As of January 29, 2021, China's current depreciation system provides:
Article 18 of Chapter 4 of the General Principles of Enterprise Finance issued by the Ministry of Finance stipulates that: the categorized depreciation life of fixed assets, depreciation methods, and the scope of depreciation shall be determined by the Ministry of Finance. Enterprises choose specific depreciation methods and determine the rate of accelerated depreciation in accordance with state regulations.
Chapter III, Article 13 of the General Principles of Accounting for Enterprises stipulates that: depreciation of fixed assets should be based on the original value of fixed assets, the estimated net salvage value, the estimated useful life or the estimated workload. Calculated using the average life method or workload (or production) method. Accelerated depreciation method can also be used if the relevant provisions are met.
Expanded Information:
Depreciation methods
1, average life method
Fixed assets depreciated under the average life method are generally considered to have a more even depletion over the periods, and the proportion of income earned in each period is about the same. Under the average life method, the amount of depreciation is shown as a ray parallel to the x-axis in the plane coordinate system (with the starting point on the y-axis), so depreciation is a fixed cost at this time.
2, the workload method
The workload method of depreciation of fixed assets, it is generally believed that its wear and tear in the work is more average, but outside the work basically unable to provide economic benefits. In essence, the workload method complements and extends the average life method.
Under the average life method, the amount of depreciation is represented as a ray segment parallel to the x-axis in the plane rectangular coordinate system at the time of depreciation (with the beginning of the first segment on the y-axis or in the first quadrant), and therefore depreciation at this time is a fixed cost.
3, double declining balance method
Double declining balance method of depreciation of fixed assets, it is generally considered to be in the super-intensity of wear and tear all year round, and in the period of the income obtained in the period is also therefore decreasing.
Under the double-declining-balance method, the amount of depreciation in the plane right-angled coordinate system as a folding line, the first period is a negative slope of a straight line, to the last two periods to change to the x-axis and parallel to the line segment. Thus in the front depreciation is a variable cost, to the last two periods become a fixed cost.
4, sum-of-the-years method
The sum-of-the-years method of depreciation of fixed assets, generally considered to be in a strong vibration all year round, highly corrosive state, or the industry in which it is technological advances, product upgrading faster. Under the double-declining balance method, the amount of depreciation is shown as a straight line with a negative slope in the plane rectangular coordinate system. Therefore, the amount of depreciation is a variable cost.