Fixed Assets 1. Overview of fixed assets (Art. 24) 41.1 Tangibles ‘Tangible depreciable assets are defined as separate assets that: Aso include: Note: Unless otherwise speciid, al references in this course notes material are from the Fiscal Code as at 30 September 2012. ‘Are held and used in production, delivery of goods or supply of services, for rental to third parties, for administrative purposes Have an entry value of more than the limit established by Government decision (1,800 Lei) Have a normal period of use of more than one year.” For tangible non-current assets that are used in lots, sets or that form a single body, lot or set, entire value of the body, lot or set is to be taken into account in determining depreciation. Components that enter into the structure of a tangitle asset and that have a normal period of different from the resulting asset, the depreciation is to be determined in part fr each component Investments made to fixed assets that are the subject to a rental, concession, administration or similar contract, Fixed assets put into partial operation, for which the recording as tangible asset has not completed; they are to be Included in the groups in which they are going to be recorded, atthe resulting from the adcition of the actual expenses incurred by their realisation Investments made for excavations, in order to derive value from useful mineral substances, as well {or works of opening and preparation for extraction, both underground and at the surface Investments made to existing fixed assets, under the form of subsequent expenses realised in order improve initial technical parameters and that lead to the obtaining of future economic benefits, increasing the value of fixed assets Investments made from own sources that result in new goods ofthe nature of those belonging tot public domain, as well as the development and modernisation of goods under public ownership Land improvements. 60oF sepitalised expenses related to: hts, licenses, trademarks or production marks and other similar values ‘270 evelopment expenses, which, for accounting purposes, represent intangible fixed 0quired or produced within the business (improvement of intangible assets is a cost of expanded application or a change of use of a a ie Pee Be Oe 24 following assets state given the reason whether itis a tax depreciable fixed asset or no: : Initial | Useful tte | Narrative ; cost | (fiscal) : (Le) | (months) (Audi 8) 120,000 | 60 The car was bought in order tobe a spare car at the managements disposal r are (Ciel) 13,600 | 36 The software is used in the accounting department 1 2 Software (Engish) | 1,500 | 36 ‘The software is used by the management, : Table 3,000 | 120 For the meeting room 20 chairs 10,000 | 120 For the meeting room . : Set of 12 seats 10,800 | 60 The set of seats was used to convert a van in a minibus used to transport employees : Window 2,600 | 36 Used to replace @ broken window of a rented warehouse (the renting agreement is for 4 yrs) Electrical installation | 5,000 | 69 The installation was for the same rented (wires, sockets, etc) warehouse 20 Trees 38,000 | 120 To be planted around the head office ution Unless othernse s ember 2012. 61 peciied, al references in tis course notes material are from the Fiscal Code as t 30LECTURE EXAMPLE SOLUTIONS Solution 2.4 No. | Name Inial cost | Useful tte | Depreciale | Reason (Len | (fiscal) | fixed asset? (mths) 1 | Car(audias) | 120,000 | 60 | n0 |As“spare" car 2 | Software (Ciel) | 13.600 | 36 Yes Used for business 3 | Software 1500 | 36 No It Value is below 4,800 Lei (Engish) 4 | Table 3.000 | 120 Yes Considering that it is used for business purposes 5 | 20.chairs 10,000 | 120 No The value per item is below 1,800 6 | Setot12seats | 10,800 | 60 Yes itis an investment which changes significantly the use of another asset and must be considered as a whole 7 | Window 2600 | 36 No Itis nota separate asset 8 | Electrical 5000 | 60 Yes The investment must be depreciated over installation the period ofthe renting agreement (wires, sockets, etc) 9 | 20Trees 38,000 | 120 Yes Even if itis not for business purposes it qualffes as an investment on the public domain Note: Unless otherwise specific, al references inthis course notes material ae from the Fiscal Code as at 30 September 2012. 