Does the provision for impairment of fixed assets affect depreciation

If an impairment provision has been made for a fixed asset, the depreciation rate and depreciation amount should be recalculated according to the carrying amount of the fixed asset (the original price of the fixed asset minus the accumulated depreciation and the provision for impairment) and the remaining useful life; If the value of a fixed asset for which an impairment provision has been made is restored, the depreciation rate and amount shall be recalculated according to the carrying amount and remaining useful life of the fixed asset after recovery. However, when the depreciation amount of fixed assets is adjusted due to the provision for impairment of fixed assets, no adjustment will be made to the accumulated depreciation that has been accrued before.

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Provision for impairment of fixed assets.

It affects depreciation; If a fixed asset has been provided for impairment, the carrying amount of the fixed asset should be followed.

The original value of the fixed asset minus the accumulated depreciation.

and the provision for impairment) and the remaining useful life recalculation to determine the depreciation rate and depreciation amount.

In the process of production and operation, the enterprise uses fixed assets and causes the loss of their value to reduce only a certain residual value, and the difference between the original value and the residual value is apportioned over its useful life, which is the depreciation of fixed assets.

Determining the depreciation range of a fixed asset is a prerequisite for accruing depreciation. [1] A monetary estimate of the value of the value consumed by capital during the period examined. Also known as capital consumption allowance in the national income account.

Depreciation of fixed assets refers to the systematic apportionment of the accrued depreciation amount according to the determined method during the useful life of the fixed assets. Useful life refers to the expected life of a fixed asset, or the quantity of goods or services that the fixed asset can produce. Accrued depreciation refers to the amount of the original price of a fixed asset for which depreciation is accrued after deducting its estimated net residual value.

For fixed assets for which provision for impairment has been made, the cumulative amount of provision for impairment of fixed assets shall also be deducted.

After the impairment of fixed assets is provided, depreciation shall be provided as a new fixed asset.

For example, 1 million assets, double declining balance method depreciation, total 5 years, 100 * 2 5 depreciation after 1 year of depreciation 40, 2 years later (100-40) * 2 5 = 24, at this time there is still 36 in the book, depreciation of 60,000, after the impairment of 60,000, the basis for depreciation is 300,000, and then calculated according to the remaining life (5-2 years).

The Accounting Standard for Business Enterprises ---Fixed Assets" stipulates that depreciation is made for fixed assets for which provision for impairment has been made.

, the carrying amount of the fixed asset (i.e., the original price of the fixed asset minus the accumulated depreciation and the accrued impairment standard) shall be followed.

and the remaining useful life to recalculate and determine the depreciation rate and depreciation amount;

If the value of a fixed asset for which an impairment provision has been made is restored, the depreciation rate and depreciation amount of the fixed asset shall be determined by recalculating the depreciation rate and depreciation amount according to the book value of the fixed asset after the recovery of the value and the remaining useful life. That is to say, after the provision for impairment of fixed assets is made, it directly affects the accrued depreciation amount of fixed assets or the depreciation base, if at the end of an accounting period, once the impairment provision for fixed assets begins, the original depreciation of fixed assets based on the original price (such as the average life method) or the net book value (such as the double declining balance method) is no longer applicable.

This also means that at the end of the current period, the valuation policy of fixed assets has been changed, from the valuation of net fixed assets to the lower of the book value and the recoverable amount, and the amount of retained earnings and related items at the beginning of the period should also be adjusted by the retrospective adjustment method according to the accounting treatment of the change in accounting policy.

1. The nature and purpose of the two are different.

Accumulated depreciation. It is the "measurement of asset value loss", which apportions the value of fixed assets to the expected useful period of fixed assets according to a certain standard, so as to achieve the ratio of income and expenses, which is a means of cost allocation or apportionment process.

The impairment of the value of fixed assets represented by depreciation is mainly due to the value transfer formed by the participation of fixed assets in production and business activities, which can be compensated from the sale of goods.

and provision for impairment of fixed assets.

In essence, from the perspective of "the asset is the expected future economic benefit", the recoverable amount and the book value.

