DepreciationGuru is always looking to add to the depth of information here. If you have questions on any of the existing topics, please feel free to add them to the comments and one of our moderators or other visitors can post a reply.
If you do not find any information on a particular fixed asset or depreciation topic, then please send us an email and we will do our best to research an answer. We can then post the new topic for others to read and add comments.
Hello Casey,
Financial Book (accounting) typically does it one of two ways. Federal tax (IRS) will do it another:
· Financial book: First of two ways: If the improvement is subject to the terms of a lease agreement were your company is the lessee and the improvement is made under or pursuant to the lease by the lessee. Then the leasehold improvement will be depreciated of the remaining life of the lease as of the service date. Therefore, when you first move in and the lease is 10 years, you will depreciate the initial LHI cost over 10 years. Now, five years later when additional LHI are done, the expense would be depreciated over the remaining five years of the lease.
While, we do not see the second way to depreciate an LHI for Financial book very often. The second method for Financial book would be to depreciate the LHI over 39 or 40 years and then write off the remaining net book value at the termination of the lease. Any additional LHI done during the term of the lease would be depreciated over the 39 or 40 year period as the original LHI was treated
· Federal tax (IRS) is based upon current tax law and is depreciated over 39 or 15 years for commercial property. Qualified Leasehold Improvements, which meet the specific requirements of the current tax law would be depreciated over 15 years. “Ordinary” leasehold improvements that do not meet the specific requirements of “Qualified Leasehold Improvements” under the current law would be depreciated over 39 years.
Additionally, the Qualified LHI is expensed over 15 years with straight line and a half year first year convention. The Non-Qualified LHI is expensed over the 39 year period with straight line and a mid month first year convention.
Hello- I’m attempting to do some research regarding the depreciation of leasehold improvements. We are relocating at the end of 2013 and for the next 8 months the space will be modified to fit our business. When should the amortization of the leasehold improvements begin?
When a company spends money to acquire goods and/or services, these goods and/or services are either used up in the current period (year) or used over a period of years.
Therefore, goods and/or services that are consumed in less than the current period (year) are expensed. Goods and/or services that are used for a period of more than one year at capitalized. Although inventory and prepaid expenses are assets that can benefit future periods, the term Capital Assets generally are long-lived assets that provide benefit over multiple years.
Capital assets are depreciated over their expected useful life.
Hi Sir,
Greetings!!!
Currently i am working on Fixed Asset module and defining the policies and prcedures for this module.
I have some concerns regarding the following point:
1-On which cost i should consider as a “Fixed Assets” or “Current Asset” OR “Normal Expense”????
*As per my understadings, Current Assets are those with usefulness within current Fianancial Year or with less than one year useful life just like inventory items.
we sold a rental property in 2012 for 65K. We bought it in 2004 for 128k Do we take depreciation or just report the loss on 4797?
We here at depreciationguru.com have no knowledge of a depreciation method with the abbreviation WDV. Abbreviations such as SL and DDB are known to us.
Changing an existing method to straight line is allowed in GAAP and we also believe that it is allowed in IFRS under certain conditions.
Unfortunately, our working knowledge of GAAP is far more extensive than with IFRS. But since both GAAP and IFRS seem to be very similar, we believe that you would not need to do a recalculation back to the original in service date because of a switch to straight line. In GAAP, you make the switch to straight line and depreciate the net book value over the remaining life, or a new shorter remaining life, or one that is longer. This is a function known as “Remaining Life”.
If I understand the fourth point correctly, my answer is yes.
Hi,
Please suggest on below scenario:
Business was following WDV method of depreciation on asset. From 01-Jan-2012, Business decided to change the method of depreciation to Straight line.
Is it mandatory under IFRS to recalculate the depreciation from starting of period on asset and pass the adjustment entry.
Is is allowed to depreciate the NBV of asset on december-2011 on straight line method with assumption that asset is going to be useful for next 4 years or so.
Please reply asap..
Hello Dave,
Your questions appear to be based upon the assumption that an existing LHI asset being depreciated over a 15 year period will be converted or changed to a 39 year recovery period starting in 2013. If we have assumed correctly, fear not. IRS depreciation rules are based on current law/regulation in effect as of the placed in service date of the asset. When those laws or regulations change in the future they only affect assets placed in service as of or beyond the effective date of the new law or regulations. So, to reiterate, if the service date of the asset is previous to the change in law, there is no affect. Only assets with a service date that is on or after the implementation of the new law or regulation are affected.