761.3 Non depreciable fixed assets 2) Land, including land with forests b) Pictures and art objects ©) Goodwil 6) Ponds, pools, and lakes that do not result from an investment ©) Goods from the public domain that are financed from budgetary sources 1) Any fixed asset that does not lose value over time due to use, as provided by norms 9) Own houses of rest, dwellings of protocol, ships, aircrafts, cruise ships, other than those ut for the purpose of realising income. 2. Depreciation 24 Who can depreciate? The following persons can depreciate: WHO can depreciate? owner lessee (Owned assets Technical appreciation on leased assets Except those leased under financial lease Goods under financial lease 2.2 Input price (Art 7, paragraph 33) ‘TAX (FISCAL) VALUE ~ acquisition or production cost or market value of assets freely received or in exch of share capita. ‘Acquisition cost ‘+ Ifthe asset was acquired for @ consideration. The purchase price includes any costs relating to the: acquisition (as per the accounting rules) Own costs ‘= If producedinstalled by own labour (include appropriate direct cost and overheads). ‘Market value for the assets contributed es share capital Note: Unless otherwise specitied, al references in his course notes material are rom the Fiscal Code as at 30 September 2012, 62new owner of contriuuted asset continues the depreciation started by the original owner butor). In the year of contribution each owner (the original and the new one) includes in their tion the proportion of depreciation given by the time of actual use ofthat asset in the market value of an asset does not affect ts fiscal value, From WHAT amount? roost own cost expert valuation cost if de cary inal oer coses ‘appreciation ical_ appreciation (or technical improvement) means significant expenditure on an nlimprovement to an asset, which prolongs its life or improves its output parameters. It is not @ repair, which is expensed. nical appreciation includes: 2) Extensions ») Additions ©) Reconstruction which alters technical parameters 4) Modemisation, Treatment The value is added to the original input price at the time itis incurred and the increased value is depreciated over the remaining useful life ofthe asset eciation rules ciation should be computed as follows: - 9) Beginning with the month that follows the month in which the depreciable fixed asset is put into operation ) For investment expenses made from own sources to fixed assets from the public domain, over the: Normal period of use, or over the remaining normal period of use or over the period of the contract ‘of concession or rental, as the case may be Unless othenvise spected, al references in his course notes material are ftom the Fiscal Code as at 30 ber 2012,©) For investment expenses made to fixed assets under concession, rental oF Gnd ‘administration ofthe entity that effected (made) the investment, over the period oF fie ‘aciministration contract or over the normal period of use, as the case may be 4) For investment expenses made for (land improvement), on a straight ine basis over (90 period) €) The depreciation of mining buildings and other constructions, sat mines with extraction in solution by wells, quarries, current explotations, for solid mineral substances and those in the industry of of extraction, for which the period of use is limited by the duration of the reserves and which may not be given other uses after the reserves are exhausted as well as investments for uncovering, it be computed per unt of product, depending on the exploitable reserve of the useful mineral substance. The depreciation per unit of product should be computed as follows: ce, Every 5 years for mines, quarries, ol extraction, as well as investment expenses for ‘uncovering 2. Every 10 years for salt mines 4) The means of transport may be depreciated also based on the numberof kilometres or the number ‘of hours of operation as provided for in technical books, for those acquied ater January 1, 2004 9) For workplace dwellings, depreciation is fiscally deductible up to the level corresponding to the constructed area as provided by the law on dwellings 1) For cars used by the management the tax depreciation may be computed up to one car per management person. 