Differences in Accounting

1. Differences in Accounting Topic: Fixed Assets

2. Overview Fixed Assets

3. Details Austria • Depreciation:straight-line method, sometimes reducing balance method • The minimum expected useful life is mostly given by law, a change of useful life is impossible. • Depreciationstarts when the asset is ready for usage and is calculated for half a year. • Low value asset: 400€/item • Must be activiated on a special account and can be written down in the first year. • Treatment of intangible assets and the goodwill: • Are written down within 15 years • Treatment of a hidden reserve if you sell a fixed asset (market price > book value)? • Profit (or loss) must be added (deducted) to taxable income. • Special instructions for private companies

4. Details Denmark • Depreciation: By the direct, straight-line method. • Calculation: (cost – scrap value)/ lifetime • The expected useful life: No rules according to law of accounting – realistic approach. • Depreciation starts with purchase date • Low value asset: 11000 Dkr. (ca. 1400€) /item • Must be activated on a special account and can be written down in the first year. • Treatment of intangible assets and the goodwill: • Are written down by straight line method. • Treatment of a hidden reserve if you sell a fixed asset (market price > book value)? • Profit is added to income.

5. Details Estonia • Depreciation: There are no specific requirements in tax law and is a voluntary instruction: Revaluation is prohibited by Estonian GAAP • No lawful, minimum expected useful life, and it is legal to change the expected useful life. • Depreciation starts when the asset is ready for usage and is calculated by month (small companies by year) • Low value asset: the limit depends on the size of the enterprise • low-cost assets are written down in the moment of using them • Treatment of intangible assets and the goodwill: • Intangible assets are amortised during useful life. • Goodwill is not amortised, but an impairment test for determining the value shall be performed at each balance sheet date and if their recoverable amount is smaller than their carrying amount, their carrying amount shall be written down • Treatment of a hidden reserve if you sell a fixed asset (market price > book value)? • If the fixed asset is sold the gain or loss is showed immediately

6. Details Estonia 1 • Which amount is the basis for the depreciation?In Estonia the acquisition cost is. It consists of purchase priceandany costs directly attributable to its acquisition. Directly attributable costs are those that are necessary for bringing the asset to its operating condition and location. • If an item of property, plant and equipment consists of separate identifiable parts with different useful lives, these parts shall be recognised initially as separate items of property, plant and equipment and separate depreciation rates shall be assigned to them depending on their useful lives. • How do you calculate the cost of manufacture? • a) designing fees and other similar fees of an asset; • b) wages and salaries and related taxes paid to the employees in connection withthe construction of an asset; • c)materials and tools used in the construction of an asset (incl. depreciation ofnon-current assets used in the construction);

7. Details Germany • Depreciation:By the direct, straight-line method or reducing balance method, a one time change to straight-line method is possible. • The expected useful life is sometimes given by law, a change must be well grounded. • Depreciation starts when the asset is ready for usage and is calculated by on a monthly basis. • Low value asset: 410€/item • Must be activated on a special account and can be written down in the first year. • Treatment of intangible assets and the goodwill: • Are written down within 15 years • Treatment of a hidden reserve if you sell a fixed asset (market price > book value)? • Special instructions for immovables

8. Details Finland 1 • Depreciation: By the straight-line method or declining-balance method. • Calculation: straight-line: (cost – scrap value)/ lifetime Reducing balance: Cost x depreciation rate • The expected useful life: No rules according to law of accounting – realistic approach. • a change must be well grounded. Additional information must be given. • Depreciation starts when the asset is ready for usage and is calculated on monthly basis. • Low value asset: € 850,- or below, it can be deducted from the taxable income. • Another limit is for the equipments, machines etc., which have expected useful life 3 years or less. • Treatment of intangible assets and the goodwill: • Are written down by Straight-line depreciation in ten years • Treatment of a hidden reserve if you sell a fixed asset (market price > book value)? • We book the difference between market price and book value to a special account.

