How to calculate depreciation on intangible assets in accounting

In accounting and tax accounting of an enterprise, it is customary to amortize intangible assets (intangible assets) that have a specific service life (useful use).
If objects are officially recognized (considered) as depreciable assets, their cost is gradually and methodically attributed to the costs of the legal owner organization precisely through the depreciation mechanism.

This practice is used when determining the taxable profit of a business entity and is clearly provided for by the tax legislation in force in the Russian Federation.

The calculation of depreciation charges for intangible assets is of great importance for accounting and ensuring the safety of this category of non-current assets.

Methods for determining and calculating depreciation are clearly regulated for intangible assets by the relevant accounting standards and specific rules of tax legislation.

However, the amortization of intangible assets has its own methodological specificity, which is observed both directly in accounting and in accounting procedures regularly carried out at the enterprise for tax purposes.

The specifics of determining depreciation charges for intangible assets should be considered in more detail using specific examples.

Useful life

When putting it on the balance sheet, the organization must determine the useful life of the asset or decide that it is impossible to determine it (clause 25 of PBU 14/2007).

Determine the useful life of intangible assets based on:

• the period during which the organization will own exclusive rights to the object. This period is indicated in the documents of protection (patents, certificates, etc.) or it follows from the law (for example, the exclusive rights of the database manufacturer are valid for 15 years (Article 1335 of the Civil Code of the Russian Federation));

• the period during which the organization plans to use the facility in its activities;

• the quantity of products or other physical indicator of the amount of work that the organization intends to obtain using this asset.

This is stated in paragraphs 25, 26 of PBU 14/2007.

If it is impossible to determine the useful life of an intangible asset, then there is no need to charge depreciation on it (clause 23 of PBU 14/2007). Such objects are called assets with an indefinite life (clause 25 of PBU 14/2007). Factors that interfere with determining the useful life are listed in the Explanations to the Balance Sheet and the Statement of Financial Results (clause 41 of PBU 14/2007). There is also no need to charge depreciation on intangible assets of a non-profit organization (clause 24 of PBU 14/2007).

Let's start with the main thing: assets

When it comes to economic indicators and words like “depreciation” appear on the horizon, professionals always advise starting with the most basic and simple things, in other words, repeating the basics. We will do so.

It is difficult to imagine a businessman who has not encountered the concept of assets. We all know that assets are good, the more assets, the better the company. But what does modern economics mean by assets? Is this what the company owns? Is this something that will bring her profit, but the ownership of the asset is not important? Not quite so, in order for a certain object to become an asset from an economic point of view, it must meet two parameters - make a profit and belong to the enterprise. Only in this case will we talk about the presence of an asset.

The property with which furniture is made in a factory is an asset. Securities offered for sale are an asset. Finally, the intellectual property from which a company plans to make a profit is also an asset. It does not matter how exactly the economic benefit will be extracted from the object.

An intangible asset differs from a tangible asset solely in its form. And here it is important to understand that intangible assets can turn into tangible ones and vice versa. For example, first the company bought someone’s industrial design (meaning simple sketches of it) - this is intellectual property. However, if the enterprise creates this very industrial model, the asset will become material. At the same time, sometimes such assets can exist in parallel - suppose the company sells information on how to make such a model to a third party, and continues to use the manufactured equipment itself.

Both the knowledge of making a model and the model itself are assets.

Types of intangible assets are usually distinguished according to different characteristics. You can divide assets into those that provide profit now or will provide benefit in the future. Intangible assets are also grouped by how the company acquired ownership of them. Let's think about how we can get information. Firstly, of course, for a fee - by purchasing it. Secondly, it's free. Thirdly, as payment for some service or product. Fourthly, you can create intangible resources yourself.

The concept of economic depreciation is also found in classifications. An intangible (intellectual) asset is strongly associated with this process. Now that we have understood what assets in general and intangible assets in particular are, we propose to move on to an analysis of the concept of depreciation.

Accounting

Depending on the nature of the use of the intangible asset, include the depreciation accrued on it either as part of expenses for ordinary activities, or as part of other expenses, or as part of capital investments. In this case, make the following entries:

Debit 20 (23, 25, 44...) Credit 05

– depreciation has been accrued on intangible assets used in the production of goods (performance of work, provision of services) or in trading activities;

Debit 08 Credit 05

– depreciation was accrued on intangible assets used in the creation (modernization, reconstruction) of other non-current assets;

Debit 91-2 Credit 05

– depreciation is accrued on intangible assets used in other types of activities (for example, on intangible assets provided for use by other persons).