3. Depreciation methods ‘The useful lives of tangible assets for fiscal depreciation purposes are established by law (Government Decision No. 2139 of 2004). The first month of tax depreciation is the month following the acquisition date/date when the ‘asset is put into operation (i.e. an asset acquired in May will be depreciated starting from June the same year). For exam purposes it is not necessary to know these useful lives; if necessary, the information will be given to ‘you in the exam questions, ‘Tax depreciation represents a right not an obligation forthe taxpayer. The taxpayer can decide to interrunt tax depreciation, When tax depreciation is started again, itis calculated as if there was no interupton. Methods of depreciation ‘© Straight-ine method of depreciation applies to: * Constructions © Software —overa three (3) years period © Other intangible assets except patents, goodwill and set-up costs ‘© Any other assets which may qualify for the digressive method or for accelerated method Note: Unless otherwise specified, al references inthis course notes material are from the Fiscal Code as at 30 ‘September 2012. 64‘+ Accelerated method applies to: ‘© Technological equipment, respectively machines, tools, and installations, ‘+ Computers and equipment peripheral to computers, © Patents, ‘+ Equipment used in research and development activities, starting from 1* January 2009(art 191 (2) + Digressive method applies to: ‘+ Any assets which does not qualifes just forthe straight-Jine method (but this method is exempt from exam) Technical equipment Straightdine method computers, Patents, Buildings; and any R&D equipment other intangibles except patents Acoelerated method S Digressive method Any other depreciable asset depreciable assets, the tax depreciation is the only allowance permitted for corporate income tax and the accounting depreciation should be added back sllosses resulted from the disposal of 2 depreciable assets are computed using the tax value of the the accumulated tax depreciation ight ine depreciation method depreciation over the depreciation period is always 100% of the input price ofthe asset tion % per year = straightline rate = 12/ total no. of months of useful.live"100 = 1/no of years of useful otherwise speciod, al references inthis course notes material are from the Fiscal Code as at 30 2012. 65‘styear depreciation = (purchase price! total na. efmonms of useful life)" no. of months used during fist year. In subsequent years depreciation = purchase prive" depreciation % per year In the last year depreciation = (purchase price! total no. of months of useful ve)" no. of months used during the last year. Illustration 4 Asset: computer Useful: 3 years (36 months) Purchased: ‘August 15, 2008 Purchase price: 100,000 Lei : Monthly straight in rate = 100/96 = 2.78% Yeatly straight ine rate = 100/3 = 33.33% 2008 Depreciation = 100,000 * 2.78% "4 = 11,111 Lei 2009 - 2010 Depreciation = 100,000 * 33.33% = $3,333 Lei 2011 Depreciation = 100,000 * 2,78% * 8 = 22,228 Lei 32 Straight line depreciation with technical appreciation (improvement) “Technical appreciation is expenditure incurred which increases the input value of a tangible asset. Method «Inthe year of technical appreciation the remaining value is increased by the cost of the appreciation. ‘©The new value is then depreciated over the remaining useful life of the asset ‘+ The technical staff ofthe company that owns the asset may consider an increase of the useful fe of the assets to which an improvement was made. In this case, based on a management decision, the depreciation may be computed on a longer period of time. ‘= ifparts (not fully depreciated) ofthe fixed asset are replaced, the tax net value ofthe replaced parts is deductible expense. Ir parts (uly depreciated) ofthe fixed asset are replaced, the new asset will have new useful fe established by technical expertise. Method of amortisation of technically appreciated intangible asset: «Taxpayer continues amortisation from increased input price reduced by already applied amortisation ((¢. increased tax residual value) over the remairing usel life ofthe asset Note: Uniess otherwise specified, al references in tis course notes material ae fom the Fiscal Code as at 30 ‘September 2012. 