Make regular comparisons. When the recoverable amount is lower than the book value, the impairment of the fixed assets is recognized, and the impairment provision for the fixed assets is made to adjust the book value of the fixed assets, so that the book value of the book price can truly and objectively reflect the actual value.

2. The accounting time of the two is different.

The provision for depreciation of fixed assets is made on a monthly basis and is included in the relevant costs or current expenses according to the purpose, which is due to the passage of normal time in different accounting periods.

costs or expenses, which are systematic and related;

However, the accounting of impairment provision for fixed assets is usually carried out at the end of the year or at the end of the specified accounting period according to the actual situation, and in the absence of evidence that the impairment has occurred, there is no need to make accounting treatment, so there is no inevitable systematic connection between the impairment loss in different accounting periods and the passage of time or normal use.

3. The accrual method of the two is different.

Enterprises choose the depreciation method according to the expected realization of the economic benefits contained in the fixed assets, which can use the average life method, the workload method, the sum of years method, and the double declining balance method.

Wait. If there is a significant change in the expected way in which the economic benefits contained in the fixed assets are realized, the depreciation method of the fixed assets can be changed accordingly.

However, there are no multiple alternative methods for the provision for impairment of fixed assets like depreciation, and it is mainly made at the end of the period through the valuation, analysis and comparison of the recoverable amount of fixed assets and their book value.

There are four main factors that affect the depreciation of fixed assets:

1) The original price of fixed assets. Refers to the cost of fixed assets. For fixed assets that have reached the intended state of use, but have not yet completed the final accounts, the cost shall be determined according to the estimated value, and depreciation shall be provided; After the completion of the final accounts, the original provisional value will be adjusted according to the actual cost, but the depreciation amount that has been accrued is not adjusted.

2) Estimated net residual value. It refers to the amount obtained by an enterprise from the disposal of a fixed asset after deducting the estimated disposal costs when the expected useful life of the fixed asset has expired and is at the end of its useful life. The question is generally given directly as a known condition.

3) Provision for impairment of fixed assets. It refers to the accumulated amount of provision for impairment of fixed assets.

4) The service life of fixed assets. It refers to the estimated period of use of fixed assets by an enterprise or the quantity of products or services that can be produced or services provided by such fixed assets. When determining the useful life of fixed assets, enterprises should consider the following factors:

the projected production capacity or physical production of the asset;

physical wear and tear of the asset, such as wear and tear in the use of equipment, natural erosion of buildings, etc.;

The intangible wear and tear of the asset, such as the technical level of the existing asset is relatively obsolete due to the emergence of new technologies, and the product is obsolete due to changes in market demand;

Restrictions on the use of the asset as provided for by law or similar.

Impairment provision is actually an adjustment of the fair value of assets, when the impairment provision is withdrawn from fixed assets, including the state box, it means that the fixed trace mu assets have been impaired, and then depreciation according to the original basis will distort the financial data, and at the same time can not reflect the true value of fixed assets, so it is necessary to depreciate according to the latest fair value, but the difference between the new fair value and the original basis is adjusted to the current profit or loss through the impairment provision, so the impairment of fixed assets will affect the depreciation of fixed assets.

Impairment provision is actually an adjustment to the fair value of assets, when the impairment provision is withdrawn from the fixed assets, it means that your fixed assets have been impaired, and then depreciation according to the original basis will distort the financial data, and at the same time, it cannot reflect the true value of the fixed assets.

Therefore, depreciation needs to be carried out at the latest fair value, but the difference between the new fair value and the original basis is adjusted to the current profit or loss through impairment provisions, and the current profit is compensated.

Provision for impairment of fixed assets and accumulated depreciation are both allowance accounts for fixed assets, so it is easy to confuse them in accounting. So what's the difference between the two?

What is a provision for impairment of fixed assets?

Fixed assets are damaged, technically obsolete, or for other economic reasons, resulting in a recoverable amount that is less than their book value.

What is accumulated depreciation?

In the process of production and operation, the enterprise uses fixed assets and causes them to lose their value, leaving only a certain residual value, and the difference between the original value and the residual value is apportioned over its useful life.

The difference between impairment provision and accumulated depreciation of fixed assets.

a) Similarities.