This procedure follows from the Instructions for the chart of accounts.

It is impossible to charge amortization on the credit of account 04 “Intangible assets”, that is, reducing the initial cost of an asset from January 1, 2008. PBU 14/2007 no longer provides for this method of calculating depreciation.

Record the results of calculating depreciation charges in the primary document (Part 1, Article 9 of Law No. 402-FZ of December 6, 2011). For example, in the depreciation statement.

Disposal of intangible assets

The disposal of intangible assets, just like their receipt, must be correctly documented, and the correct entries must be reflected in the accounting department.

Intangible assets are retired in the following cases:

1. If the asset has become obsolete or physically worn out, making it unsuitable for further use
2. When transferring intangible assets to another company for a fee, that is, sale
3. When transferring an asset free of charge to another enterprise, that is, donation
4. Contribution to the authorized capital of another enterprise

In fact, intangible assets can leave the enterprise in the same cases as fixed assets.

Disposal of intangible assets upon write-off

If an intangible asset is damaged, its useful life has expired, the intangible asset has lost its functions and properties and is not suitable for further use for its intended purpose, then it must be written off from accounting.

A special commission evaluates the condition of the asset and makes a decision on the need to write off the asset. At the same time, an order is drawn up, which indicates which intangible asset is subject to write-off and for what reason. The write-off process itself occurs on the basis of the write-off act. When an object is deregistered, a note about this is made on the intangible asset registration card NMA-1.

When disposing of intangible assets, the residual value must be written off as an expense for the enterprise. The residual value is determined as the difference between the original cost and depreciation accrued on the write-off date.

If a separate account 05 was used to calculate depreciation of intangible assets, then the accrued depreciation is written off by posting D05 K04. After which the residual value identified on account 04 is written off as other expenses using posting D91/2 K04.

If a separate account was not opened for depreciation, and depreciation charges were written off directly from the credit of account 04, then you simply need to determine the residual value of the asset and write it off as expenses of the enterprise.

After this, you can determine the financial result of the write-off (loss).

Postings when writing off intangible assets:

Transfer of an intangible asset for a fee

The sale of intangible assets is also processed through 91 accounts (unless, of course, the sale of intangible assets is a normal activity of the enterprise). The debit of account 91 collects all costs associated with sales, and the credit collects proceeds from sales.

When transferring the exclusive right to an asset to another legal entity or individual, you must similarly write off the residual value of the asset in the debit of account 91. Postings are made similar to write-offs for wear and tear.

A number of intangible assets are exempt from VAT: the exclusive right to programs, databases, inventions, designs and models, to the topology of integrated circuits and know-how.

If the asset does not belong to the list of objects exempt from value added tax, then the selling price (revenue) must include the amount of VAT. The selling organization must pay this VAT to the budget. The entry for calculating VAT payable on the sold intangible asset has the form: D91.2 K68.VAT. Proceeds from the sale are reflected by posting D62 K91.1.

Based on the results of the sale, a financial result is displayed, which is reflected in account 99 (loss on debit or profit on credit).

Postings when selling intangible assets:

Free transfer of an intangible asset to another person

When donating, the object is transferred at its residual value, which is formed under the loan account 04.

A gratuitous transfer is equivalent to a sale, so to complete this procedure you also need to use account 91 and do not forget to charge VAT on the market value of this intangible asset.

The debit of the account collects all expenses for the gratuitous transfer of an asset: residual value, VAT, other expenses. The sum of all these expenses will be the loss from the gift, which is reflected by posting D99 K91.9.

Postings when donating intangible assets

Entering an intangible asset into the capital of another organization

Here the accounting is reflected somewhat differently. In this case, the contribution of intangible assets to the authorized capital is considered a financial investment with the aim of receiving profit in the form of dividends. Therefore, here you need to use account 58. The posting reflecting the debt of the enterprise for the contribution to the capital company has the form D58 K76.

The asset is transferred at its residual value. From the credit account 04, the residual value of intangible assets is written off to the debit account 76. The wiring looks like D76 K04.

Postings when entering intangible assets into the capital of another enterprise:

Methods for calculating depreciation

In accounting, depreciation on intangible assets can be calculated:

• in a linear way;

• reducing balance method;

• by writing off the cost in proportion to the volume of products (works).

