Romanian standard depreciation method description
This document is an appendix to the documentation on the setup of Depreciation methods.
In standard, Sage X3 comes with a number of depreciation methods.
Some are associated with a given legislation, while others are common to all legislations.
This document describes the calculation principles of the depreciation methods associated with the Romanian legislation.
The other methods are described in appendix documentations, which can be accessed from the documentation on the depreciation methods common to all legislations.
RL - Romanian straight-line
This is a straight-line depreciation method used in Romania.
All types of fixed assets are concerned: tangible, intangible and goodwill.
Depreciation origin
The depreciation always starts on the first day of the month that follows the start of service date (including if the start of service date is the 1st day of the month):
- In the depreciation method definition, the depreciation start date displayed has the value of the Start of service date, but the depreciation start date that will really be applied will be the first day of the month that follows the start of service.
- In creation, the depreciation start date is initialized by default with the start of service date. It is modifiable. The depreciation start date that will really be applied will be the first day of the month that follows the displayed date.
Once the asset is created, the depreciation start date and the purchase, posting and service start dates can no longer be modified.
Duration
The user can specify either the duration, or the rate.
If the duration is specified by the user, Sage X3 automatically determines the depreciation rate as well as the depreciation end date based on this duration. The rate is equal to: 1/duration.
When the rate is specified, the depreciation duration is determined from the entered rate but this duration is only displayed for information purposes: what is applied is the rate.
The duration is expressed in years and hundredths of years.
Example : 6,66 or 6,67 for a duration of 6 years 2/3.
Minimum duration: 1 year
Maximum duration: none
Rate
The rate can be specified by the user. It can have up to 6 decimals.
In this case, the depreciation duration is calculated for information purposes but it is the entered rate that is applied.
In the case when the depreciation rate is not specified by the user, Sage X3 will determine it as follows: 1/duration (without rounding); the calculated rate will be displayed with 6 decimals.
Depreciation end date
The depreciation end date is determined from the depreciation start date and the depreciation duration. It always corresponds to the last day of a month and it cannot be forced.
When an asset is disposed, the user can enter the actual disposal date but the depreciation is calculated for the complete disposal month: the depreciation end date will always be the last day of the asset disposal month.
Examples:
|
Issue date |
Depreciation end date |
|
1/1/2011 |
1/31/2011 |
|
2/5/2011 |
2/28/2011 |
|
6/30/2011 |
6/30/2011 |
Prorata temporis
Time is expressed in months.
Depreciation charges
The depreciation is calculated on the ex-tax receipt value of the asset.
If the rate has not been forced, it is determined from the duration: 1/depreciation duration
Annual depreciation = [Ex-tax base * (number of months in possession during the year, excluding the service start month) / 12 ] * rate.
Example of number of months in possession during the year (excluding the service start month)
|
Start of service date |
Number of months in possession |
|
1/15/2011 |
11. |
|
6/6/2011 |
6. |
|
10/1/2011 |
2. |
|
Depreciation end date |
Number of months in possession |
|
1/31/2011 |
1. |
|
6/30/2011 |
6. |
|
10/30/2011 |
10. |
Distribution of the fiscal year charge on the periods
If the fiscal year is divided into several periods, the fiscal year charge is distributed over these periods as follows:
Period Charge pc =
Fiscal year charge
*
[ Σ p1 to pc (Number of holding days in the period )
/
Σ p1 to pf (Number of holding days in the period ) ]
-
Depreciation total of previous periods
p1 to pc = from the 1st holding period in the fiscal year to the current period included (1)
p1 to pf = from the 1st holding period in the fiscal year to the last holding period in the fiscal year
(1) Unless the asset is disposed in the fiscal year before this current period or if it is completely depreciated in the fiscal year before this current period.
The prorata used is in months, so the depreciations by period will all be identical (for instance, if the period is monthly, the monthly depreciation will be the same for the 12 months of the fiscal period), with an exception concerning the rounding rules.
Impact of actions on the depreciation
Depreciation method change
The method change is authorized in the following cases:
- an exceptional event that affects the company status (Initial Public Offering, change of ownership, etc.),
- more reliable and detailed information is required,
- a legislation change.
