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Fixed Asset
The goal of the SIGAATF environment is to reduce profit by preventing shareholders, when seeing a high profit, from withdrawing, through dividends, this money that should be safeguarded. Thus, depreciation expense is credited to an account called Accrued Depreciation, and its resources are used to strengthen the company's working capital by increasing current assets.
Permanent Asset
Investments: Equity interests of a permanent nature (shares), goods and rights also acquired on a permanent basis and which are not used in the company's production activity.
Deferred Charges: Represent the expenses, incurred or not, pre-operational expenses (expenses incurred before the start of the company's activities) or with the company's restructuring, and must be amortized within a maximum of 10 years.
Fixed Assets: These are goods acquired on a permanent basis for use in the company's production activities.
Cost of fixed assets - Acquisition cost is considered to be all the expenses incurred to acquire the asset (IPI, freight, labor) and the expenses incurred to put it into use in the production process.
Small Value Assets
These can be considered as expenses or costs provided the unit value of the asset is lower than BRL 326.21 or with a useful economic life of less than one (1) year. Always check the value with the customer's accountant.
Some assets are only useful to the company as a group. In these cases, the value above refers to each group.
Hardware and Software must be capitalized.
In the case of Hardware - it must be depreciated in at least 5 years.
In the case of Software - it must be amortized in 5 years
Principle of Substance over Form
Accounting Council Resolution - 95
Form = legal aspect of the operation
Substance = economic aspect of the operation
Whenever there is a conflict between the legal and economic aspects, the economic aspect (substance) prevails. This is the case of the consortium, in which, applying the Accounting Principle, the correct thing to do would be to consider it as fixed assets, but due to the economic aspect it is considered as an expense (the tendency would be to capitalize the total value of the Contract).
Assets Produced by the Company
To arrive at the costs of the units produced, the following must be considered:
1. Costs of materials used
2. Workforce
3. Charges
4. Direct and indirect costs
While transferring assets produced in the head office to the branches and vice versa, you must consider the value of stock (costs).
Building in Progress
All Material is recorded in a fixed asset account and, at the end of the construction, these values are transferred to the Fixed Asset account.
In cases of renovation with parts from other equipment, all items that can be valued must be listed, and the depreciation of the machine whose parts were used in the renovation must also be considered.
Donations
Consider market value for fixed assets - Normative Opinion 113/78
If it is a donation from the Government
Consider the Market Value
The receiving company considers it as Capital Reserve.
If it is a donation from a Private Company
Consider the Market Value;
The receiving company uses Market Value as Acquisition Cost;
The donee will have non-operating income, but taxed;
To the donor, the donation amount will be considered a non-deductible loss (exceptions for donations to Philanthropic or Public Utility companies).
Maintenance and Repairs
Article 286 - RIR/94 - Income Tax Regulation Normative Opinion 22/87
Determine the rest of the depreciation;
Apply the rest of the depreciation on the Maintenance cost (Expense Account);
Check the difference between the Maintenance Cost and the result of the item above (fixed asset).
Only apply this criterion when the maintenance promotes the increase of the asset's useful life. Otherwise, consider the value of the maintenance cost as expense and do not capitalize any value.
Depreciation
Regular
It is a form of registering the loss of value of the asset due to wear and tear, obsolescence, natural action etc. It is classified as reducing account.
Generally, depreciation is made by usage, because a Technical Report from competent authorities is required for obsolescence or natural action.
The depreciation rate is determined by: Economic Useful Life
Example:
Vehicles at the 20% rate; this rate can only be increased with a Technical Report from a competent official body (IPT).
The depreciation rate can be reduced.
Example:
In 1995, 15% was the rate used, when the correct would be 20%. In 1996, I can return to the rate = 20%, but the difference of 5% relative to the year 1995 cannot be recovered.
The depreciation generates expense (administrative area) or cost (production area). It starts to be calculated from the moment when the asset was put into use. Assets that do not lose value (appreciate) do not suffer depreciation (Artwork, Real Estate, etc...)
The system calculates the Depreciation based on the annual rate entered for each item until the accrued depreciation value is equal to the acquisition value in strong currency.