Hope that this answers your question. If not, please let us know.
Depreciation Guru:
In the event that a renewal of the 2004 Tax Laws does not transpire, and as such the return to the historical application of depreciation on Leasehold Improvements to a 39-yr useful life from the present, accelerated application, of 15-yr useful life-
For a retailer that primarily operates out of leased space- what might the resulting impact be on their balance sheet’s Property, Plant, & Equipment, “PPE”
1. What would the resulting outcome be in the event that the law is not renewed or “upheld” and an immediate return to the historical useful life is mandated?
2. How would this impact the value of PPE?
3. Would PPE have a potential to be booked below market value?
4. Would any sale of PPE result in a “false” gain or, Capital Gains resulting in taxation implications?
For assets placed in service between September 9, 2010 and December 31, 2011, a business is allowed to expense 100% of the cost of an asset used for business purposes. This 100% deduction is allowed under code section 168(k) bonus depreciation allowance. Therefore, the video equipment that cost $19,188 and is used for business 45% of the time has an adjusted basis for tax purposes is $8635. You are allowed a 100% bonus depreciation deduction of $8635 in the 2011 tax year.
I purchased video recording equipment that I use 45% for business (Asset class 57.0). The equipment cost $19,188 when purchased and placed in service on February 20, 2011. What is the 2011 depreciation. Assume the half-year convention
when to switch to straight line depreciation in 200 declinning balance in half year convention…..
Hi!
An asset is revalued at USD 125,000 on 31st Dec, 2011. Before revaluation the value of the asset was USD 100,000 and WDV USD 80,000. Now, my question is how the depreciation will be charged for the additionl amount of USD 25,000? If the remaining life of the asset is 4 years, should the additional value to be depreciated in 4 years? Can you please explain this from IFRS angle?
Regarding the in service dates, what should be the in service dates when capitalizing assets if the customer choose not to use the assets temporarily for now even though the assets are ready to use. For example, the assets are dilivered and ready to use in Jan. 2012, but they started to use that in late March?
Does IFRS allow full month depreciation?
Can I use MACRS to depreciate real property for federal tax purposes and use the straight line method to depreciate the same property for New Mexico state tax purposes?
there is a company which produces edible oil products. Due to low demand the plant is not working on normal capacity and some time the plant is shut down. So they are charging depreciation based on usage method wherein they have the information of expected total production volume on the entire life and depreciation is charged based on actual production in proprtion to total expected production. Is it correct under IFRS? Please advice.
many thanks and regards
IAS 16 says critical spare parts should be capitalized as property, plant, and equipment. We have to have very expensive spare parts on hand that require a year lead time to get to our facility. Do they get depreciated even though they are not in use?
Dear Sir,
How to Caluculate In IFRS Deprecation & Diffreance B/w IAS & IFRS
Please provide above Comments
Thanking you,
Shivakumar
Can I use 15year S/L depreciation for a HAVC unit on the buiding I lease? The building is older than 3 years. Thanks for your help.
Sold a rental house dec.2008 on a land contract. Repossed the house in august 2010. I got pub. 537 from irs and figured my new basis and the gain . The instructions do not tell you where on form 4797 you report the repossession, and the gain.
I want to confirm wether it is mandatry to maintain seprate accumulated depreciation account/ledger or we can post depreciation entries on main asset cost account.
Thank You
Yasir Masood
Accounts Officer
Hello,
What are the specific guidelines on fixed assets depreciation on which IFRS differes from normal rules followed earlier in general. Please send me some writeup these new rules/guidelines for my knowledge.
Thanks in advance,
Kishor Shethia
SYSTIME Computers (India)
Hi,
suppose that you have an asset which has 10 years useful life. you bought that at the value of 110.000$ and 10.000$ residual value. By ifrs and SL method, we depreciate 10.000$ / 12 monthly. i want to know, if you make a renovation(20.000$) for that asset after 15 months later than you bought it, what will the new monthly depreciation?
I know on form 4797 section III is the place when you sell your business equipment (year 2000 semi truck) line 19 thru 24 then this is where I am not sure dont I carry the amount down to line 30? then where on the first page do I fill out? this is very confusing
What is the journal entry to record the 50% bonus depreciation on an asset that cost $1,000,000? Does it affect the accumulated depreciation balance?