The change is not authorized during the fiscal year, it will become effective on the first day of the next fiscal year. Indeed, companies are not authorized to reprocess historical data even if there has been an accounting error (for instance, a wrong depreciation method was chosen). In that case, the correction is calculated and it impacts:
- either the operating income if the error is not material,
- directly the results account if the error is material (for instance, the "117400 - Carry-forward coming from the correction of accounting errors" account of the Romanian Chart of Accounts).
Sale and disposal of an asset
The asset is always disposed at the accounting net value of the end of the current month.
Rules for the calculation of loss and profit: basic rules.
Revaluation
The assets can be revalued (to their actual value) only at the end of the fiscal year. The revaluation is calculated on the basis of the accounting net value of the fixed asset at the end of the fiscal year. The difference between the accounting net value at the fiscal year end and the revalued value is posted either in the revaluation reserves (for instance, the "10500 - Revaluation reserves" account from the Romanian Chart of Accounts), or in the results account (this depends on the previous revaluations and their results). The new depreciation is calculated (on the revalued value) from the 1st day of the next fiscal year.
Notes:
- The revaluation can only be performed by authorized experts.
- All the fixed assets of a class need to be revalued, not just one or several assets: "cherry-picking' is not permitted.
Impairment loss
Impairment loss is authorized and it must be carried out and posted on the last day of the fiscal year. Indeed, fixed assets must be presented in the financial reports at the costs on which the total depreciation and the impairment loss will be deduced. Therefore an impairment loss is authorized only when the current period is the last period of the fiscal year.
Any other action that can update the FY end accounting net value will be forbidden if no impairment loss cancellation is performed.
Stop/restart of depreciations
An action can be used to stop and later restart the depreciation of each plan of the Accounting and fiscal context and other plans, except the IAS/IFRS plan.
When the company decides to stop the depreciation of an asset, the stop is effective from the month following the stop date. The depreciation is calculated for the current period.
When it restarts, it is calculated from the current period on. Two possibilities are suggested:
- Restart: the depreciation duration and end date are conserved. The depreciation is calculated as a monthly residual straight-line depreciation.
- Restart extension: the depreciation end date is extended to the duration of the stop.
Examples
1st example
- Ex-tax receipt value: 10,000
- Residual value: 0.
- First use date 10/15/2011
- Depreciation start date: 11/1/2011
- Depreciation duration: 7 years --> Rate: 1/7
- Depreciation end date: 10/31/2018
|
Fiscal year |
Net depreciable value |
Fiscal year charge |
Fiscal year total |
|
1/1/2011 - 12/31/2011 |
10,000.00. |
238.10 (1) |
238.10. |
|
1/1/2012 - 12/31/2012 |
9,761.90. |
1,428.57 (2) |
1,666.67. |
|
1/1/2013 - 12/31/2013 |
8,333.33. |
1,428.57. |
3,095.24. |
|
1/1/2014 - 12/31/2014 |
6,904.76. |
1,428.57. |
4,523.81. |
|
1/1/2015 - 12/31/2015 |
5,476.19. |
1,428.57. |
5,952.38. |
|
1/1/2016 - 12/31/2016 |
4,047.62. |
1,428.57. |
7,380.95. |
|
1/1/2017 - 12/31/2017 |
2,619.05. |
1,428.57. |
8,809.52. |
|
1/1/2018 - 12/31/2018 |
1,190.48. |
1,190.48 (3) |
10,000.00. |
(1) 10 000,00 * (2 / 12) * 1/7 = 238,10 since the asset has been held for 2 months during this 1st fiscal year.
(2) 10 000,00 * (12 / 12) * 1/7 = 1 428,57 for the asset has been held for 12 months during this fiscal year.
(3) 10 000,00 * (10 / 12) * 1/7 = 1 190,48 for the asset has been held for 10 months during this fiscal year.
