Differences in Accounting

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Differences in Accounting

• Topic
• Fixed Assets

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Overview Fixed Assets
Depreciation straight-line method or declining-balance method. Low value asset 400 / item, can be written down in the first year.
Depreciation By the straight-line method or reducing balance method. Low value asset DKK 6,700 (ca. 900 ), can be written down in the first year.
Depreciation no specific requirements in tax law and vountary instruction. Low value asset depends on enterprise.
By the direct, straight-line method or reducing balance method. Low value asset 410 / item, activation on a special account, are written down in the first year.
Depreciation straight-line method or reducing balance method. Low value asset 850 , can be written down in the first year.
Depreciation only straight-line method Low value asset 100.000 HUF (ca.395 ), can be written down in the first year.
Depreciation straight-line method or reducing balance method Low value asset depends on enterprise
IFRS IAS 16. Property, Plant and Equipment.
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Details Austria

• Depreciation straight-line method, sometimes
  reducing balance method
• The minimum expected useful life is mostly given
  by law, a change of useful life is impossible.
• Depreciation starts when the asset is ready for
  usage and is calculated for half a year.
• Low value asset 400/item
• Must be activiated on a special account and can
  be written down in the first year.
• Treatment of intangible assets and the goodwill
• Are written down within 15 years
• Treatment of a hidden reserve if you sell a fixed
  asset (market price gt book value)?
• Profit (or loss) must be added (deducted) to
  taxable income.
• Special instructions for private companies

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Details Denmark

• Depreciation By the direct, straight-line
  method.
• Calculation (cost scrap value)/ lifetime
• The expected useful life No rules according to
  law of accounting realistic approach.
• Depreciation starts with purchase date
• Low value asset 11000 Dkr. (ca. 1400) /item
• Must be activated on a special account and can be
  written down in the first year.
• Treatment of intangible assets and the goodwill
• Are written down by straight line method.
• Treatment of a hidden reserve if you sell a fixed
  asset (market price gt book value)?
• Profit is added to income.

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Details Estonia

• Depreciation There are no specific requirements
  in tax law and is a voluntary instruction
  Revaluation is prohibited by Estonian GAAP
• No lawful, minimum expected useful life, and it
  is legal to change the expected useful life.
• Depreciation starts when the asset is ready for
  usage and is calculated by month (small companies
  by year)
• Low value asset the limit depends on the size of
  the enterprise
• low-cost assets are written down in the moment of
  using them
• Treatment of intangible assets and the goodwill
• Intangible assets are amortised during useful
  life.
• Goodwill is not amortised, but an impairment test
  for determining the value shall be performed at
  each balance sheet date and if their recoverable
  amount is smaller than their carrying amount,
  their carrying amount shall be written down
• Treatment of a hidden reserve if you sell a fixed
  asset (market price gt book value)?
• If the fixed asset is sold the gain or loss is
  showed immediately

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Details Estonia 1

• Which amount is the basis for the
  depreciation?In Estonia the acquisition cost is.
  It consists of purchase price and any costs
  directly attributable to its acquisition.
  Directly attributable costs are those that are
  necessary for bringing the asset to its operating
  condition and location.
• If an item of property, plant and equipment
  consists of separate identifiable parts with
  different useful lives, these parts shall be
  recognised initially as separate items of
  property, plant and equipment and separate
  depreciation rates shall be assigned to them
  depending on their useful lives.
• How do you calculate the cost of manufacture?
• a) designing fees and other similar fees of an
  asset
• b) wages and salaries and related taxes paid to
  the employees in connection with the construction
  of an asset
• c)materials and tools used in the construction of
  an asset (incl. depreciation of non-current
  assets used in the construction)

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Details Germany

• Depreciation By the direct, straight-line method
  or reducing balance method, a one time change to
  straight-line method is possible.
• The expected useful life is sometimes given by
  law, a change must be well grounded.
• Depreciation starts when the asset is ready for
  usage and is calculated by on a monthly basis.
• Low value asset 410/item
• Must be activated on a special account and can be
  written down in the first year.
• Treatment of intangible assets and the goodwill
• Are written down within 15 years
• Treatment of a hidden reserve if you sell a fixed
  asset (market price gt book value)?
• Special instructions for immovables

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Details Finland 1

• Depreciation By the straight-line method or
  declining-balance method.
• Calculation straight-line (cost scrap value)/
  lifetime
• Reducing balance Cost x depreciation rate
• The expected useful life No rules according to
  law of accounting realistic approach.
• a change must be well grounded. Additional
  information must be given.
• Depreciation starts when the asset is ready for
  usage and is calculated on monthly basis.
• Low value asset 850,- or below, it can be
  deducted from the taxable income.
• Another limit is for the equipments, machines
  etc., which have expected useful life 3 years or
  less.
• Treatment of intangible assets and the goodwill
• Are written down by Straight-line depreciation in
  ten years
• Treatment of a hidden reserve if you sell a fixed
  asset (market price gt book value)?
• We book the difference between market price and
  book value to a special account .

