What is a depreciation?

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A depreciation is a calculation method used to record the depreciation of a company's fixed assets. Losing all acquisitions made by a company, such as machines, computers or company cars continuously in value as they age, wear out, or from new technical advances to be overtaken. This reduction in value must then be recorded using various depreciation methods for accounting, business and tax purposes.

Impairments of fixed assets must be taken into account.
Impairments of fixed assets must be taken into account.

One depreciation, also called depreciation for wear and tear (Depreciation), is a method for calculating the depreciation of fixed assets. It is based on the acquisition or production costs as well as the useful life of the respective asset. The useful life of various machines and devices is determined by the Federal Ministry of Finance and as list published on the homepage.

What is the purpose of a write-off

  • The acquisition or manufacture of a device or a machine alone does not represent a reduction in the company's assets in terms of tax law.
  • So that the company can claim its losses, which arise from the depreciation of these machines, for tax purposes and also economically (accounting or cost accounting), it uses the various writing methods at.

Methods of depreciation

  • Certain useful lives have been defined for each asset. For example, the average useful life of a company car is around 6 years, while that of a property is an average of 33 years.
  • Are the acquisition or production costs (possibly minus the remaining proceeds) evenly distributed over the respective useful life, this is referred to as straight-line depreciation (depreciation in equal annual amounts).
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  • With the declining balance depreciation (depreciation in decreasing annual amounts) a certain Percentage that always remains the same on the continuously decreasing residual value of an asset applied.
  • This can amount to a maximum of 25%. However, the depreciation value must not exceed two and a half times the value of straight-line depreciation.
  • The advantage here is that the respective company can claim a higher amount for tax purposes in the first few years.
  • However, viewed as a whole, the degressive depreciation is usually not more favorable than the linear depreciation. It is only more advantageous in the case of a long period of use.

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