The organization must choose the method of calculating depreciation that will most accurately reflect the receipt of benefits from its use. If an organization cannot reliably determine the order in which benefits will flow, then use the straight-line method. Such rules are established by paragraph 28 of PBU 14/2007. Record your choice in your accounting policy.

An example of depreciation on an intangible asset. After commissioning, the use of the intangible asset is temporarily suspended

In March of this year, Alfa CJSC acquired exclusive rights to the trademark. The initial cost of exclusive rights, formed in accounting and tax accounting, is the same and amounts to 500,000 rubles. Alpha began using the trademark in April, so depreciation has been accrued on it since May. The useful life of a trademark is 5 years (60 months). Alpha calculates depreciation using the straight-line method.

The amount of monthly depreciation in accounting was: 500,000 rubles. : 60 months = 8333 rub.

In July, by agreement of the parties, the contract for the supply of products in which the trademark was used was temporarily suspended (until the beginning of next year). At the same time, the organization continues to accrue depreciation of the intangible asset (paragraph 2 of clause 31 of PBU 14/2007).

The calculation of depreciation charges for the period of useful use of the exclusive right to a trademark is presented in the table.

Transition to a nonlinear method

When switching from a linear to a non-linear method, include intangible assets in the depreciation group (subgroup) at their residual value. Determine the residual value as of January 1 of the year from the beginning of which the accounting policy for tax purposes established the use of a non-linear depreciation method.

In this case, intangible assets must be included in depreciation groups (subgroups) based on the useful life established when they were put into operation.

This procedure is provided for in paragraph 3 of Article 322 of the Tax Code of the Russian Federation.

Linear method

To calculate depreciation using the straight-line method, you need to know the original cost of the intangible asset (current market value if the asset is revalued) and its useful life. The organization is obliged to use this method to amortize business reputation (clause 44 of PBU 14/2007).

Determine the depreciation amount for the month using the formula:

This procedure is provided for in subparagraph “a” of paragraph 29 of PBU 14/2007.

The linear method of calculating depreciation is also used in tax accounting. For details on the specifics of its use, see How to calculate depreciation of intangible assets using the straight-line method in tax accounting.

The advantage of the straight-line method of calculating depreciation is its ease of application: the cost of an intangible asset is repaid evenly over its entire useful life. Therefore, it is used in cases where it is difficult to predict future revenues from the use of an asset (clause 28 of PBU 14/2007). In addition, using the linear method in accounting and tax accounting will allow you to avoid temporary differences.

An example of calculating depreciation for intangible assets using the straight-line method

Alpha LLC acquired exclusive rights to the trademark. The organization cannot predict the volume of production and sales of products in which this trademark will be used. Therefore, it was decided to depreciate the object using the straight-line method in both accounting and tax accounting. The initial cost of exclusive rights, formed in accounting and tax accounting, is the same and amounts to 500,000 rubles.

The useful life of exclusive rights to a trademark in accounting and tax accounting is 11 years (132 months).

The amount of monthly depreciation in both accounting and tax accounting was: 500,000 rubles. : 132 months = 3788 rub.

Tax financial depreciation

This is depreciation of fixed assets, which is calculated according to tax accounting rules. These standards in the Russian Federation are quite strict; they differ from the assessments that the company gives itself for the purpose of forming economic or management accounting.

Therefore, the amount and method of tax depreciation are usually dictated by the tax authorities. As a result, depreciation of fixed assets according to the rules of economic accounting will differ from depreciation of the Federal Tax Service. It is tax depreciation that must be deducted for the purposes of calculating taxable profit, that is, the income from which income tax expense will be calculated.

Now you know what methods can be used for depreciation and in what situations it is appropriate to use one or another technique. Remember that legislation does not limit an enterprise in choosing a method, the main thing is that it provides the opportunity to operate stably and successfully.

Enterprises choose a linear model, use an acceleration factor, and even tie the depreciation amount to productivity. You see, the modern economy provides a wide field for activity.

A prerequisite for the use of depreciation remains the presence of a certain service life. There are no models or formulas that can actually be used to calculate it. However, in the material we have named criteria that will help you correctly calculate the expected life of an intangible asset.

Reducing balance method

To calculate depreciation of a declining balance using this method, you need to know the residual value of an intangible asset at the beginning of the year, its useful life and the coefficient established by the organization, but not more than 3. Such rules are provided for in subparagraph “b” of paragraph 29 of PBU 14/2007.