Provision for impairment of fixed assets and accumulated depreciation are both accounts of allowances.

b) Differences.

1. The target is different.

Accumulated depreciation is a reduction of the original value of a fixed asset.

The provision for impairment of fixed assets is aimed at the reduction of net fixed assets.

2. The timeliness of problem handling is different.

Provision for impairment of fixed assets: It is more timely and can be adjusted directly at the end of the period.

Accumulated depreciation: The timeliness is weak, because the depreciation method cannot be changed arbitrarily after the depreciation method is selected.

3. The law and frequency of occurrence are different.

Provision for impairment of fixed assets: Due to the problem of the causes of impairment provisions for fixed assets, the frequency of impairment provisions for fixed assets is low.

Accumulated depreciation: The amount and time of accrual are more regular and occur more frequently.

4. The timing is different.

Provision for impairment of fixed assets: It is determined based on the difference between the book value at the end of the period and the amount of the penisto.

Accumulated depreciation: When an enterprise acquires a fixed asset, it is depreciated.

5. Some of the accounting contents are independent of each other.

In addition to the reduction in the value of fixed assets due to technological progress and damage, accumulated depreciation: pays more attention to the transfer of value of fixed assets due to normal use.

Provision for impairment of fixed assets: It is also necessary to account for the impairment of fixed assets that have been idle for a long time.

Depreciation of fixed assets purchased by an enterprise is generally accrued on a monthly basis, and when the recoverable amount of fixed assets is lower than the book value due to damage, provision for impairment should be made. So how to distinguish between impairment provision and accumulated depreciation of fixed assets?

The frequency and regularity of their occurrence are different. Depreciation is generally accrued on a monthly basis, so depreciation accrual is frequent, and the amount accrued is regular, and it matches the current income. The impairment of fixed assets is different, it is a non-operating expense, and the reasons for the impairment of fixed assets do not occur frequently.

The two are aimed at different objects. Accumulated depreciation is a reduction of the original value of a fixed asset, while an impairment provision for a fixed asset is a reduction of the net value of a fixed asset. This is evident from the presentation of the financial statements.

The timeliness with which the two deal with the problem differs. The estimated service life of fixed assets, the estimated net residual value, and the depreciation method shall not be changed at will once determined. When there is a deviation in the depreciation estimate and the value of the fixed asset is impaired, the provision for impairment of the fixed asset can be adjusted in a timely manner at the end of the period.

How to understand the provision for impairment of fixed assets?

The recoverable amount of a fixed asset is lower than its book value due to damage, technical obsolescence or other economic reasons, which is called impairment of fixed asset assets.

If the recoverable amount of a fixed asset is lower than its book value, an impairment provision shall be made for the difference between the recoverable amount and its book value, and shall be included in the profit or loss for the current period.

What is Accumulated Depreciation of Fixed Assets?

During the useful life of the fixed assets, the enterprise shall systematically allocate the accrued depreciation amount in accordance with the determined method, and reasonably determine the useful life and estimated net residual value of the fixed assets according to the nature and use of the fixed assets. Once the useful life and estimated net residual value of fixed assets are determined, they shall not be changed at will. Accumulated depreciation refers to the accumulated depreciation of fixed assets withdrawn by an enterprise at the end of the reporting period.

This indicator is presented at the end of the period under the "Accumulated Depreciation" item in the accounting "Balance Sheet". Accumulated depreciation is when the credit registers an increase, the debit registers a decrease, and the balance is on the credit.

Depreciation of fixed assets shall be accrued on a monthly basis, and the depreciation accrued shall be recorded in the "accumulated depreciation" account, and included in the cost of the relevant assets or current profit or loss according to the use.

The depreciation of fixed assets used in the process of self-construction of fixed assets by enterprises shall be included in the cost of construction in progress; The depreciation of the fixed assets used in the basic production workshop shall be included in the manufacturing expenses; The depreciation of fixed assets used by the management department shall be included in the management expenses; The depreciation of the fixed assets used by the sales department shall be included in the sales expenses; The depreciation amount of the fixed assets leased out of operation shall be included in other business costs.