66‘+ This is applied as of the month following the month in which technical appreciation was put into operation «The technical improvement ofa fully amortised asset is amortised over the period established by the he technical management of the taxpayer. ation 2 ation of tax depreciation of software acquired through a license agreement for an indefinite period of 14 September 2006, Jicense fee is 500,000 Lei. On 24" August 2008 the taxpayer finalised a technical improvement of this The value of the technical improvement was 450,000 Lei ion of 2006 and 2007 depreciation charge: Monthly depreciation 500,000/38 = 13,889 (rounded up to whole Leu) 2006 annual depreciation 13,889°3 = 41,667 Lei 2007 annual depreciation 13,889°12 = 166,668 Lei Remaining value as at 31 December 2007: 500,000 ~ 41,667 ~ 166,668 = 291,665 Lei tion of 2008 depreciation charge: 2008 depreciation charge for January to August: 13,889°8 = 111,112 Lei Remaining value as at 31 August 2008: 291,665 ~ 111,112 = 180,553 Let ‘The technical improvement was finalised in August 2008. By August 2008, this asset was depreciated cover 23 months. The remaining period of depreciation is therefore 13 months (36 - 23). 2008 depreciation charge for September to December must be computed on the increased remaining value: 180,553 + 450,000 = 630,553 Lei Monthly depreciation 630,553/13 = 48,504 Lei ‘September to December 2008 depreciation charge: 48,504"4 = 194,016 Lei Total 2008 depreciation charge: 111,112 + 194,016 = 305,128 Lei 2009 annual depreciation 48,504°9 = 436,536 Lei Total depreciation ofthe intangible asset = 41,667 + 166,668 + 305,128 + 436,537 = 500,000+450,000 Unless otherwise specified, al references in this course notes material are from the Fiscal Code as at 30 tember 2012. 6Lecture example 2.2 Asset: Useful lif: Purchased Purchase price: machinery 7 years (84 months) 5° April 2004 840,000 Lei ln February 2006 the machinery supported @ technical appreciation for 93,000 Lei which did not change its remain useful if. In December 2008 2 component of the machinery (valued at 10% of the net tax value of the machinery) had to be replaced. The cost ofthe new component was 56,000 Lei Required Calculate straightline tax depreciation charges for the whole life of the machinery and its new component. State and ‘compute if there are any other tax deductions. « Solution Note: Unless otherwise specified, al references inthis course notes material ae fom the Fiscal Code as at 30 September 2012, 68acquisition = 840,000 Lei. cof months: Depreciation | accumulated z Used in] @ | charge Sanreciica (tei) _| Net fiscal value (Le L01 | yeariper (tei) = 840,000°8/84 = += 840,000 ~ 80,000 = = 80,000 760,000 = 840,000"12/84 = £840,000 ~ 200,000 = = 120,000 914,285, = 840,000"2/84= | = 200,000 + 20,000 = | = 840,000 - 220,000 = = 20,000 620,000 = 743,000"10/62 = 115,000 = 620,000 + 93,000 — esa 115,000 = 598,000 = 713,000"12162 15,000 + 138,000 | = 713,000 - 253,000 = = 138,000 53,000 480,000 =713,000"1262 = 713,000 = 391,000 = = 138,000 322,000 = 322,000 - = 148,200 10%*322,000 + 56,000 - 148,200 = 197,600, = 345,800"12/28 148,200 =345,800'12/28= | = 148,200 + 148,200 | =345,800~ 296,400 = = 148,200 96,400 | 49,400 = 345,000°4/28= | = 296,400 + 49,400 = 245,400 345,800 345,800 - 45,800 =0 after technical appreciation the tax value of the assets = the net tax value before improvement + the ‘of improvement = 620,000 + $3,000 = 713,000 Lei to be depreciated over the remaining life ofthe asset as ‘technical improvement date (62 months) 2009, after the replacement of old component, the new tax value ofthe asset is the tax net value before ament — the tax value of the old component + the value of the new component = 322,000 - 10%*322,000 + = 345,800 to be depreciated over the remaining life of the asset as at the replacement date (28 months) tax value of the old component = 10%4"322,000 = 32,200 Lei is deductible expense when replaced (in iver 2008). Unless otherwise specified, all references in this course notes material are from the Fiscal Code as at 30 ber 2012, 7ted depraciation method shall be computed as follows: Forthe fist yar of use: deprecation shall not exceed 60% ofthe entry value ofthe fixed asset (and for exam purposes you will consider 50%) For subsequent years of use: depreciation shall be computed by diving