a kind of expense, but this kind of expense has not paid real monetary funds during the accrual period, and this kind of expense has already occurred in the early stage, and the income of this kind of expense is realized within the effective use period after the assets are put into use. Depreciation needs to be accrued from accrual basis principle or income-expense ratio principle. Enterprises should choose depreciation methods reasonably according to the applicable conditions of various depreciation methods.
Abstract of intransitive verbs
The depreciation method of fixed assets can be analyzed from different angles, but no matter which method, as long as it can ensure the scientific and clear reflection of the use of fixed assets, enterprises can also manage fixed assets scientifically and extract depreciation accurately, which is reasonable and scientific. I put forward the above depreciation method of fixed assets from the perspective of comparative analysis. On the one hand, it can accurately describe the use of fixed assets, on the other hand, it can also accumulate enough funds for enterprise reproduction and prepare for the upgrading of fixed assets. It is believed that the comparative choice of depreciation methods of fixed assets can bring great development to small and medium-sized enterprises, thus making the economy of the motherland more prosperous.