9. Details Finland 2 • What about lawful, minimum expected useful life?Do you have lawful, minimum expected useful life?No. But according to a Good Accounting Practise there are common “rules”, which are normally used. E.g. we have suggestions for expected useful life, they aren´t obligatory. Accounting Bureau in Finland has given these suggestions for expected useful life. • Is it legal to change the expected useful life?It´s possible to change it, if you´ve a good reason. Additional information must be given:

10. Details Hungary • Depreciation: By the straight-line method • The expected useful life: No rules according to material assets – realistic approach immaterial assets: please look at „Treatment of intangible assets and the goodwill“ • It´s possible to change useful lifetime if substantial change occurred in the following cases: • in service life of the plant property • in the value of the given plant • in the due residual value • Depreciation starts in the following month. • Low value asset: 100.000 HUF (ca.395 €), can be written down in the first year.

11. Details Hungary 1 • Treatment of intangible assets and the goodwill (periods are given by law) • Activation value of the establishment and restructuring 1-5 years • activation value of the development 1-5 years • Business or goodwill at least 5 years • Treatment of a hidden reserve if you sell a fixed asset (market price > book value)? • It´s not regulated and must be shown in the notes of the accounts.

12. Purchase of Assets in UK Assets and Expenses

13. What is an asset ? An asset is usually defined as premises, machinery or equipment that is owned by the business, used for the purpose of carrying out the business, and likely to remain in use by the business for a period of time. Assets are recorded in an asset register. Assets are depreciated according a straight line method or a reducing balance method. The materiality concept should be used to decide if an item represents capital or revenue expenditure. In an office, a computer would be regarded as an asset, but a stapler or paper bin would probably be regarded as revenue expenditure.

14. Capital and Revenue Expenditure The purchase of an asset is capital expenditure. The purchase of smaller items is treated as revenue expenditure. For example: A computer and printer are purchased by a small business. These are treated as capital expenditure. Any delivery cost and installation cost (such as connecting to a network) are treated as capital expenditure. The cost of printer ink, paper and computer discs would be treated as revenue expenditure.

15. Purchase of a vehicle The following are capital expenditure: Net cost of vehicle Number plates Delivery costs The following are revenue expenditure. Fuel Vehicle excise duty / road fund licence Insurance Servicing

16. Depreciation The provision for depreciation is calculated each year for nearly all fixed assets. The provision is recorded as a credit in the Accumulated Depreciation Account (a balance sheet account) and as a debit in the Depreciation Expense Account (an expense account). The method by which depreciation is calculated for each asset is determined when the asset is first purchased. Under normal circumstances this method of depreciation should not change.

17. Details IFRS • What about lawful, minimum expected useful life?IFRS does not have • Is it legal to change the expected useful life?In accordance with IAS 16: The useful life of an asset and the depreciation method applied must be reviewed at least at each annual reporting date. A change in the useful life or depreciation method is accounted for prospectively as a change in accounting estimate. • Which amount is the basis for the depreciation?In accordance with IAS 16: Property, plant and equipment is recognised initially at cost. Cost includes all expenditure directly attributable to bringing the asset to the location and working condition for its intended use. Property, plant and equipment is depreciated over its useful life. An asset’s depreciable amount is its cost less its residual value. An item of property, plant and equipment is depreciated even if it is idle. However, an item of property, plant and equipment that is held for sale is not depreciated. When an item of property, plant and equipment comprises individual components for which different depreciation methods or rates are appropriate, each component is depreciated separately.

18. Details IFRS 1 • When does depreciation start?In accordance with IAS 16: Subsequent to initial recognition property, plant and equipment is depreciated on a systematic basis over its useful life. The depreciation starts when the asset is available for use (i.e., when it is in the location and conditions necessary for it to be capable of operating in the manner intended by management). • How do you treat the intangible assets and the goodwill?In accordance with IAS 38:Intangible assets with finite useful lives are amortised over their expected useful lives. • The following costs cannot be capitalised as intangible assets: internally generated goodwill, internal research costs, costs to develop customer lists, start-up costs, and expenditure incurred on training, advertising and promotional activities or on relocation or reorganisation. • The method of amortisation of an intangible asset with finite useful life should reflect the pattern of consumption of the economic benefits. The method used should be reviewed at least at each annual reporting date and a change in the method applied should be accounted for prospectively as a change in estimate. The amortisation of intangible assets a finite useful life begins when the asset is available for use (i.e., when it is in the location and conditions necessary for it to be capable of operating in the manner intended by mananagement). • Acquired goodwill and other intangible assets with indefinite useful lives are not amortised but must be tested for impairment at least annually.