Where to calculate factory depreciation and how to calculate factory depreciation properly is what investors in calculating profits in production activities of enterprises.
This is a simple idea when there is a support team of accountants because they understand the financial knowledge of the business. Besides, if it is not possible to calculate the investment that will bring profit, when investing in expanding production is not smart, it will affect the development momentum of the corporation.
Factory depreciation is calculated according to annual depreciation. Investors need to know the following formula
The annual fixed factory depreciation is calculated as the historical cost of the fixed asset multiplied by the depreciation rate (in % per year).
Formula:
Accumulated depreciation on fixed assets up to year n = depreciation on fixed assets in year n-1 + increase in depreciation on fixed assets in year n – decrease in depreciation on fixed assets in year n.
Where n is the year the enterprise calculates
According to Circular 45/2013/TT-BTC, of the Ministry of Finance, the factory depreciation calculation is regulated as follows.
Depreciation of fixed assets needs to be calculated and should be distributed according to the historical cost system of fixed assets to production or business expenses during the depreciation of fixed assets.
Calculate the time to depreciate fixed assets is known as the time the business takes to calculate and depreciate fixed assets to be able to recover the investment in this asset item.
How many years of factory depreciation can be determined by referring to Appendix Table 1 issued with Circular 45/2013/TT-BTC.
How many years does the factory depreciate? Each factory has a different depreciation period
Formula:
Depreciation time of fixed assets (fixed assets) = Fair value of fixed assets: Selling price of new fixed assets of the same type 100% equivalent in the market x Depreciation time of new fixed assets of the same type determined according to the Appendix. 1 according to Circular 45/2013/TT-BTC.
Time table for calculating depreciation of machinery and factory equipment for businesses
Formula to determine how many years of factory depreciation
According to the legal provisions in the Circular No. 45/2013/TT-BTC dated April 25, 2013 of the Ministry of Finance as follows:
Depreciation of fixed assets is the calculation and systematic allocation of the historical cost of fixed assets to all production and business expenses during the depreciation period in the fixed asset class.
Depreciation time of fixed assets is the necessary time that enterprises make for the depreciation of fixed assets in order to be able to recover fixed asset investment capital.
To determine how many years to depreciate, we have the following ways:
For fixed factory assets that are new and have not been used, to determine how many years to depreciate the factory must be based on the table in Appendix 1 issued with Circular 45/2013/TT-BTC.
For used fixed factory assets, the depreciation period of fixed assets will be determined according to the following formula:
Depreciation period of fixed factory assets (fixed assets) = Fair value of fixed assets / Selling price of new fixed assets of the same type 100% equivalent in the market * Depreciation period of new fixed assets of the same type is determined prescribed in Appendix 1 to Circular 45/2013/TT-BTC.
Things to know when building a factory to extract depreciation on leased land
Circular 96/2015/TT-BTC needs to amend and supplement Circular 78/2014/TT-BTC guiding the law on corporate income tax and Decree 218/2013/ND-CP. At the same time, based on the provisions at Point E, Clause 2.2, Article 4 of Circular 96/2015/TT-BTC, stipulating the implementation of depreciation calculation into expenses as follows:
+ In case the enterprise has works on the land such as office headquarters, factories or shops for the purpose of production and business activities of the enterprise, the enterprise will be allowed to depreciate and calculate the deductible expenses. when determining taxable income in accordance with the depreciation and useful life of fixed assets under current regulations of the Ministry of Finance for these works, if the following conditions are satisfied:
++ Have a land use right certificate bearing the name of the enterprise (in case the land is under the ownership of the enterprise) or have a lawful land lease or loan contract between the enterprise and the unit or individual land owners and business representatives will also be responsible before the law for the accuracy of the contract (if the land is leased or borrowed).
++ Payment invoice of the volume of construction work handed over together with the construction contract, contract liquidation and final settlement of the value of the construction work bearing the name, address and tax identification number of the enterprise. .
++ Works on land are managed, and monitored and recorded according to current regulations on fixed asset management.
Thus, if your company or unit leases land from an individual, in the agreement your company is allowed to build a factory on the land, your company will be able to depreciate the factory with Depreciation time frame is from 25 years to 50 years if the following documents are available:
Having a land lease contract to build a factory with a legal individual.
Have a bill of payment for the volume of construction work bearing your company's name, MST and address.
Minutes of acceptance, handover and finalization of the work value bearing the name, MST, and address of your own company.
The contract liquidation minutes are still valid with the name, MST and address of your company.
Labor contract documents and invoices for purchasing materials.
To be managed, monitored and recorded according to current regulations on management of fixed assets.
Determine the useful life and depreciation rate of fixed assets
For fixed assets subject to weather conditions, the environment that affects asset wear and tear will be specified for a time not exceeding 20% according to the reference table.
