Objectively speaking, the depreciation period depends on the useful lives of fixed assets. Because life itself is an experience of the expected value of depreciation makes life a lot of man-made elements to accommodate for a reasonable plan to provide the possibility of tax avoidance. Shorten the depreciation period is conducive to accelerated cost recovery, enabling the latter part of the costs forward, so that after the occurrence of pre-transfer accounting profit. In the case of a stable tax rates, income tax deferred pay, equivalent to an interest-free loan made to the state.
Several commonly used method of calculating depreciation on the income tax impact of
1. Life France
Life method is based on the original value of fixed assets less estimated residual value, according to the average expected life span of a method of depreciation. Years of useful life of France also known as line averaging method, straight-line method, it balanced the use of depreciation during the various periods. Thus, this method of depreciation calculated by the amount of use in each year or month is equal. Its calculation formula is:
Fixed annual amount of depreciation = (original value - estimated residual value + is expected to clean-up costs) / estimated useful life
A certain period of accrued depreciation of fixed assets and the ratio of the original value of fixed assets is called the rate of depreciation of fixed assets. It reflects the loss of value of fixed assets during a certain extent, its formula is as follows:
= Annual depreciation rate of fixed assets, annual depreciation of fixed assets / fixed assets × 100%
Annual depreciation rate of fixed assets = (1 - ratio of net salvage value) / depreciable life of × 100%
Life of the law is characterized by the same amount of depreciation each year, but the drawback is that with the use of fixed assets, repairs more and more to the use of assets and post-repair depreciation of fixed assets purchased will be much higher than the first few years, thus affecting the amount of corporate income tax and profits.
2. Production method
Production method is the assumption that the service potential of fixed assets will be diminished with the use of the extent, therefore, the average number of years the law would be effective use of fixed assets useful life can be changed to use the assets of the number of products or services. Its calculation formula is:
The depreciation cost per unit of product = (+ original value of fixed assets is expected to clean-up costs - estimated residual value) / accrued the estimated total depreciable assets
= Annual depreciation of fixed assets that year yield × unit of depreciation charges
Production method can be more objective in reflecting the use of fixed assets during the period of depreciation and the cost ratio.
3. Working hours law
This approach is similar with the production method, but will produce the number of products or services can be changed to number of hours worked, their formula is:
Use of hourly depreciation cost = (fixed assets + is expected to clean-up costs - estimated residual value) / estimated accrued depreciation of durable assets, the total number of hours
Annual depreciation of fixed assets = fixed assets, the year × number of hours worked per hour depreciation charges using
Hours of work, like law with the production method can be more objective in reflecting the use of fixed assets during the period of depreciation and the cost ratio.
4. Accelerated depreciation method
Accelerated depreciation method is also called diminishing depreciation cost method, saying that each provision for fixed assets depreciation charges in the use of early to mention much less in the later raised to a relatively faster rate of depreciation. There are several methods of accelerated depreciation, the main well-established law and the sum of the number of double declining balance method.
(1) The number of years of summation
Also known as the total length of Law, is the original value of fixed assets, after subtracting the net rate of the net residual value to a diminishing fraction of calculating the annual depreciation. The decreasing fraction of molecular representatives can still use the number of years of fixed assets, the denominator the number of delegates the sum of the number of years. Its calculation formula is:
The annual depreciation rate = (depreciable life - have been useful life) / [depreciable life × (depreciation life +1) ÷ 2] × 100%
Annual depreciation = (original value of fixed assets - estimated residual value) × the annual depreciation rate
(2) double declining balance method
Double declining balance method is the residual value of fixed assets without regard to circumstances, each opening of fixed assets according to the book balance and the double straight-line depreciation rate of fixed assets depreciation method. Its calculation formula is:
Annual depreciation rate = 2 / depreciable life of × 100%
On the depreciation rate = annual depreciation rate ÷ 12
= Annual depreciation of fixed assets book value × the annual depreciation rate
The implementation of double-declining balance method depreciation of fixed assets, depreciation of fixed assets should be in his life before the two years, the average net fixed assets will be amortized.
Accelerated depreciation method, the cost of fixed assets to accelerate the use of time for compensation. But this does not mean that one or more to mention the depreciation of fixed assets scrapped in advance, because no matter what method used to mention depreciation of all fixed assets used during the run, the total amount of depreciation remain unchanged, therefore, the total net proceeds of the enterprise is not affected. However, each particular year, due to accelerated depreciation method, so that the amount of accrued depreciation in fixed assets, amortization of the use of more pre-and post-amortization less bound to the enterprise net profit pre-and post-more relatively small.
Different methods of depreciation tax companies will have different tax effects. First of all, different depreciation methods for fixed value of compensation and compensation for time will result in a different morning and evening. Second, different depreciation methods result in an annual amount of depreciation extracted directly affect the amount of corporate profits by the extent of write-downs, resulting in a progressive tax regime, tax amount and proportion of differences in tax liability under the tax system borne of the time difference. Enterprises are used to compare and analyze these differences in order to choose the best depreciation method to achieve the best tax benefits.
Tax burden from the enterprise point of view, in the progressive tax rates, the length of the averaging method used to make the lightest tax burden the responsibility of enterprises, natural wear and tear method (ie, production method and working hours law) followed by rapid depreciation method the worst. This is because the average length of the averaging method to make depreciation apportioned costs, and effectively curbed the profit in a year is too concentrated, for the higher tax rate; while other years profits have plummeted. Therefore, the tax amount and the tax burden is relatively small, relatively light. On the contrary, accelerated depreciation method profits concentrated in the later years will inevitably lead to higher tax rates for several years after the tax commitment. However, in the case of proportional tax rates, accelerated depreciation method is more beneficial to the enterprise. Accelerated depreciation method because it allows the use of fixed costs in the period to speed up compensation, companies pre-profits less tax less; the latter part of profits and more tax more, and thus play the role of deferred tax.