Distribution of the 2011 fiscal year charge
|
Period |
Due period |
Depreciation total |
Period charge |
|
11/1/2011 - 11/30/2011 |
1. |
|
119.05 (1) |
|
12/1/2011 - 12/31/2011 |
2. |
119.05. |
119.05 (2) |
|
Fiscal year 2011 total |
|
|
238.10. |
(1) 238,10 * 1 / 2 - 0 = 119,05
(2) 238,10 * 2 / 2 - 119,05 = 119,05
Distribution of the 2018 fiscal year charge
|
Period |
Due period |
Depreciation total |
Period charge |
|
1/1/2018 - 1/31/2018 |
1. |
|
119.05. |
|
2/1/2018 - 2/29/2018 |
2. |
119.05. |
119.05. |
|
3/3/2018 - 3/31/2018 |
3. |
238.10. |
119.04. |
|
4/1/2018 - 4/30/2018 |
4. |
357.14. |
119.05. |
|
5/1/2018 - 5/31/2018 |
5. |
476.19. |
119.05. |
|
6/1/2018 - 6/30/2018 |
6. |
595.24. |
119.05. |
|
7/1/2018 - 7/31/2018 |
7. |
714.29. |
119.05. |
|
8/1/2018 - 8/31/2018 |
8. |
833.34. |
119.04. |
|
9/1/2011 - 9/30/2011 |
9. |
952.38. |
119.05. |
|
10/1/2011 - 10/31/2011 |
10. |
1,071.43. |
119.05. |
|
Fiscal year 2018 total |
|
|
1,190.48. |
2nd example (disposal and sale)
- Ex-tax receipt value: 30,000.
- Depreciation start date: 12/1/2011
- Depreciation duration: 3 years --> Rate: 1/3
- Depreciation end date: 11/30/2014
- Asset disposal on 2/15/2014 --> Effective disposal date: 2/28/2014
|
Fiscal year |
Net depreciable value |
Fiscal year charge |
Fiscal year total |
|
1/1/2011 - 12/31/2011 |
30,000.00. |
833.33 (1) |
833.33. |
|
1/1/2012 - 12/31/2012 |
29,166.67. |
10,000.00 (2) |
10,833.33. |
|
1/1/2013 - 12/31/2013 |
19,166.67. |
10,000.00. |
20,833.33. |
|
1/1/2014 - 12/31/2014 |
9,166.67. |
1,666.67 (3) |
22,500.00. |
(1) 30 000,00 * (1 / 12) * 1 / 3 = 833,33 for the asset has been held for 1 month in this 1st fiscal year.
(2) 30 000,00 * (12 / 12) * 1 / 3 = 10 000,00 for the asset has been held for 12 months during this fiscal year.
(3) 30 000,00 * (2 / 12) * 1 / 3 = 1 666,67 since the depreciation end is on 11/30/2014 and the asset has been disposed on 2/28/2014 (held for 2 months).
Distribution of the 2014 fiscal year charge
|
Period |
Due period |
Depreciation total |
Period charge |
|
1/1/2014 - 1/31/2014 |
1. |
|
833.33. |
|
2/1/2014 - 2/28/2014 |
2. |
833.33. |
833.34. |
|
3/3/2014 - 3/31/2014 |
3. |
1,666.67. |
|
|
4/1/2014 - 4/30/2014 |
4. |
1,666.67. |
|
|
5/1/2014 - 5/31/2014 |
5. |
1,666.67. |
|
|
6/1/2014 - 6/30/2014 |
6. |
1,666.67. |
|
|
7/1/2014 - 7/31/2014 |
7. |
1,666.67. |
|
|
8/1/2014 - 8/31/2014 |
8. |
1,666.67. |
|
|
9/1/2014 - 9/30/2014 |
9. |
1,666.67. |
|
|
10/1/2014 - 10/31/2014 |
10. |
1,666.67. |
|
|
11/1/2014 - 11/30/2014 |
11. |
1,666.67. |
|
|
Fiscal year 2014 total |
|
1,666.67. |
RD - Romanian declining
This is a declining depreciation method used in Romania.
It concerns all types of fixed assets except:
- buildings,
- licenses, copyrights, R&D expenses, and software.
Depreciation origin
The depreciation always starts on the first day of the month that follows the start of service date (including if this date is the first day of the month):
- In the depreciation method definition, the depreciation start date displayed has the value of the Start of service date, but the depreciation start date that will really be applied will be the first day of the month that follows the start of service.
- In creation, the depreciation start date is initialized by default with the start of service date. It is modifiable. The depreciation start date that will really be applied will be the first day of the month that follows the displayed date.
Once the asset is created, the depreciation start date and the purchase, posting and service start dates can no longer be modified.
Duration
The duration is mandatory. It must be greater or equal than 2 years and it has to be entered by the user.
Rate
The rate that can be applied to the declining depreciation calculation can neither be entered, not determined by field associations.
It is automatically determined by Sage X3 by multiplying the straight-line depreciation rate corresponding to the standard use duration of the fixed asset by a coefficient.
