How assets lose value over time and how that is treated for tax and accounting.
19 terms in this topic
Accelerated depreciation is any depreciation method that front-loads deductions, so a business claims more of an asset's cost in the early years of its life and less later.
Read definitionAn asset is anything a business or person owns or controls that is expected to produce future economic benefit, such as cash, equipment, vehicles, property or receivables.
Read definitionAsset disposal is the sale, trade-in, scrapping or retirement of a business asset, which takes it off the asset register and triggers accounting and tax adjustments.
Read definitionCapital allowances are the tax deductions you can claim for the decline in value of depreciating assets, such as plant and equipment, that you hold to produce assessable income.
Read definitionCapital expenditure (CapEx) is money a business spends to buy or improve fixed assets such as buildings, plant and vehicles, rather than on day-to-day running costs.
Read definitionDepreciation is the fall in an asset's value over time, spread across the years the asset is used so the cost can be claimed as a tax deduction.
Read definitionA depreciation schedule is a report that lists an asset's cost, its effective life and the depreciation you can claim against income each year.
Read definitionEconomic life is the period during which an asset keeps earning enough to justify running it, after allowing for maintenance costs, lost efficiency, new technology and market demand.
Read definitionThe instant asset write-off is a tax concession that lets eligible businesses deduct the full cost of a depreciating asset in the year of first use, up to a threshold.
Read definitionReducing balance depreciation is a depreciation method that charges a fixed percentage of an asset's written-down value each year, so the deduction starts high and falls over time.
Read definitionResidual value is the amount a leased car or asset is expected to be worth when the lease ends, set at the start and used to calculate the rentals.
Read definitionSalvage value is the informal name for what AASB 116 calls an asset's residual value: what it will fetch at the end of its useful life.
Read definitionStraight-line depreciation is a method that spreads an asset's cost, less its expected salvage value, evenly over its useful life so the same amount is deducted each year.
Read definitionTechnological obsolescence is the loss of an asset's usefulness, value or resale market because newer technology, standards or business models have superseded it, even though it may still work.
Read definitionTemporary full expensing is a time-limited tax concession that let eligible businesses deduct a qualifying asset's full cost in its first year of use instead of over its effective life.
Read definitionTotal cost of ownership (TCO) is the full cost of buying, financing, running and disposing of an asset over a set period, not just its purchase price.
Read definitionUseful life is the period an asset is expected to be available for use by a business, and the number of years over which its cost is depreciated.
Read definitionA write-off is an accounting entry that removes an asset or unpaid customer invoice from the books because it no longer has recoverable value, recording the loss against profit.
Read definitionWritten-down value (WDV) is a depreciating asset's cost less the depreciation claimed so far, and the base for future deductions and for gains or losses on disposal.
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