Calculation of Depreciation
Value in BRL x Depreciation Rate = Annual charge in BRL
(Annual Charge / 12) = Monthly Charge in BRL
For assets acquired during the fiscal year, the rate must be proportional to the period the asset is depreciated (in months, not in days).
Example:
Dec /95 at BRL 20,000.00 x 10 % = BRL 2,000.00 (10% per year)
Monthly Record at 2,000 / 12 = BRL 166.66 (depreciation per month)
There is no obligation to make the depreciation proportional to the days of the month in the case of assets purchased in the middle of the month, being at the discretion of the company
For assets acquired up to Dec/95, the corrected original value will be:
Corrected Value = Original value: + Accrued Indexation (up to Dec/95)
The residual value will be used to determine the profit or loss on the sale of an asset.
Residual Value = Corrected Value - Accrued Depreciation (up to Dec/95)
Residual Value = Original Value - Accumulated Depreciation (after Dec/95)
Accelerated depreciation
Regular Acceleration - The depreciation will be based on the number of daily hours of operation. The law determines the rate of acceleration, such as:
1 shift of 8h at 1.0
2 shift of 8h at 1.5
3 shift of 8h at 2.0
Asset running in 2 shifts -> 10% x 1.5 = 15% (depreciation rate)
Asset running in 3 shifts -> 10% x 2.0 = 20%
Acceleration Incentive - It is a tax incentive with the purpose of encouraging the modernization of facilities and equipment.
Decree no. 2433/88 and statute nos. 8661/93 and 8248/91
Provisional Measure no. 1435/96 - Deals with assets acquired between 06/14/96 and 12/31/97 that have IPI and ICMS exemptions.
This depreciation is an extra accounting incentive and is controlled by the LALUR - Book of Statement of Real Earnings. The accounting record must be regular, but when determining the record in LALUR, delete the Net Profit from part "A" of LALUR and record it in part "B".
Accounting Statement:
+ at Inclusions
- at Deletions
= at Actual Profit/Tax loss (in the case that the Profit applies 15% for Inc. Tax Calc.)
Used Assets
Normative Instruction 103/84
For the depreciation of used assets, half the useful life of a new asset or the remaining useful life of the asset (whichever is higher) is considered.
Example: New Machine: 10 years of useful life
Used Machine: 5 years of useful life
Whoever sold the machine used it for 6 years. Therefore, the remaining useful life will be 4 years.
In conclusion: The machine must be depreciated in 5 years.
Depletion
Mineral Resources
1st Criterion - It is the percentage ratio between the production volume and the ore reserves of the mine (ore reserves = Amount of ore that the mine possesses)
Example:
Ore reserves: 1000 tons
Production Volume in the period: 150 tons
Depreciation rate= 1000 at 100 x = 15 %
150 at x
Depreciation = 15% x Mine value = Depletion charge
2nd Criterion - Based on the concession term for exploitation of the mine.
Forest Resources
Fruit trees do not suffer depletion, they suffer depreciation for the period that they bear fruit. Trees that suffer depletion are those used to produce furniture or paper. There must be a project for planting and another for cutting (with Ibama's authorization). To determine the number of trees, it is necessary to consider how many times the tree sprouts again after the cut.
Amortization
Loss of capital value applied in the acquisition of intangible assets
Trademarks and Rents
Amortization can only be done with rights that have a term of use (we cannot amortize telephone lines)
Rent can be amortized over the period stipulated in the Rental Contract
Trademarks and Patents have a term defined by law to consider the first period, not considering renewals.
Assets subject to depreciation must be registered with the field "Classification" filled in with:
S - Net Equity
A - Amortization
C - Capital Stock
The calculation is the same as in depreciation.
Indexation/Monetary correction
This corresponds to the variation in the value of the asset in local currency, based on its original value in a strong currency and updated by the quotation of this currency on the last day of the month.
Indexation of Depreciation
It corresponds to the variation of the already depreciated balance of the asset (in local currency), calculated from this balance in a strong currency and updated by the exchange rate of this currency on the last day of the month.
Posting of Assets from the Permanent Asset
In the accounting posting, the asset must also physically leave the company. The posting of the asset must be done based on the acquisition value and, in the cases of assets acquired until 12/31/95, must be monetarily corrected.
In the case of companies that do not have fixed asset control and need to post some assets, it is necessary to: