Indexation and Depreciation

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Depreciation signifies wastage or loss of the usage capacity (useful life) of tangible or physical assets by usage, natural causes or by technological obsolescence.

Generally, depreciation is made by usage, because a Technical Report from competent authorities is required for obsolescence or nature's action.

It is calculated by applying the depreciation rate, fixed based on the estimated useful life of the item, on the value of the assets subject to depreciation.

Depreciation generates an expense (administrative area) or cost (production area). It starts being calculated only from the moment it was started to be used.

Some assets do not lose value, such as: land, works of art, etc. These assets are not depreciated.

The system calculates depreciation based on the annual depreciation rate entered for each asset till the accumulated depreciation amount is equal to the acquisition amount in the hard currency, i.e., it is totally depreciated.

See Also