the remaining depreciable value ofthe fixed asset by te remaining normal period of use of the asset computer 3 years(36 months) 30" June 2008 90,000 Lei reciation year 1 (July 2008 - June 2009) = 90,000°50% = 45,000 Lei = 90,000 - 45,000 = 45,000 Lei years: reciation = 45,000 / 24 = 1,875 Lei per month 18 (6 months of. accelerated depreciation): ,000°6!12 = 22,500 Lei (Gmonths of accelerated depreciation and 6 months of straight-line depreciation: 0006/12 = 22,500 Lei» [875°6 = 11,250 Lei Fotal 2009 = 33,750 Lei 10 (12 months of straight-line depr 4,875"12 = 22,500 Lei 2011 Remaining months: 36 ~6 (2008) - 12 (2008) -12 (2011) = 6 months 4,875"6 = 11,250 Lei WUniess otherwise spected al references in his course notes material af rom the Fiscal Code 2s at 3 2012. cyExemption: ‘Taxpayers who invest in fixed assets that are intended forthe prevention of labour accidents and professior illness, as well as fr the creation and operation of medical clinics, may deduct the entire value of the invesime hen computing taxable profit on the date when itis put into operation or may recover these expenses depreciation deductions, as provided by the provisions ofthe present aticle (in certain conditions as provided the law) Note: Uniess otherwise specified all references inthis course notes material are from the Fiscal Code as at 20 Sepiember 70machinery 5 years 10 September 2008 1,000,000 Lei ical appreciation for 150,000 Lei. #3, the main component of the machinery is replaced with a new one costing 300,000 Lei se the technical expertise report, the machinery is expected to run for another 3 years. After the machine is to be depreciated using straight line depreciation, depreciation charges for the whole life ofthe asset. 88 otherwise spected, al references in his course notes material are ftom the Fiscal Code as at 30, 2012. m1Solution 2.3 Accumulated Net fiscal value Year | Coefficient | Depreciation charge | serreciation(Lel) fu) = 1,000,000°50%"3/12 = | = 125,000 = 1,000,000 ~ 125,000 = 125,000 175,000 2008 | 50% * 3/12 = 1,000,000°50%"9/12 375,000 = 1,000,000°50%"3/48, 31,250 50% * 8/48 | = 1,000,000°50%"8/48, 531,250 + 83,333 = 000,000 - 614,583= 83,333 614,583, = 385,417 50th * 9112 25,000 + (976,000 + | = 1,000,000 ~ 531,250 = 31,250) = 831,250 168,750 50% * 3/48 = 535,417 ° 4137 = 535,417 ~ 57,883 = = 57,883, 77,534 = = 505417" 1267 = = 535417 ~ 231,595 = = 173,682 eee = 635,417 * 12187 = 535,417 ~ 405,187 = 2012 = 173,652 130,230 = 535,417 * 9137 = 2013 = 535,417 ~ 596,417 =0 130,230 fe os = 300,000 - 25,000 = 2013 10,000°3/36 = 25,000 275,000 300,000"1236 25,000 + 100,000 = | = 300,000 - 125,000 a 100,000 125,000 175,000 = 300,000°12/36 = 126,000 + 100,000 = | = 300,000 - 225,000 = a 00,000 225,000 75,000 = 225,000 + 75,000 = 300,000 = 300,000 - 300,000 = 0 2016 += 300,000°9/36 = 75,000 * the remaining useful life at the improvement date = 60-(3+12+8) = 37 months. The asset will depreciate starting with its new, increased by the improvement, value of 385,417 + 150,000 = 835,417 Lei, by straight line depreciation method. * When the improvement is done over a fully depreciated asset, the new tax value of the asset is the value of the new component and the new useful life isthe one given by the technical expertise report ‘Note: Unies otherwise specified, all references inthis course notes material are from the Fiscal Code as at 30 ‘Septemiber 2012, 784, Impairment of fixed assets In accordance with article 7, paragraph 1.33, letter c, in case of impairment, the fiscal value of the asset should not be affected, ‘The impairment expense is not 2 deductible expense: consequently it should not affect the deductible depreciation expense too. The only case when impairment may have impact on the tax value of an asset is when the impairment occur after € positive revaluation surplus. In this case the value of this impairment will decrease the revaluation surplus. If the value of the impairment is above the revaluation surplus, just the revaluation surplus will be eliminated from the tax value of the asset Lecture example 24 Asset equipment Useful life: 10 years ¥ Purchased: 48 October 2004 Purchase price: 720,000 Lei In December 2005 the equipment was technically appreciated by 60,000 Lei and consequently its fiscal remaining life