Depreciation guidelines?

Kev D

Can anybody assist with any document that details depreciation percentages and how they are calculated. In the AAT studies we see that vehicles depreciate at x % computers at 33.3 % reducing balance. I cannot find any guidelines where these figures are documented. I am doing the books of my Kayak club and would like to know for none profit making organisations such as clubs what is the depreciation rate for clubs such as this. Also in the osborne books they give examples of full depreciation in year one and none in year of disposal but I am lead to believe by the tutor that in practice all depreciation is charged on a monthly pro rata basis. Surely there must be some definitive guidance documents in existence? Any help greatly appreciated. Kev D

CeeJaySix

Kev,

The definitive guidance is that assets should be depreciated over their useful lives, allowing for any residual value on disposal.

In your examples, computers and software are generally superseded fairly quickly and have little or no residual value, so it is common to depreciate them over three years straight line.

Vehicles normally have a residual value and depreciate more quickly the newer they are, so using a suitable %age reducing balance is appropriate, possibly allowing for the residual value before calculating depreciation or setting the depreciation rate so that the value at the projected time of disposal is in the right ballpark. In practice it seems rare to actually allow for residual values by any other means than a reducing balance depreciation rate.

It is entirely down to the organisation to set it's own accounting policies for depreciation; similarly it is the organisation's policy whether to calculate depreciation monthly, or whether to charge a full year in the year of purchase and none in the year of disposal. These policies will then be set out in the notes to the financial statements.

I hope that helps, feel free to ask if you want any more detail.

Kev D

Hi CeeJay Thanks for taking the time to respond much appreciated, I would have thought that there would be more prescriptive guidelines issued under FRS regulations but never mind thanks again. I have no doubt that as a learner just starting out I will be using this site quite a lot cheers Kev

Kev D

Hi CeeJay Thanks for taking the time to respond much appreciated, I would have thought that there would be more prescriptive guidelines issued under FRS regulations but never mind thanks again. I have no doubt that as a learner just starting out I will be using this site quite a lot cheers Kev

CeeJaySix

Kev,

I haven't come across any, but then I am new to the industry and far from an expert, so there may be advice somewhere. However I have always been told that as long as it is reasonable (which is a very common term in audit at least!) then it's entirely at the company's discretion.