What Is Currency Depreciation?

The depreciation method is a cost analysis structure that is determined based on the wear status of a fixed asset throughout its useful life. It includes methods such as average method, workload method and accelerated depreciation method.

Depreciation method

Objectively speaking, the depreciation period depends on

Two rules for depreciation methods

Provides the possibility of choosing a depreciation method.

Article 18 of Chapter IV of the General Principles of Corporate Finance promulgated by the Ministry of Finance stipulates that the classified depreciation period, depreciation method and depreciation scope of fixed assets shall be determined by the Ministry of Finance. The enterprise selects a specific depreciation method and determines the accelerated depreciation margin in accordance with national regulations.

Article 13 of Chapter III of the "General Principles of Business Accounting" stipulates that the depreciation of fixed assets shall be based on the original value of the fixed assets, the estimated net residual value, the estimated useful life or the estimated workload. Calculated using the average years method or the workload (or output) method. If the relevant regulations are met, the accelerated depreciation method can also be adopted.

Depreciation method tax law provisions

Provided tax legal basis for method selection.

Article 26 of Chapter IV of the "Implementation Rules of the People's Republic of China Enterprise Income Tax Regulations" stipulates that the depreciation period of fixed assets shall be implemented in accordance with relevant state regulations. The depreciation of fixed assets shall, in principle, adopt the average age method (straight line method) and workload If the taxpayer needs to adopt other depreciation methods, it can be applied by the enterprise and reported to the provincial, municipal, and autonomous region tax bureaus for approval.