This coefficient is called declining coefficient and varies based on the depreciation duration:
- Duration = or > 2 years and < or = 5 years --> Coefficient = 1.5
- Duration > 5 years and < or = 10 years --> Coefficient = 2
- Duration > 10 years --> Coefficient = 2,5
The calculated depreciation rate is displayed with 6 decimals.
The calculations are performed without rounding the rate (1 / Duration * Coefficient).
Examples:
|
Duration |
Coefficient |
Rate |
|
2. |
1.5. |
0.750000. |
|
3. |
1.5. |
0.500000. |
|
4. |
1.5. |
0.375000. |
|
5. |
1.5. |
0.300000. |
|
6. |
2. |
0.333333. |
|
7. |
2. |
0.285714. |
|
8. |
2. |
0.250000. |
|
9. |
2. |
0.222222. |
|
10. |
2. |
0.200000. |
|
11+ |
2.5. |
0.227273. |
Depreciation end date
The depreciation end date is determined from the depreciation start date and the depreciation duration converted in months. It thus always corresponds to the last day of a month and it cannot be forced.
When an asset is disposed, the depreciation is calculated for the complete disposal month: the depreciation end date will always be the last day of the asset disposal month.
Examples:
|
Issue date |
Depreciation end date |
|
1/1/2011 |
1/31/2011 |
|
2/5/2011 |
2/28/2011 |
|
6/30/2011 |
6/30/2011 |
Prorata temporis
Time is expressed in months.
Depreciation charges
- The depreciation charge of the 1st fiscal year is equal to:
Depreciation value * rate * prorata temporis (number of holding months / 12)
Note: the number of holding months during the year does not take into account the start of service month. Examples of numbers of holding months during a year (excluding the start of service month).Start of service date
Number of months in possession
1/15/2011
11.
6/6/2011
6.
10/1/2011
2.
- The depreciation charge of the next fiscal years is equal to:
Net depreciable value of fiscal year start * rate * prorata temporis (number of holding months / 12)
When the declining fiscal year charge becomes inferior to the straight-line residual charge, the declining depreciation method is automatically replaced by the straight-line residual method (net depreciable value at fiscal year start * (number of holding months in the fiscal year / number of months remaining for depreciation from the fiscal year start).
Notes:
- Depreciable value = Ex-tax receipt value – Residual value
- Net depreciable value = Net value – Residual value
|
Depreciation end date |
Number of months in possession |
|
1/31/2011 |
1. |
|
6/30/2011 |
6. |
|
10/30/2011 |
10. |
For depreciations, the first year corresponds to the first 12 months and not to the months contained in the fiscal year, and so on for the following years.This 12 month period can thus be split over two fiscal years.
See below an example of a charge calculation illustrating this rule.
Distribution of the fiscal year charge on the periods
If the fiscal year is divided into several periods, the fiscal year charge is distributed over these periods as follows:
Period Charge pc =
Fiscal year charge
*
Σ p1 to pc (Number of holding days in the period )
/
Σ p1 to pf (Number of holding days in the period )
-
Depreciation total of previous periods
p1 to pc = from the 1st holding period in the fiscal year to the current period included (1)
p1 to pf = from the 1st holding period in the fiscal year to the last holding period in the fiscal year
(1) Unless the asset is disposed in the fiscal year before this current period or if it is completely depreciated in the fiscal year before this current period.
The prorata used is in months, so the depreciations by period will all be identical (for instance, if the period is monthly, the monthly depreciation will be the same for the 12 months of the fiscal period), with an exception concerning the rounding rules.
Impact of actions on the depreciation
Depreciation method change
The method change is authorized in the following cases:
- an exceptional event that affects the company status (Initial Public Offering, change of ownership, etc.),
- more reliable and detailed information is required,
- a legislation change.
The change is not authorized during the fiscal year, it will become effective on the first day of the next fiscal year. Indeed, companies are not authorized to reprocess historical data even if there has been an accounting error (for instance, a wrong depreciation method was chosen). In that case, the correction is calculated and it impacts:
- either the operating income if the error is not material,
- directly the results account if the error is material (for instance, the "117400 - Carry-forward coming from the correction of accounting errors" account of the Romanian Chart of Accounts).
Sale and disposal of an asset
The asset is always disposed at the accounting net value of the end of the current month.
Rules for the calculation of loss and profit: basic rules.
