consult man
Jan 24,2016

Records of low value assets

Fixed assets are assets (fixed assets not qualified investments) with an expected useful lives longer than 12 months, complete and fit for use, designed for the needs of the business. Companies that benefit from write-downs are required to keep detailed records of fixed assets. Businesses, however, do not always know how to do it correctly.

The provisions of the Income Tax allow the inclusion in the cost, once the purchase date, depreciation of fixed assets whose initial value does not exceed 3 500 gold. Despite the fact that these are tax laws, many entrepreneurs treat this value as a threshold to recognize or challenge the asset as an asset. An alternative to the most commonly used materials are the costs, which weighted the value of purchased and intended to use low value (ie those whose value does not exceed 3 500 thousand) assets. Very often encounter the fact that regardless of how long is planned useful life of the asset, the only criterion is the initial value if it does not exceed 3 500 gold, it is recognized directly as an expense.

While in the case of an entrepreneur who is not obliged to conduct a full accounting or preparation of financial statements, such a simplistic approach is appropriate, it is not the end of it correct for individuals who are required to prepare financial statements. If the number and total value of assets recognized as a low value (ie not entering records and once recognized as an expense) is substantial, despite the fact that they are used by the company and bring him benefits, the value recognized in the balance sheet is reported as zero This presentation is not consistent with reality.

Tax depreciation or accounting?

First of all, you should make a distinction between depreciation for tax and accounting. Rate of tax depreciation and given the amount of 3 500 gold represent the maximum rates that the company may apply for the purpose of determining deductible expenses and accounting for income taxes. While depreciation for accounting purposes is demonstrated in the profit and loss account the costs associated with the use of an asset for a given year, while adjusted (reduced) value of this asset in the balance sheet exhibited.

Unfortunately, many businesses, regardless of the intended useful life of the asset is used to simplify the tax depreciation rates, which can lead to serious disorders of the value of fixed assets in the balance sheet and the value of depreciation expense in the income statement.

In addition, assuming that all the equipment and supplies, regardless of their useful life and guided only by the value of 3 500 gold, are treated as expenses in the current period, not recognized their value in the balance sheet and thus reduces the value of assets, over-burdening the income statement the cost of their purchase.

Entrepreneurs take to such arguments, the issue of tax benefits and the possibility of early settlement of the purchase of low-cost devices. Nothing stands in the way of that for tax purposes to treat such purchases as a deductible cost at time of purchase and at the same time accounting charge for depreciation based on the rate taking into account the planned useful life of the asset. It should be remembered that the changes which have entered into force on 1 January 2013 in connection with the obligation to revise expenses for CIT and PIT for the part included in the cost of depreciation, in which the purchase price of the asset has not been settled paid (in the period specified in art. 24d paragraph. 1 or 2 of the PIT Act and art. 15b paragraph. 1 or 2 of the Act on CIT).

QUESTION! Whether for accounting purposes, each piece of equipment should be treated as an asset and amortize it for 5, 10 years old, regardless of its initial value? For example, if the desk bought for 700 gold, amortized over five years, or every month to make depreciation in the amount of USD 11.67?

Here it is advisable that the company elaborated in this regard has been accounting policy (which is a compulsory document for each undertaking having an obligation to keep accounting records and prepare financial statements). Depending on the nature of low-purchased assets, their intended purpose, value and number during the year, the entrepreneur should determine what will be a fixed, low-value equipment and finally supplies.


It may be useful herein, for example, that all the hardware and data communications (including mobile phones and modems) are fixed assets, regardless of their initial value. At the same time, if the initial value does not exceed X (and this amount can not be higher than 3 500 thousand) are subject to a one-off depreciation. Thanks to the treatment of these components as fixed assets and entered into the register of fixed assets, the entrepreneur has control over them is able to determine at any time how many there are, who their user, when they were purchased without tedious retrieval of information in invoices to purchase in a few previous years.

If an entrepreneur does not monitor the purchased piece of equipment, computers and phones assuming that their unit value is insignificant it must take into account that in case of loss or theft, it may go unnoticed. There are no clear rules on what is and what is not treated as assets and which is subject to accounting community as a result of the mandatory inventory of fixed assets carried out every four years it significantly hinders or even prevents the proper settlement.