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Details Finland 2

• What about lawful, minimum expected useful life?
  Do you have lawful, minimum expected useful
  life?No. But according to a Good Accounting
  Practise there are common rules, which are
  normally used. E.g. we have suggestions for
  expected useful life, they arent obligatory.
  Accounting Bureau in Finland has given these
  suggestions for expected useful life.
• Is it legal to change the expected useful
  life?Its possible to change it, if youve a
  good reason. Additional information must be
  given

cars 4 years
lorries 4 years
buildings 20 40 years
office furniture 3 6 years
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Details Hungary

• Depreciation By the straight-line method
• The expected useful life No rules according to
  material assets realistic approach
• immaterial assets please look at Treatment of
  intangible assets and the goodwill
• Its possible to change useful lifetime if
  substantial change occurred in the following
  cases
• in service life of the plant property
• in the value of the given plant
• in the due residual value
• Depreciation starts in the following month.
• Low value asset 100.000 HUF (ca.395 ), can be
  written down in the first year.

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Details Hungary 1

• Treatment of intangible assets and the goodwill
  (periods are given by law)
• Activation value of the establishment and
  restructuring 1-5 years
• activation value of the development 1-5 years
• Business or goodwill at least 5 years
• Treatment of a hidden reserve if you sell a fixed
  asset (market price gt book value)?
• Its not regulated and must be shown in the notes
  of the accounts.

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Purchase of Assets in UK

• Assets and Expenses

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What is an asset ?
An asset is usually defined as premises,
machinery or equipment that is owned by the
business, used for the purpose of carrying out
the business, and likely to remain in use by the
business for a period of time. Assets are
recorded in an asset register. Assets are
depreciated according a straight line method or a
reducing balance method. The materiality concept
should be used to decide if an item represents
capital or revenue expenditure. In an office, a
computer would be regarded as an asset, but a
stapler or paper bin would probably be regarded
as revenue expenditure.
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Capital and Revenue Expenditure
The purchase of an asset is capital expenditure.
The purchase of smaller items is treated as
revenue expenditure. For example A computer and
printer are purchased by a small business. These
are treated as capital expenditure. Any delivery
cost and installation cost (such as connecting to
a network) are treated as capital
expenditure. The cost of printer ink, paper and
computer discs would be treated as revenue
expenditure.
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Purchase of a vehicle
The following are capital expenditure Net cost
of vehicle Number plates Delivery costs The
following are revenue expenditure. Fuel Vehicle
excise duty / road fund licence Insurance Servicin
g
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Depreciation
The provision for depreciation is calculated each
year for nearly all fixed assets. The provision
is recorded as a credit in the Accumulated
Depreciation Account (a balance sheet account)
and as a debit in the Depreciation Expense
Account (an expense account). The method by which
depreciation is calculated for each asset is
determined when the asset is first purchased.
Under normal circumstances this method of
depreciation should not change.
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Details IFRS

• What about lawful, minimum expected useful
  life?IFRS does not have
• Is it legal to change the expected useful life?
  In accordance with IAS 16 The useful life of an
  asset and the depreciation method applied must be
  reviewed at least at each annual reporting date.
  A change in the useful life or depreciation
  method is accounted for prospectively as a change
  in accounting estimate.
• Which amount is the basis for the
  depreciation?In accordance with IAS 16
  Property, plant and equipment is recognised
  initially at cost. Cost includes all expenditure
  directly attributable to bringing the asset to
  the location and working condition for its
  intended use. Property, plant and equipment is
  depreciated over its useful life. An assets
  depreciable amount is its cost less its residual
  value. An item of property, plant and equipment
  is depreciated even if it is idle. However, an
  item of property, plant and equipment that is
  held for sale is not depreciated. When an item of
  property, plant and equipment comprises
  individual components for which different
  depreciation methods or rates are appropriate,
  each component is depreciated separately.

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Details IFRS 1

• When does depreciation start?In accordance with
  IAS 16 Subsequent to initial recognition
  property, plant and equipment is depreciated on a
  systematic basis over its useful life. The
  depreciation starts when the asset is available
  for use (i.e., when it is in the location and
  conditions necessary for it to be capable of
  operating in the manner intended by management).
• How do you treat the intangible assets and the
  goodwill? In accordance with IAS 38 Intangible
  assets with finite useful lives are amortised
  over their expected useful lives.
• The following costs cannot be capitalised as
  intangible assets internally generated goodwill,
  internal research costs, costs to develop
  customer lists, start-up costs, and expenditure
  incurred on training, advertising and promotional
  activities or on relocation or reorganisation.
• The method of amortisation of an intangible asset
  with finite useful life should reflect the
  pattern of consumption of the economic benefits.
  The method used should be reviewed at least at
  each annual reporting date and a change in the
  method applied should be accounted for
  prospectively as a change in estimate. The
  amortisation of intangible assets a finite useful
  life begins when the asset is available for use
  (i.e., when it is in the location and conditions
  necessary for it to be capable of operating in
  the manner intended by mananagement).
• Acquired goodwill and other intangible assets
  with indefinite useful lives are not amortised
  but must be tested for impairment at least
  annually.