Revaluation
The assets can be revalued (to their actual value) only at the end of the fiscal year. The revaluation is calculated on the basis of the accounting net value of the fixed asset at the end of the fiscal year. The difference between the accounting net value at the fiscal year end and the revalued value is posted either in the revaluation reserves (for instance, the "10500 - Revaluation reserves" account from the Romanian Chart of Accounts), or in the results account (this depends on the previous revaluations and their results). The new depreciation is calculated (on the revalued value) from the 1st day of the next fiscal year.
Notes:
- The revaluation can only be performed by authorized experts.
- All the fixed assets of a class need to be revalued, not just one or several assets: "cherry-picking' is not permitted.
Impairment loss
Impairment loss is authorized and it must be carried out and posted on the last day of the fiscal year. Indeed, fixed assets must be presented in the financial reports at the costs on which the total depreciation and the impairment loss will be deduced. Therefore an impairment loss is authorized only when the current period is the last period of the fiscal year.
Any other action that can update the FY end accounting net value will be forbidden if no impairment loss cancellation is performed.
Stop/restart of depreciations
An action can be used to stop and later restart the depreciation of each plan of the Accounting and fiscal context and other plans, except the IAS/IFRS plan.
When the company decides to stop the depreciation of an asset, the stop is effective from the month following the stop date. The depreciation is calculated for the current period.
When it restarts, it is calculated from the current period on. Two possibilities are suggested:
- Restart: the depreciation duration and end date are conserved. The depreciation is calculated with the RD method.
- Restart extension: the depreciation end date is extended to the duration of the stop.
Examples
1st example (standard)
- Ex-tax receipt value: 350,000.
- First use date 12/15/2010
- Depreciation start date: 1/1/2011
- Depreciation duration: 7 years
- Straight-line method rate: 1/7
- Declining method rate: 2 * 1/7
- Depreciation end date: 12/31/2020
|
Fiscal year |
Depreciable |
Straight-line residual |
Declining |
Switch to straight-line |
Recorded |
Fiscal year total |
|
1/1/2011 - 12/31/2011 |
350,000.00. |
50,000.00. |
100,000.00. |
No |
100,000.00. |
100,000.00. |
|
1/1/2012 - 12/31/2012 |
250,000.00. |
41,666.67. |
71,428.57. |
No |
71,428.57. |
171,428.57. |
|
1/1/2013 - 12/31/2013 |
178,571.43. |
35,714.29. |
51,020.41. |
No |
51,020.41. |
222,448.88. |
|
1/1/2014 - 12/31/2014 |
127,551.02. |
31,887.76. |
36,443.15. |
No |
36,443.15. |
258,892.13. |
|
1/1/2015 - 12/31/2015 |
91,107.87. |
30,369.29. |
26,030.82. |
Yes |
30,369.29. |
289,261.42. |
|
1/1/2016 - 12/31/2016 |
60,738.58. |
30,369.29. |
17,353.88. |
Yes |
30,369.29. |
319,630.71. |
|
1/1/2017 - 12/31/2017 |
30,369.29. |
30,369.29. |
8,676.88. |
Yes |
30,369.29. |
350,000.00. |
Distribution of the 2011 fiscal year charge
|
Period |
Due period |
Depreciation total |
Period charge |
|
January 2011 |
1. |
|
8,333.33. |
|
February 2011 |
2. |
8,333.33. |
8,333.34. |
|
March 2011 |
3. |
16,666.67. |
8,333.33. |
|
April 2011 |
4. |
25,000.00. |
8,333.33. |
|
May 2011 |
5. |
33,333.33. |
8,333.34. |
|
June 2011 |
6. |
41,666.67. |
8,333.33. |
|
July 2011 |
7. |
50,000.00. |
8,333.33. |
|
August 2011 |
8. |
58,333.33. |
8,333.34. |
|
September 2011 |
9. |
66,666.67. |
8,333.33. |
|
October 2011 |
10. |
75,000.00. |
8,333.33. |
|
November 2011 |
11. |
83,333.33. |
8,333.34. |
|
December 2011 |
12. |
91,666.67. |
8,333.33. |
|
Fiscal year 2011 total |
|
|
100,000.00. |
2nd example (it illustrates the rule that considers the first 12 months as the first year, instead of the months comprised by the fiscal year, and so on for the following years).
- Ex-tax receipt value: 49,000.