Situation: is it possible to set different coefficients for different intangible assets when calculating depreciation using the reducing balance method in accounting?

Answer: yes, you can.

PBU 14/2007 does not establish any restrictions on the choice of coefficient when calculating depreciation, except that its value cannot exceed 3 (subclause “b”, clause 29 of PBU 14/2007). Therefore, an organization can choose it independently for each object; this point of view is also confirmed by the fact that the organization must choose a depreciation method for each asset unit, which reflects the receipt of future economic benefits (clause 28 of PBU 14/2007).

Calculate the amount of monthly depreciation using the formula:

This procedure is established by subparagraph “b” of paragraph 29 of PBU 14/2007.

Since the residual value of the intangible asset is taken at the beginning of each month, the annual depreciation amount will gradually decrease.

An example of calculating depreciation on intangible assets using the reducing balance method

Alpha LLC acquired the exclusive right to the trademark. The initial cost of exclusive rights, formed in accounting, is 200,000 rubles. Its useful life is 10 years, or 120 months (10 years × 12 months). The coefficient that most accurately reflects the income from the use of this asset is 2.

Alpha began using the trademark in February. Therefore, depreciation on it is calculated from March. The calculation of depreciation charges for the period of useful use of the exclusive right to a trademark is presented in the table.

The declining balance method is most appropriate for those assets whose benefits accrue in a larger amount at the beginning of its use. The fact is that the maximum amount of depreciation when using this method is accrued in the first months.

The non-linear depreciation method used in tax accounting has some similarities with the declining balance method, in which depreciation is calculated based on the residual value and the depreciation amount decreases monthly. However, these methods are not complete analogues. The main differences between the nonlinear method (tax accounting) and the reducing balance method (accounting) are as follows:

• with the non-linear method, depreciation is calculated based on the total cost of all depreciable property items belonging to a given depreciation group (clause 2 of article 259.2 of the Tax Code of the Russian Federation);

• after the total balance of the depreciation group becomes less than 20,000 rubles, in tax accounting the organization has the right to take into account the entire residual value of the total balance as part of non-operating expenses of the current period (clause 12 of article 259.2 of the Tax Code of the Russian Federation);

• with the non-linear method, a fixed depreciation rate is established for each depreciation group, which does not depend on the useful life of the depreciable property included in this depreciation group (clause 5 of Article 259.2 of the Tax Code of the Russian Federation).

Such conclusions can be drawn based on a comparison of subparagraph “b” of paragraph 29 of PBU 14/2007 and Article 259.2 of the Tax Code of the Russian Federation.

Receipt of intangible assets to the enterprise

Non-current assets owned by an enterprise are divided into fixed assets and intangible assets.

The main difference between intangible assets and fixed assets is that the former do not have a physical form and are created as a result of intellectual activity. An intangible asset (IMA) is the exclusive right to the result of intellectual activity.

An example of an intangible asset is the exclusive right to:

• Computer programs, databases
• Inventions, models
• Topology of integrated circuits
• Breeding achievements
• Know-how
• Trademarks
• Brand names
• Commercial designations
• Business reputation of the organization

Intangible material is not the result of intellectual activity itself, but the exclusive right to it.

To be called an intangible asset, an object must simultaneously satisfy the 4 conditions below:

• Planned for use over a long period (over a year)
• Used for economic benefit
• Purchased for use and not for resale
• You can reliably determine its value.

Receipt of intangible assets to the enterprise:

First of all, we note that you need to accept the object on the basis of an acceptance certificate, after which you need to create an accounting card for it in the form of NMA-1 (similar actions are carried out when receiving fixed assets).

Documents that confirm the fact of acquisition of intangible assets may include documents such as patents, an agreement on the alienation of an exclusive right, certificates, a license agreement, etc.

An enterprise can buy an intangible asset (purchase for a fee), create it on its own or with the help of third-party organizations, receive it in the form of a contribution to the authorized capital from the founders, and also receive it as a gift (free of charge).

Let us dwell in more detail on each of these 4 methods of receiving an intangible asset, and consider what entries need to be made in accounting in this case.

Acquisition of intangible assets for a fee (purchase)

To account for intangible assets, accounting account 04 is used. Received intangible assets are recorded in the debit of this account at their original cost. Acceptance for accounting on account 04 is carried out through auxiliary account 08, the debit of which collects all costs for the acquisition of an object: the direct cost of the exclusive right to this object and the costs of its use in the future, payment of various duties, taxes, customs duties, consulting and information services, services of third parties.

