I am doing the accounts for a company that has been depreciating its assets at 25% reducing balance. The items purchased are computer eqpt ie lap tops, printers desks and minor P&M. All items were bought in 2011 so are probably obsolete from a technology point of view. There is not much left to depreciate but to continue the reducing balance method will take some time and for such items I am inclined to write them down as now obsolete. Can i do this? From a tax point of view they should have been treated as short life assets.
there is no tax perspective to depreciation. When calculating the profit for tax purposes you add the depreciation back to the profit (or loss) figure before applying capital allowances (I assume that AIA was used in the first year for the computer equipment).
The depreciation in the books is not a reflection of the value of the item but rather the pattern of consumption by the business. So, if the assets are still in use there is no reason that you should not continue to depreciate through the books on a reducing balance basis.
HTH,
Shaun.
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Shaun
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