- First use date 2/25/2010
- Depreciation start date: 3/1/2011 -->anniversary date
- Depreciation duration: 4 years
- Straight-line method rate: 25 %
- Declining method rate: 1.5 * 25 % = 37.5 %
- Depreciation end date: 2/28/2015
|
Fiscal year |
Depreciable |
Straight-line residual |
Declining
|
Switch to straight-line |
Recorded |
Fiscal year total |
|
1/1/2011 - 12/31/2011 |
49,000.00. |
12,250.00. |
18,375.00. |
No |
(1) |
15,312.50. |
|
1/1/2012 - 12/31/2012 |
30,625.00. |
10,208.33. |
11,484.38. |
No |
(2) |
27,945.31. |
|
1/1/2013 - 12/31/2013 |
19,140.63. |
9,570.32. |
7,177.74. |
Yes |
(3) |
37,834.63. |
|
1/1/2014 - 12/31/2014 |
9,570.32. |
9,570.32. |
3,588.87. |
Yes |
(4) |
47,404.95. |
|
1/1/2015 - 12/31/2015 |
- |
Yes |
(5) |
49,000.00. |
(2) 49 000,00 * 37,5 % * (2 / 12) + 30 625,00 * 37,5 % * (10 / 12) = 12 632,81
(3) 30 625,00 * 37,5 % * (2 / 12) + 19 140,63 * 10 / 24 = 9 889,32
On the anniversary date, the declining charge (19 140,63 * 37,5 %) becomes inferior to the monthly straight-line residual charge (19 140,63 * 12 / 24): from the anniversary date onwards, the depreciation method is switched from declining to residual straight-line.
(4) 19 140,63 * (2 / 24) + 9 570,32 * (10 / 12) = 9 570,32
(5) Closing of net value ( 9 570,32 * 2 / 12).
RX - Romanian accelerated
This is a declining depreciation method used in Romania.
From a fiscal point of view, It is only used for the following assets:
- technological equipment,
- computers,
- patents.
From an accounting point of view, all asset types can be depreciated with this method, but only if the depreciation pattern justifies this (depending on the expected economic profit).
Depreciation origin
The depreciation always starts on the first day of the month that follows the start of service date (including if this date is the first day of the month):
- In the depreciation method definition, the depreciation start date displayed has the value of the Start of service date, but the depreciation start date that will really be applied will be the first day of the month that follows the start of service.
- In creation, the depreciation start date is initialized by default with the start of service date. It is modifiable. The depreciation start date that will really be applied will be the first day of the month that follows the displayed date.
Once the asset is created, the depreciation start date and the purchase, posting and service start dates can no longer be modified.
Duration
The duration is mandatory. It must be greater or equal than 2 years and it has to be entered by the user.
Rate
The rate that can be applied to the declining depreciation calculation can neither be entered, not determined by field associations.
It is automatically determined by Sage X3 in the following fashion:
- A fixed 50% rate for the first year (first 12 months)
- A unrounded rate equal to: 1 / (duration - 1) on the remaining use duration. This rate is the one displayed at the asset depreciation plan level.
|
Duration |
Rate |
|
1. |
0.500000. |
|
2. |
1.000000. |
|
3. |
0.500000. |
|
4. |
0.333333. |
|
5. |
0.250000. |
|
6. |
0.200000. |
|
7. |
0.166667. |
|
8. |
0.142857. |
|
9. |
0.125000. |
|
10. |
0.111111. |
|
11. |
0.100000. |
|
... |
|
Depreciation end date
The depreciation end date is determined from the depreciation start date and the depreciation duration converted in months. It thus always corresponds to the last day of a month and it cannot be forced.
When an asset is disposed, the depreciation is calculated for the complete disposal month: the depreciation end date will always be the last day of the asset disposal month.
Examples:
|
Issue date |
Depreciation end date |
|
1/1/2011 |
1/31/2011 |
|
2/5/2011 |
2/28/2011 |
|
6/30/2011 |
6/30/2011 |
Prorata temporis
Time is expressed in months.
Depreciation charges
- The depreciation charge of the 1st fiscal year is equal to:
Depreciable value * rate (50%) * prorata temporis (number of holding months / 12)
Examples of numbers of holding months during a year (excluding the start of service month).Start of service date
Number of months in possession
1/15/2011
11.
6/6/2011
6.
10/1/2011
2.
- The number of holding months during the year does not take into account the start of service month.
- The first year, the number of holding month will always be equal to 12.