Several commonly used method of calculating depreciation on the income tax impact of
1. Life France
Life method is based on the original value of fixed assets less estimated residual value, according to the average expected life span of a method of depreciation. Years of useful life of France also known as line averaging method, straight-line method, it balanced the use of depreciation during the various periods. Thus, this method of depreciation calculated by the amount of use in each year or month is equal. Its calculation formula is:
Fixed annual amount of depreciation = (original value - estimated residual value + is expected to clean-up costs) / estimated useful life
A certain period of accrued depreciation of fixed assets and the ratio of the original value of fixed assets is called the rate of depreciation of fixed assets. It reflects the loss of value of fixed assets during a certain extent, its formula is as follows:
= Annual depreciation rate of fixed assets, annual depreciation of fixed assets / fixed assets × 100%
Annual depreciation rate of fixed assets = (1 - ratio of net salvage value) / depreciable life of × 100%
Life of the law is characterized by the same amount of depreciation each year, but the drawback is that with the use of fixed assets, repairs more and more to the use of assets and post-repair depreciation of fixed assets purchased will be much higher than the first few years, thus affecting the amount of corporate income tax and profits.
2. Production method
Production method is the assumption that the service potential of fixed assets will be diminished with the use of the extent, therefore, the average number of years the law would be effective use of fixed assets useful life can be changed to use the assets of the number of products or services. Its calculation formula is:
The depreciation cost per unit of product = (+ original value of fixed assets is expected to clean-up costs - estimated residual value) / accrued the estimated total depreciable assets
= Annual depreciation of fixed assets that year yield × unit of depreciation charges
Production method can be more objective in reflecting the use of fixed assets during the period of depreciation and the cost ratio.
3. Working hours law
This approach is similar with the production method, but will produce the number of products or services can be changed to number of hours worked, their formula is:
Use of hourly depreciation cost = (fixed assets + is expected to clean-up costs - estimated residual value) / estimated accrued depreciation of durable assets, the total number of hours
Annual depreciation of fixed assets = fixed assets, the year × number of hours worked per hour depreciation charges using
Hours of work, like law with the production method can be more objective in reflecting the use of fixed assets during the period of depreciation and the cost ratio.
4. Accelerated depreciation method
Accelerated depreciation method is also called diminishing depreciation cost method, saying that each provision for fixed assets depreciation charges in the use of early to mention much less in the later raised to a relatively faster rate of depreciation. There are several methods of accelerated depreciation, the main well-established law and the sum of the number of double declining balance method.
(1) The number of years of summation
Also known as the total length of Law, is the original value of fixed assets, after subtracting the net rate of the net residual value to a diminishing fraction of calculating the annual depreciation. The decreasing fraction of molecular representatives can still use the number of years of fixed assets, the denominator the number of delegates the sum of the number of years. Its calculation formula is:
The annual depreciation rate = (depreciable life - have been useful life) / [depreciable life × (depreciation life +1) ÷ 2] × 100%
Annual depreciation = (original value of fixed assets - estimated residual value) × the annual depreciation rate
(2) double declining balance method
Double declining balance method is the residual value of fixed assets without regard to circumstances, each opening of fixed assets according to the book balance and the double straight-line depreciation rate of fixed assets depreciation method. Its calculation formula is:
Annual depreciation rate = 2 / depreciable life of × 100%
On the depreciation rate = annual depreciation rate ÷ 12
= Annual depreciation of fixed assets book value × the annual depreciation rate
The implementation of double-declining balance method depreciation of fixed assets, depreciation of fixed assets should be in his life before the two years, the average net fixed assets will be amortized.
Accelerated depreciation method, the cost of fixed assets to accelerate the use of time for compensation. But this does not mean that one or more to mention the depreciation of fixed assets scrapped in advance, because no matter what method used to mention depreciation of all fixed assets used during the run, the total amount of depreciation remain unchanged, therefore, the total net proceeds of the enterprise is not affected. However, each particular year, due to accelerated depreciation method, so that the amount of accrued depreciation in fixed assets, amortization of the use of more pre-and post-amortization less bound to the enterprise net profit pre-and post-more relatively small.
Different methods of depreciation tax companies will have different tax effects. First of all, different depreciation methods for fixed value of compensation and compensation for time will result in a different morning and evening. Second, different depreciation methods result in an annual amount of depreciation extracted directly affect the amount of corporate profits by the extent of write-downs, resulting in a progressive tax regime, tax amount and proportion of differences in tax liability under the tax system borne of the time difference. Enterprises are used to compare and analyze these differences in order to choose the best depreciation method to achieve the best tax benefits.
Tax burden from the enterprise point of view, in the progressive tax rates, the length of the averaging method used to make the lightest tax burden the responsibility of enterprises, natural wear and tear method (ie, production method and working hours law) followed by rapid depreciation method the worst. This is because the average length of the averaging method to make depreciation apportioned costs, and effectively curbed the profit in a year is too concentrated, for the higher tax rate; while other years profits have plummeted. Therefore, the tax amount and the tax burden is relatively small, relatively light. On the contrary, accelerated depreciation method profits concentrated in the later years will inevitably lead to higher tax rates for several years after the tax commitment. However, in the case of proportional tax rates, accelerated depreciation method is more beneficial to the enterprise. Accelerated depreciation method because it allows the use of fixed costs in the period to speed up compensation, companies pre-profits less tax less; the latter part of profits and more tax more, and thus play the role of deferred tax.