Depreciation may also relate to the amortization of intangible assets. In this case, depreciation is the process of spending the costs of an intangible asset over the expected life of the asset. It measures the consumption of the value of an intangible asset, such as.B. A goodwill, a patent or a copyright. The term “depreciation” refers to two situations. First, amortization is used in the process of repaying debt through regular principal and interest payments over time. An amortization plan is used to reduce the current balance of a loan, such as a mortgage or car loan, by instalments. Depreciation can be calculated with most modern financial computers, table calculation packages such as Microsoft Excel or online depreciation diagrams. Amortization plans begin with the outstanding credit. For monthly payments, the interest payment is calculated by multiplying the interest rate by the outstanding credit balance and divided by twelve. The amount of principal due in a given month is the monthly total (a lump sum) less the interest payment for that month.
Note: There is one circumstance that ASAs should consider before considering all three issues. If the benefits offered by the contract are not expected to continue until the expiry date, there is no reason for the ACC to consider these issues. The useful life of the depreciation would be the best estimate of the period during which the benefits will be maintained. (Since this circumstance is atypical, most of them should keep reading about whether the asset should be amortized.) Don`t think that all credit details are included in a standard amortization plan. Some amortization tables show additional details about a loan, including fees such as closing costs and accrued interest (a current amount that shows the total interest paid after a certain amount of time), but if you don`t see those details, ask your lender. “Credit modification” agreements amortize loans in different ways. In the case of even capitalization, all outstanding fees and interest payments are reduced to the outstanding balance, the loan is returned to the current status and the borrower repeats regular payments at the same interest rate and either at the same maturity or with a lifetime (up to the initial term or 30 years for a 30-year mortgage). REGULAR ASSET INSPECTION Declaration No. 142 requires enterprises with an indefinite life to re-execute intangible assets during each reference period to determine whether lives are still permanent. In practice, it may be useful, at the time of acquisition, to consider circumstances that could restrict or reduce the useful life of an asset, so that they will be easier to identify in the coming years. If the entity finds that a useful life is finite, it should allocate that life to the asset and begin to amortize it over that period.
It is also necessary to regularly check whether the value of an asset has been impaired. Declaration No. 142 requires companies to check intangible assets, including commercial assets or good businesses, at least once a year, comparing their book value to their fair value. Any overrun of the carrying amount above the fair value should be eliminated by reducing the fair carrying amount of the asset and accounting for an impairment loss for that amount. For intangible assets that are the result of contractual or legal rights, including patents, licenses, trademarks, franchise rights and service rights, CAS should ask whether the company intends and is able to renew or renew the contract; if the renewal involves considerable costs; and whether there will be substantial changes to the existing contractual conditions.. . .