- For depreciations, the first year corresponds to the first 12 months and not to the months contained in the fiscal year, and so on for the following years.This 12 month period can thus be split over two fiscal years.
- The fixed 50% rate will apply for the first year of use (first 12 months).If the depreciation start date does not match the fiscal year start date, the 50% rate will be applied on two different fiscal years.
- The depreciation charge of the 2nd fiscal year is equal to:
[Depreciable value * rate (50%) * (number of holding months / 12) ] + [Depreciable net value at start of 2nd year * rate * (number of holding months / 12) ] - The depreciation charge of the next fiscal years is equal to:
Net depreciable value of 2nd fiscal year start * rate * (number of holding months / 12)
Notes:
- Depreciable value = Ex-tax receipt value – Residual value
- Net depreciable value = Net value – Residual value
Example
- Ex-tax receipt value: 24,000.
- Fiscal year from 1 January to 31 December
- Depreciation duration: 5 years
- Depreciation start date: 11/1/2011
- First year rate (first 12 months): 50 %
- Rate on following years: 25 % (1 / (Duration - 1))
FY 2011 depreciation charge: 24 000 * 50 % * (2 /12) = 2 000
FY 2012 depreciation charge: ( 24 000 * 50 % * (10/12)) + (12 000 * 25 % * (2/12)) = 10 500
Impact of actions on the depreciation
Depreciation method change
The method change is authorized in the following cases:
- an exceptional event that affects the company status (Initial Public Offering, change of ownership, etc.),
- more reliable and detailed information is required,
- a legislation change.
The change is not authorized during the fiscal year, it will become effective on the first day of the next fiscal year. Indeed, companies are not authorized to reprocess historical data even if there has been an accounting error (for instance, a wrong depreciation method was chosen). In that case, the correction is calculated and it impacts:
- either the operating income if the error is not material,
- directly the results account if the error is material (for instance, the "117400 - Carry-forward coming from the correction of accounting errors" account of the Romanian Chart of Accounts).
Sale and disposal of an asset
The asset is always disposed at the accounting net value of the end of the current month.
Rules for the calculation of loss and profit: basic rules.
Revaluation
The assets can be revalued (to their actual value) only at the end of the fiscal year. The revaluation is calculated on the basis of the accounting net value of the fixed asset at the end of the fiscal year. The difference between the accounting net value at the fiscal year end and the revalued value is posted either in the revaluation reserves (for instance, the "10500 - Revaluation reserves" account from the Romanian Chart of Accounts), or in the results account (this depends on the previous revaluations and their results). The new depreciation is calculated (on the revalued value) from the 1st day of the next fiscal year.
Notes:
- The revaluation can only be performed by authorized experts.
- All the fixed assets of a class need to be revalued, not just one or several assets: "cherry-picking' is not permitted.
Impairment loss
Impairment loss is authorized and it must be carried out and posted on the last day of the fiscal year. Indeed, fixed assets must be presented in the financial reports at the costs on which the total depreciation and the impairment loss will be deduced. Therefore an impairment loss is authorized only when the current period is the last period of the fiscal year.
Any other action that can update the FY end accounting net value will be forbidden if no impairment loss cancellation is performed.
Stop/restart of depreciations
An action can be used to stop and later restart the depreciation of each plan of the Accounting and fiscal context and other plans, except the IAS/IFRS plan.
When the company decides to stop the depreciation of an asset, the stop is effective from the month following the stop date. The depreciation is calculated for the current period.
When it restarts, it is calculated from the current period on. Two possibilities are suggested:
- Restart: the depreciation duration and end date are conserved. The depreciation is calculated as a monthly residual straight-line depreciation.
- Restart extension: the depreciation end date is extended to the duration of the stop.
Examples
1st example (standard)
- Ex-tax receipt value: 350,000.
