Annual depn assistance required.....
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If you buy an asset during a 12 month year 3 months into that year, but itâ??s been agreed that you are now preparing the financial statement for 15 months (an extended period) rather than the original 12 months do you depreciate the asset over 9/12 + 3/12 or 12 / 15 (9 months + 3 months) / (12 months + 3 months)â?¦..<BR><BR>This is a real life situation and not a question from a study text. The annual rate of depn is 25% SL<BR><BR>Any assistance will be appreciated. Thanks in advance.<BR>
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Annual depn assistance required.....
Different companies will treat it differenlty i think. In some companies, if it's not really material enough to affect the accounts, will just charge a full years depreciation in the year (or in this case 15 months) of purchase.<BR><BR>So it's a tricky one, how come thae accounts are for 15 months anyway? Seems very strange!0 -
Annual depn assistance required.....
The accounts are for 15 months because we are changing the year end (which does happen sometimes). <BR><BR>I know the effect is not material, but I want to get the correct charge in the accounts.<BR><BR>I have charged 12/12 for the period, but something told me that I should be using the 12/15 fraction. By doing so it's a different charge of about £50. The cost of the asset was £1,000<BR><BR>Thanks for the help anyway<BR>0 -
Annual depn assistance required.....
If you charge 12/12 is it not the same amount as charging 12/15? As you are still charging 12 moths depreciation?0 -
Annual depn assistance required.....
Yes decided to charge 12/12 and not 12/150 -
Annual depn assistance required.....
I would charge 15 months of depreciation, you would charge less for a lesser period so why not charge more for a longer period.0 -
Annual depn assistance required.....
Yes your point is granted, but the company has still only held the asset for 12 months out of the total 15 months. <BR><BR>Our policy is to depn in the year of acquisition and nothing in year of disposal.<BR>0 -
Annual depn assistance required.....
Apologies for that, I hadn't read your situation properly and didn't realise that it had been purchased during the year.<BR><BR>I quite agree with what you have said.<BR><BR>Annette0 -
Annual depn assistance required.....
Ok Thanks Annette<BR><BR>Reading my question again I wasnâ??t actually that clear. The policy within the practice is to depn the asset in the month of purchase, and no depn in the year of disposal. My dilemma was that we were doing firstly a 12 month year, which would have meant that I would depn the asset for 3/12th. I was then informed that we were now doing a 15 month extended period. I automatically thought ahhh 9 month depn within the first 12 months, and because we are now extending the period for a further 3 months I should now depreciate for a further 3 months, thus 12/15. But in actual fact this would leave me with less depn (12/15) than (12/12), so I couldnâ??t decide whether it should be 12/12 or 12/15. In the end I decided it should be 12/12 as by adding 9/12 + 3/12 = 12/12. I was happy with this, but as you can appreciative now 100% surely hence my question to everyone. I know, as other people pointed out that the effect wasnâ??t material to the fs, but I wanted to be sure to get it right. Maybe I shouldnâ??t have thought about it for too longâ?¦hehe<BR><BR>Many thanks anyway for taking the time to respond â?? and thanks to all other input.<BR><BR>Regards<BR>0 -
Annual depn assistance required.....
sorry - the first one is 9/12th and not 3/12...typo error0