deprecaition

toshitoshi Feels At HomeRegistered Posts: 27
Hi all

If you puchase several computer duing 2008 for £30000 and charge the approprate depreciation amount in the account for 2008. However during 2009 you receive £2000 from the supplier as discount. How do one account for this money received? Does one adjust original cost of fixed asset and recalculate new annual deprecation value??

Comments

  • AK002AK002 Font Of All Knowledge Registered Posts: 2,492
    You would post the discount to the P&L as discounts received and continue depreciating the assets at the set amount.
  • Steve CollingsSteve Collings Experienced Mentor Registered Posts: 997
    Hi,

    I would offset the discount against the asset's cost because the asset should have initially cost less and therefore should have been recognised in the balance sheet at a lesser amount. Under FRS 15 an assets 'cost' is its actual purchase price which would be net of discounts.

    Best wishes
    Steve
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    Hi,

    I would offset the discount against the asset's cost because the asset should have initially cost less and therefore should have been recognised in the balance sheet at a lesser amount. Under FRS 15 an assets 'cost' is its actual purchase price which would be net of discounts.

    Best wishes
    Steve

    The first year depreciation would have been too high then. So, would you reduce the NBV by the discount and continue to depreciate, or make an adjustment to depreciation in the second year to keep all future depreciation amounts how they would have been if the discount was recieved in year 1?
  • toshitoshi Feels At Home Registered Posts: 27
    Thanks the for quick reply


    My question relates to two different financial accounting periods?
  • Steve CollingsSteve Collings Experienced Mentor Registered Posts: 997
    I would reduce the cost of the asset by the discount received and then would just continue to depreciate at the revised amount going forward as I doubt the depreciation difference would be material.

    Kind regards
    Steve
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    toshi wrote: »


    My question relates to two different financial accounting periods?

    Is that a question or a statement?
  • toshitoshi Feels At Home Registered Posts: 27
    Hi PGM

    It was a question - So according FRS - is it possible to change the original cost/depreciate of asset if purchased is made in one financial year and discount received in the following year??


    thanks in advance for all the help
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    toshi wrote: »
    Hi PGM

    It was a question - So according FRS - is it possible to change the original cost/depreciate of asset if purchased is made in one financial year and discount received in the following year??


    thanks in advance for all the help

    Yes I believe so, just waiting for Steve to clear up the details on how.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Why was the discount applied so late? Did you receive the discount in cash or as a credit note?

    If the latter, then I would probably just net it against the next purchase, unless of course you have not yet paid for the original purchase in which case I would do as Steve suggests.
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    I would reduce the cost of the asset by the discount received and then would just continue to depreciate at the revised amount going forward as I doubt the depreciation difference would be material.

    Kind regards
    Steve

    Missed your reply before! But thanks for clearing that up, just when you think you have it figured out you get a puzzling question.
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