Similar to accelerated depreciation, it allows you to reduce by a larger amount in the first year.
According to our current financial accounting system, there are two main methods of accelerated depreciation:the sum-of-the-years method and the double-declining-balance method.
Disregarding the salvage value of fixed assets, the double declining balance method uses twice the straight-line depreciation rate as a fixed depreciation rate multiplied by the net value of the fixed assets decreasing year by year, and the method of obtaining the amount of depreciation should be increasing every year.
Similar to accelerated depreciation, it allows you to reduce by a larger amount in the first year.
Double Declining Balance Method is a method of accelerated depreciation that assumes that the service potential of a fixed asset is consumed more in the early years and less in the later years, so relatively accelerated depreciation in the early stages and reduced depreciation in the later years.
The formula for the double declining balance method.
(1) Annual depreciation rate = 2 / estimated depreciable life x 100%, annual depreciation amount = net book value of fixed assets at the beginning of the period x annual depreciation rate.
(2) Monthly depreciation rate = annual depreciation rate / 12.
(3) Monthly depreciation rate = net book value of fixed assets at the beginning of the period × monthly depreciation rate.
(4) Opening book value of fixed assets = Original value of fixed assets - Accumulated depreciation - Provision for impairment of fixed assets.
Based on the double-declining balance method of fixed assets, the balanced net book value of fixed assets less the estimated net salvage value should be before the expiration of the fixed assets amortized depreciation evenly over many years (when the straight-line method of depreciation is the amount of depreciation is greater than or equal to the double-declining depreciation amount of the balancing method).
According to Article 1 of the Circular of the Ministry of Finance and the State Administration of Taxation on Enterprise Income Tax Policies Related to the Deduction of Equipment and Appliances (Cai Shui [2018] No. 54), the equipment and appliances newly purchased by enterprises during the period from January 1, 2018 to December 31, 2020, with a unit value of not more than 5 million yuan, are permitted to be credited as a one-time lump sum to the current cost of costs and expenses in the calculation of taxable income If the unit value exceeds 5 million yuan, it shall still be deducted in accordance with the Regulations for the Implementation of the Enterprise Income Tax Law, the Circular of the Ministry of Finance and State Administration of Taxation on Improving the Policy of Accelerated Depreciation of Fixed Assets for Enterprise Income Tax Purposes (Cai Shui 〔2014〕 No. 75), the Circular of the Ministry of Finance and State Administration of Taxation on Further Improving the Policy of Accelerated Depreciation of Fixed Assets for Enterprise Income Tax Purposes (Cai Shui 〔2015〕 No. 106), and other relevant regulations. No. 106]) and other relevant provisions.
The second article stipulates that the equipment and apparatus referred to in this Circular refers to fixed assets other than houses and buildings.