Depreciation

When a business buys equipment, vehicles, software or buildings, the expenditure is not an expense of one year. Depreciation allocates the cost over the useful life of the asset, typically by the straight-line method (equal amounts each year) or a declining-balance method (larger amounts early on). The annual charge reduces both accounting profit and, subject to tax rules, taxable profit.

Every EU country sets a threshold under which an asset can be expensed immediately and rules on tax depreciation periods or rates, which often differ from the accounting useful life. Some countries offer accelerated or extra depreciation as an investment incentive. Land is not depreciated. Assets should be recorded in a fixed asset register with the purchase document, the start date and the method. Kontevia flags purchases above the national threshold so they are capitalised rather than expensed.