Depreciation On Equipment

[fatfrog]

Just wondering out of curiosity how many years do people depreciate their equipment over for financial purposes.

 

Obviously certain items way we'll still be making money we'll after they have been fully depreciated.

 

I know certain things like laptops have a useful life of say 3 years so you would probably depreciate this at 33% per year.

 

What kinda time frame would you guys fell is an appropriate period to write gear off over - I was thinking maybe 5 years or so.

 

Any suggestions.

 

Alan

[Yorkie]

I think, as you suggest it's variable on what the equipment is. It also depends how much use and what sort of maintenance a piece of kit gets. Permanently installed piece of static truss vs speaker system.

 

If you run a venue then you may be able to make it dependent on how many of that piece of kit there are, for instance a venue with three DJ booths may choose to replace one mixer each year etc.

 

I wouldn't know where to start with something like a multipair system though.

[Guest lightnix]

20% per year.

[fatfrog]

Definitely correct, I'd even go as far to say that a digital desk is going to depreciate far quicker than something like a heap of XLR cables or similar.

 

I thinking I'll depreciate equipment over 5 years as I maintain my gear very well but stuff still goes out of date quite quickly.

 

Alan

 

EDIT: Lightnix just beat me to it - Seems about right at 20% anyways

[TonyMitchell]

25% reducing balance

[drsound]

Bear in mind that the tax man will only let you write down 25% per annum on a piece of kit (assuming it's "short life", 10% if it's "long life") so there's often no benefit to depreciating it faster than this on your balance sheet. Of course if the kit has to be scrapped due to failure, loss or damage then you can write off the residual value in one lump anyway.

 

A lot of companies with multiple small assets choose to pool their assets to avoid having to attempt to track every single asset through the books. As an example: Do you know how many individual leads and connectors you have, their purchase date, purchase price and residual value? We have spent over £10k on cabling in the last couple of years so it's got to be tracked somewhere and the only practical way is to pool them and apply 25% reducing balance.

 

The best way to depreciate is very much dependent on how you run you company and how often you turn over gear. I'm sure your accountant will have some interesting thoughts on the best way to do things for your particular business model.