As for VAT on all these costs, it should be noted that not all intangible assets are subject to this tax.

VAT does not need to be allocated for the following intangible assets - the exclusive right to programs and databases, inventions, models, know-how, integrated circuits.

For other assets, it is necessary to separate out the amount of VAT from the sum of all costs that form the initial cost and send it for deduction.

Postings when purchasing intangible assets:

On account 08 we open an additional sub-account 5 “Purchase of intangible assets”. Using the debit of this account, we will collect all expenses, after which we will send them in one transaction to the debit of account 04, thus we will form the initial cost of the intangible asset.

Postings:

Creation of intangible assets

You can create an intangible asset yourself, with the help of employees of your own enterprise, or you can place an order with a third-party organization that specializes in this.

No matter how the intangible asset is created, it is also necessary to collect all the costs associated with its creation in the debit of account 08, and then transfer them to the debit of account 04.

If the process of creating an intangible asset occurs on your own, then the expenses may include the salaries of employees involved in this process, insurance premiums accrued and paid from this salary. Expenses also include depreciation on equipment used in research and other activities.

If third-party organizations are involved, then the cost is payment for their services.

After expenses are collected under debit 08, a posting is made to accept the object for accounting D04 K08.

Entering intangible assets into the Criminal Code

If an intangible asset is contributed to the authorized capital in the form of a contribution from the founder, then we attract an account for accounting settlements with the founders and make the following entries:

D08 K75 – the initial cost of intangible assets is reflected

D04 K08 – the asset is accepted for accounting

Free receipt of intangible assets

When receiving an intangible asset under a gift agreement, it must be assessed at the average market value as of the current date in order to know at what value to accept it and from what to charge depreciation in the future.

Third-party assessment organizations may be involved in the assessment.

To account for gratuitously received intangible assets, you need to use accounts 98 “Gratuitous receipts.”

Postings for accounting for intangible assets received under a gift agreement:

D08 K98 – reflects the market value of the asset obtained after valuation.

D04 K08 – the object is accepted for accounting.

In the future, when calculating depreciation, it is necessary to write off the amount of depreciation deductions also from account 98 by posting D98 K91/1.

Brief concept and purpose

Depreciation of intangible assets is a regulated process of gradually transferring the book value of operated intangible assets to the actual cost of manufactured (manufactured) products, services provided, and work performed.

The primary cost of a depreciable object, initially recorded on the balance sheet, is transferred in certain parts to the cost of the product.

In other words, depreciation charges in the economics of an enterprise are not unreasonably considered an element of the cost of the product produced (work performed, service provided).

The process of such transfer of value is carried out throughout the useful life of the intangible asset, which is, in fact, the established depreciation period.

Thus, depreciation rates for intangible assets are determined based on two important parameters:

• their useful life;
• the primary cost of these objects.

As mentioned earlier, if enterprise specialists do not have the ability to reliably determine the service life of intangible assets subject to depreciation, it is considered that it corresponds to a twenty-year period.

However, the actual duration of the depreciation period in this case should not be longer than the period of activity of the organization itself.

Active or passive?

Depreciation charges for intangible assets are usually written off to accounting accounts, which record the expenses incurred by the organization.

The choice of specific accounts for writing off depreciation of intangible assets is determined by the scope of use of the corresponding object.

This could be production of products, marketing of goods, administrative purposes and other options. Thus, the debit of expense accounts (20,44,26) corresponds in this case with the credit of account 05.

If the intangible asset is purposefully used by the copyright holder company to form other non-current assets (for example, for the construction of a building), depreciation charges for such intangible asset are recorded by correspondence between account 08 (debit) and account 05 (credit).

Fixing depreciation of intangible assets on the accounting account 05, which is passive in nature, is not at all a basis for the statement that depreciation charges are taken into account as an asset/liability of the business balance sheet.

The balance sheet, as is known, is formed based on a net assessment of the corresponding values, that is, minus the regulatory values.

Accordingly, the balance sheet does not provide for a separate reflection of depreciation.

conclusions

Like the company's fixed assets, intangible assets gradually transfer their primary (current) cost to the actual cost of products/services/work through the depreciation procedure.

The depreciation process is carried out over a regulated period of operation of the asset, the establishment of which has its own nuances in tax and accounting.

The ability to reliably determine the useful life of intangible assets is the basis for its depreciation. Accrual and write-off of depreciation for intangible assets are subject to careful accounting.