Fiscal Depreciation Calculation Example

Overview

This topic explains how the system calculates fiscal depreciation when using the degressif method of depreciation for your rental assets.

 

First, use the Equipment Fiscal Depreciation Coefficient program to set up the table of published French accounting coefficients used to calculate a method of French tax depreciation called degressif.  Degressif depreciation is a declining balance method of depreciation using a variable coefficient that is based on the lifetime of an asset and on fiscal legislation rules.  This table is used to assign the appropriate coefficient when a new asset is entered in the system.

 

When using this method of depreciation, use control record RAEDP4 to turn derogatoire (derogating or declining) journal entries on.

 

Example

The following table and formulas are used to illustrate the fiscal depreciation of an asset with an acquisition value of 90,000.00 and a depreciation duration of 12 years for the straight-line method and 6 years for the degressif method.

 

 

Acquisition Value                                                90,000.00

Date of Acquisition                             01/01/NN

Book S/L Depreciation Duration                                12

Tax Degressif Depreciation Duration                       6

Fiscal Coefficient                                             1.75

 

 

 

Book Depreciation (S/L)

Fiscal Depreciation (Degressif)

Year

Yearly Dep

Net Value

Dep Rate Degressif

Dep Rate S/L

Degressif Dep Amt

S/L Dep Amt

Yearly Dep

Net Value

1

7,500.00

82,500.00

29.17

16.67

26,250.00

15,000.00

26,250.00

63,750.00

2

7,500.00

75,000.00

29.17

20.00

18,593.75

12,750.00

18,593.75

45,156.25

3

7,500.00

67,500.00

29.17

25.00

13,170.57

11,289.06

13,170.57

31,985.68

4

7,500.00

60,000.00

29.17

33.33

9,329.16

10,661.89

10,661.89

21,323.78

5

7,500.00

52,500.00

29.17

50.00

6,219.44

10,661.89

10,661.89

10,661.89

6

7,500.00

45,000.00

29.17

100.00

3,109.72

10,661.89

10,661.89

0.00

7

7,500.00

37,500.00

 

 

 

 

 

 

8

7,500.00

30,000.00

 

 

 

 

 

 

9

7,500.00

22,500.00

 

 

 

 

 

 

10

7,500.00

15,000.00

 

 

 

 

 

 

11

7,500.00

7,500.00

 

 

 

 

 

 

12

7,500.00

0.00

 

 

 

 

 

 

Totals

90,000.00

 

 

 

76,672.63

71,024.74

90,000.00

 

 

Fiscal Coefficient

Duration of Amortization (Years)

Acquired Before 01/01/2001

Acquired After 01/01/2001

3 to 4

1.5

1.25

5 to 6

2.0

1.75

7 +

2.5

2.25

 

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Formulas and Calculations

The following formulas and calculations explain the results in the above tables:

Degressif Depreciation Rate (for each period)

fiscalDegDepRate = (1/taxDuration) x fiscalCoefficient x 100%

 

29.17%= (1/6) x 1.75 x 100%

 

Fiscal Straight-line Depreciation Rate (for each period)

fiscalSLDepRate = (1/remainingLifetime) x 100%

 

16.67% = (1/6) x 100%

 

Degressif Depreciation

First Period:  fiscalDegDep = acquisitionValue x degDepRate

Subsequent Periods:  fiscalDegDep = fiscalNetValue x FiscalDegDepRate

 

Period 1 Example:  26,250.00* = 90,000.00 x 29.17%

Period 3 Example:  13,170.57* = 45,156.25 x 29.17%

 

*Rounding down and using only whole numbers for calculations

 

Fiscal Straight-line Depreciation

First Period:  fiscalSLDep = acquisitionValue x fiscalSLDepRate

Subsequent Periods:  fiscalSLDep = fiscalNetValue x fiscalSLDepRate

 

Period 1 Example:  15,000.00* = 90,000.00 x 16.67%

Period 4 Example:  10,661.89* = 31,985.68 x 33.33%

 

*Rounding down and using only whole numbers for calculations

 

Fiscal Depreciation (all periods)

IF (fiscalDegDep > fiscalSLDep) THEN fiscalDep = fiscalDegDep ELSE fiscalDep = fiscalSLDep

 

Period 1 Example:  Degressif depreciation at 26,250.00 is greater than the S/L depreciation at 15,000.00, so the Fiscal depreciation for that period is 26,250.00.

 

Period 4 Example:  Degressif depreciation at 9,329.16 is less than the S/L depreciation at 10,661.89, so the Fiscal depreciation for that period is 10,661.89.

 

Fiscal Net Value (all periods)

fiscalNetValue = acquisitionValue - fiscalDep

 

Period 1 Example:  63,750.00 = 90,000.00 - 26,250.00

 

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General Ledger Impact

The derogatoire depreciation that is used to make the general ledger journal entries is calculated as the difference between the fiscal depreciation and the book straight-line depreciation*.  The derogatoire depreciation is calculated for each period of the book lifetime (12 years in our example).  This means that the derogatoire depreciation will be negative for periods after the fiscal lifetime (6 years in our example).  The debit and credit accounts are determined by whether the derogatoire depreciation is negative or positive.

 

Derogatoire Depreciation

derogDep = fiscalDep - bookDep*

 

*Book depreciation is a straight-line depreciation calculated in the normal way.

 

Period 1 Example:  18,750.00 = 26,250.00 - 7,500.00

Period 7 Example:  -7,500 = 0 - 7,500.00

 

 

Period 1 Derogatoire journal entry:

 

Account

Debit

Credit

687200-0000-0000-00

18,750.00

 

145000-0000-0000-00

 

18,750.00

 

Account

Debit

Credit

145000-0000-0000-00

7,500.00

 

787200-0000-0000-00

 

7,500.00

 

 

Period 7 Derogatoire journal entry:

 

Account

Debit

Credit

687200-0000-0000-00

 

7,500.00

145000-0000-0000-00

37,500.00

 

 

Account

Debit

Credit

145000-0000-0000-00

 

37,500.00

787200-0000-0000-00

7,500.00

 

 

Other Factors

Although TAX depreciation is only run live once a year, the derogatoire depreciation G/L journal entries must be made monthly.  This means that if an asset that has been assigned degressif (fiscal) depreciation is sold during the year, an amendment must be made to the derogatoire depreciation that has already been booked.

 

Related Topics

Equipment Fiscal Depreciation Coefficient

Run Monthly Depreciation

Depreciation Simulation Report

Budget Depreciation Report

 

 

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