- First use date 12/15/2010
- Depreciation start date: 1/1/2011
- Depreciation duration: 10 years
- First year rate: 50 %
- Rate on following years: 11,11 % 11,1111 %
- Depreciation end date: 12/31/2020
|
Fiscal year |
Depreciable |
Fiscal year charge |
Fiscal year total |
|
1/1/2011 - 12/31/2011 |
350,000.00. |
175,000.00. |
175,000.00. |
|
1/1/2012 - 12/31/2012 |
175,000.00. |
19,444.44. |
194,444.44. |
|
1/1/2013 - 12/31/2013 |
155,555.56. |
19,444.44. |
213,888.88. |
|
1/1/2014 - 12/31/2014 |
136,111.12. |
19,444.44. |
233,333.32. |
|
1/1/2015 - 12/31/2015 |
116,666.68. |
19,444.44. |
252,777.76. |
|
1/1/2016 - 12/31/2016 |
97,222.24. |
19,444.44. |
272,222.20. |
|
1/1/2017 - 12/31/2017 |
77,777.80. |
19,444.44. |
291,666.64. |
|
1/1/2018 - 12/31/2018 |
58,333.36. |
19,444.44. |
311,111.08. |
|
1/1/2019 - 12/31/2019 |
38,888.92. |
19,444.44. |
330,555.52. |
|
1/1/2020 - 12/31/2020 |
19,444.44. |
19,444.44. |
350,000.00. |
Distribution of the 2011 fiscal year charge
|
Period |
Due period |
Depreciation total |
Period charge |
|
January 2011 |
1. |
|
14,583.33. |
|
February 2011 |
2. |
14,583.33. |
14,583.34. |
|
March 2011 |
3. |
29,166.67. |
14,583.33. |
|
April 2011 |
4. |
43,750.00. |
14,583.33. |
|
May 2011 |
5. |
58,333.33. |
14,583.34. |
|
June 2011 |
6. |
72,916.67. |
14,583.33. |
|
July 2011 |
7. |
87,500.00. |
14,583.33. |
|
August 2011 |
8. |
102,083.33. |
14,583.34. |
|
September 2011 |
9. |
116,666.67. |
14,583.33. |
|
October 2011 |
10. |
131,250.00. |
14,583.33. |
|
November 2011 |
11. |
145,833.33. |
14,583.33. |
|
December 2011 |
12. |
160,416.67. |
14,583.33. |
|
Fiscal year 2011 total |
|
|
175,000.00. |
2nd example (it illustrates the rule that considers the first 12 months as the first year, instead of the months comprised by the fiscal year, and so on for the following years).
- Ex-tax receipt value: 50,000.
- First use date 2/25/2010
- Depreciation start date: 3/1/2011 -->anniversary date
- End of first year: 2/29/2012
- Depreciation duration: 4 years
- First year rate: 50 %
- Rate on following years: 33,33% 33,3333 %
- Depreciation end date: 2/28/2015
- Fiscal year from 1 January to 31 December
|
Fiscal year |
Depreciable |
Fiscal year charge |
Total at end of |
|
1/1/2011 - 12/31/2011 |
50,000.00. |
(1) |
20,833.33. |
|
1/1/2012 - 12/31/2012 |
29,166.67. |
(2) |
31,944.44. |
|
1/1/2013 - 12/31/2013 |
18,055.56. |
(3) |
40,277.77. |
|
1/1/2014 - 12/31/2014 |
9,722.23. |
(3) |
48,611.10. |
|
1/1/2015 - 12/31/2015 |
1,388.90. |
(4) |
50,000.00. |
(1) 50 000,00 * 50 % * (10 / 12) = 20 833,33 since the asset has been held for 10 days during this 1st fiscal year.
(2) 50 000,00 * 50 % * (2 / 12) + 25 000 * 33,33 % * (10 / 12) = 11 111,11
(3) 25,000.00 * 33.33 % * (12 / 12) = 8,333.33
(4) 25,000.00 * 33.33 % * (2 / 12) = 1,388.88
Distribution of the 2012 fiscal year charge
|
Period |
Due period |
Depreciation total |
Period charge |
|
January 2012 |
|
|
2,083.33. |
|
February 2012 |
|
|
2,083.34. |
|
March 2012 |
1. |
|
694.44. |
|
April 2012 |
2. |
694.44. |
694.45. |
|
May 2012 |
3. |
1,388.89. |
694.44. |
|
June 2012 |
4. |
2,083.33. |
694.45. |
|
July 2012 |
5. |
2,777.78. |
694.44. |
|
August 2012 |
6. |
3,472.22. |
694.45. |
|
September 2012 |
7. |
4,166.67. |
694.44. |
|
October 2012 |
8. |
4,861.11. |
694.45. |
|
November 2012 |
9. |
5,555.56. |
694.44. |
|
December 2012 |
10. |
6,250.00. |
694.44. |
|
Fiscal year 2012 total |
|
|
11,111.11. |