Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
let's say netbook with cost £220 is a capital expense for small business, what is the useful life of it for depreciation purpose then?who decides the useful lifes for assets?
How long do you expect the asset to be used by the business for?
Thats the keys definition really. How long will the asset be used for by the business rather than how long it will last.
Electronic goods are out of date almost as soon as you buy them but will still have a useful economic life to the business (If they didn't then there would be no point in their purchase).
The depreciation schedule should be such that the financial statements properly reflect the financial situation in the company therefore, if the business is looking to replace the netbook every two years then depreciate over two years as the benefit to the business is consumed over the two years.
The commonly accepted practice for computer equipment is however an estimated four year economic life as the assumption is that equipment puchased now will be used by a business for four years.
If the business doesn't know how long that they will be using the asset for then depreciate over four years as in general electonic goods are not expected to last any longer than that although they invariably do (He says looking at an eight year old Iiyama monitor that was depreciated over four years... Touch wood it will be good for at least another eight although imagine that I will get through a few more PC's attached to it in that time).
For others reading this thread don't forget that the depreciation schedule has nothing to do with the tax situation for the asset. Depreciation is for financial reporting, not tax calculations.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
How long do you expect the asset to be used by the business for?
Thats the keys definition really. How long will the asset be used for by the business rather than how long it will last.
On a slightly related topic....
My brothers' have a van that is no longer used to drive around in. It has been SORN'd the last couple of years and just sits at the side of the workwhop and is used to store things in. I think it is valued in the balance sheet at £206 (last June). Should it be written out of the accounts or just kept in there until actually got rid of. Just asking your views as accountant will probably decide himself soon enough.
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Never buy black socks from a normal shop. They shaft you every time.
