Depreciation of computer equipment
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Accounting is not everyone's expertise. And when you add the term “amortization” to it, you can live getting lost.
However, theamortization of your computer equipment, it is a crucial subject for the financial visibility of your venture. It's a bit like maintaining your car: if you don't know it, you may end up paying for it later.
But don't panic! We are going to demystify theIT amortization without giving you a headache.
What is computer hardware depreciation?
So what is it? Behind this terminology, however, is a concept that is quite simple to understand.
Definition
When your venture Buy a computer Brand new laptop at 1,500 euros, it would be a shame to make €1,500 “disappear” from your assets all at once, right? Especially since this computer, you are going to use it for several years.
THEaccounting amortization, it is the art of spreading this purchase cost over the duration of use Estimated of your hardware.
Instead of considering that you spent €1,500 in Year 1, the bookkeeping Go say, “OK, this PC is going to serve 3 years. We will therefore record a charge of €500 each year for 3 years.”
It's a way to reflect the loss in value of your hardware (due to use, time, obsolescence) in your accounts.
The golden rule to remember:In France, if your computer equipment (or office equipment) costs less than €500 excluding VAT, you can “charge” it directly. The total amount is deducted from your earnings the first year, and we don't talk about it anymore.
If it costs more (and a good computer fleet can quickly add up), it should be recorded as an asset (or “tangible asset”). And who says fixed assets, says amortization!
The amortization period of computer equipment
For the computer hardware (PCs, servers, tablets...), the amortization period The most commonly accepted is 3 years.
Why 3 years? It's the lifetimes useful estimated by the administration before your war machine became a luxury paperweight, overtaken by new technologies. For some peripherals or office equipment more robust (a large photocopier, for example), the duration can sometimes be extended to 5 years.
If in doubt, ask your Chartered Accountant, it is your best friend to validate the right Expected duration of use.
How to calculate the depreciation of computer equipment?
This is where things get (a bit) mathematical. There are two main ways to create your amortization plan.
- Linear amortization: the “Zen” method
It is the simplest and most used method. We take the mounting HT of your Purchase computer equipment and we divide it by the timeframe amortization.
- Example: You are buying a computer €1,200 EXCL. VAT
- Duration: 3 years
- Calculation: €1,200/3 years = €400 amortization per year.
- The linear depreciation rate is therefore 33.33% per year (100%/3 years).
Each year, for 3 years, your venture will record a charge of €400 (called “amortization expense”).
Attention: La first year, we apply a Prorata temporis. If you bought your PC on October 1, you only used it 3 months out of 12. You will therefore only amortize €100 (€400 * 3/12) during this first accounting year.
- Degressive amortization: the “Booster” method
This method is a bit more complex, but fiscally more aggressive. It allows you to amortize more at the beginning, and less at the end. The idea is that a computer loses more value the first year only the third.
The degressive depreciation rate It is obtained by multiplying the linear rate by a coefficient (for 3-4 years, the coefficient is 1.25).
- Example (continued):
- Linear rate: 33.33%
- Degressive rate: 33.33% * 1.25 = 41.66%
- Year 1: €1,200 * 41.66% = €500 amortization.
- Year 2: The rate is calculated on the remaining value (1,200 - 500 = 700€). That is €700 * 41.66% = €291.62.
- And so on...
The advantage? You create more loads the early years, which further reduces your short-term taxable profit.
The benefits of depreciating computer hardware
OK, it's paperwork. But why theventure Is she doing that to herself?
- For a faithful image: Your balance sheet reflects the true value of your fleet. It's more honest and more professional.
- To smooth the loads: Instead of taking a “blow” of €10,000 on your result theyear of buying 10 PCs, you spread the impact. It's much better for managing your cash flow.
- For fiscal fairness: It's your CFO's thing. Les depreciation allowances are recognized charges. By spreading the cost of the purchase, you smooth out your result over several accounting years. The advantage? Your taxable profit is in line with your real performance as closely as possible. You therefore pay fair tax, based on the gradual wear and tear of your hardware.
What about leased computer equipment?
If the management of fixed assets and plans ofdamping seems complex to you, there is another way: the Leasing (or location).
Accounting is a very different approach. In the case of business computer leasing, thedamping does not apply in the same way, because you do not own the property.
The rent What you pay is considered to be a operating charge And maybe entirely deducted from your results every month.
It is a solution that offers a financial flexibility interesting, because it does not directly impact your fixed assets and maintains your borrowing capacity.
The particular case of leasing with a purchase option (LOA)
It is a very common hybrid formula. Here's how it works from a perspective bookkeeper :
- During the rental period: It is simple. Rents are deductible as operating expenses, in the same way as a traditional rental.
- At the end of the lease (exercise of the purchase option): If you decide to exercise the purchase option, thecomputer becomes an asset in your wealth at that point.
- Depreciation is back: From this date of purchase, the property must be registered as an asset and will be dampened On her lifetimes useful remaining, according to the rules of the General Tax Code (CGI).
Buying or Leasing: the choice is yours!
Now that theamortization of computer equipment has no more secrets for you, you have all the keys in hand.
That you want purchase or opt for the flexibility of Leasing, you can now make an informed choice.
To equip yourself, whatever your decision, consult our catalog!