was increased by 2 yeas. In December 2008 the company decide that the equipment needed an impairment provision of 30,000 Lei. In April 2009 the equipment was sold for 260,000 Lei ‘The company depreciated the equipment using the accelerated method, Required Calculate the tax depreciation charges for the equipment as well as the tax loss/gain from the sale of this equipment forall relevant years. Solution Note: Unless othenise specified, al roferences inthis course notes mater rom the Fiscal Code as at 30 September 212 nrate = 720,000°S0% = 360,000 from 1 November 2004 until 31% October 2005, depreciation after 1* year = residual value/remaining lif (720,000 - 360,000)/12"(10 - ‘of accelerated depreciation) ion charge = 720,000 *50% * 2/12 = 60,000 lei ‘of accelerated depreciation and 2 of straight-line depreciation) ion charge = 720,000 * 60% * 10/12 + 3,333.33 * 2 = 306,667 Lei ‘equipment before improvement = 720,000 — 60,000 ~ 306,667 = 353,333 Lei of the equipment after improvement = 353,333 + 50,000 = 403,333 Lei i life as from improvement = 120 ~2-12-+24 = 130 months ‘deductible depreciation charge = 403,333/130 = 3,102.56 Lei nual deductible depreciation charge = 3,102.56 * 12 = 37,231 Lei has no impact on the fiscal value ofthe asset. reciation charge = 3,102.56 * 4 = 12,410 Lei (of the equipment when sold = 403,333 -37,231*3 -12,410 = 279,230 Lei sale = 279,230 ~ 250,00 29,230 Lei ‘otherwise specie, al references inthis course notes material are from the Fiscal Code as at 30 2012 79jation of fixed assets with article 7, paragraph 1.33, letter 0, in case of increase of fixed assets value through inorease should affect the fiscal value too. the deductible depreciation expense will increase too. 2s the revaluation reserve (Which leaded to an increased depreciation expense) was nat taxed (via incomes}, in accordance with article 22, paragraph 5, any deorease! change of destination of the be considered assimilated income and taxed accordingly. ion 5 building 50 years(600 months) 20" September 2006 yn cost: 3,000,000 Lei ithly deductible depreciation is 3,000,000/600 = 5,000 Levmonth December 207, the building was re-valued at 4,000,000 Lei June 2008, the building was sold for 5,000,000 lei and the revaluation reserve was reclassified as ted earnings, evaluation date, the remaining useful feof the building is 600-3-12 = 585 months net fiscal value ofthe building before revaluation was: (000 * 585/600 = 2,925,000 Lei ‘surplus due to revaluation is 4,000,000 — 2,925,000 = 1,075,000 Lei (showed by the increase of tion reserve) revaluation, the monthly deductible depreciation charge is 4,000,000/585 = 6,838 Leimonth ‘due to revaluation the company will increase its deductible expenses due to depreciation each month by n the building was sold, its net fiscal value is 4,000,000 * (585-6)/585 = 3,958,972 and the fiscal gain the sale ofthe building is 5,000,000 ~ 3,958,972 = 1,041,028 Lei , in accordance with article 22 (6), an assimilated income should be consider equal to the value of lution reserve transferred to retained earings = 1,075,000 Lei. Unless othenvise specified, all references in his course notes material ae ftom the Fiscal Code as at 30 ber 2012 BFinally, for that building, which cost 3,000,000 Lei, the fiscal deduction wes = §,000°15+6,838"6 = 116,028 Lei through its consumed life and ~ 3,958,972 Lei when sold The amount totally deducted being = 4,075,000 ‘And when sold, the taxable income related to it was: 6,000,000 + 1,075,000 = 6,075,000 ‘So, the fiscal gain related to this building is 6,075,000 ~ 4,075,000 = 2,000,000 Lei which is exactly the difference between the sale value and the acquisition cost. Reminder: In case when a revaluation resuts in a decrease of value, i.e. in an impairment, the Impairment should nat affect the tax value of the asset. The only case when impairment may have impact on the tax value of an asset is when the impairment occur after a positive revaluation surplus. In this case the value ofthis impairment wil decrease the revaluation surplus. Ifthe value of the impeiment is above the revaluation surplus, just the revaluation surplus will be eliminated from the tax value of the asset Starting with 1 May 2009, according to the art 22 (6'), any revaluation surplus should be taxed via an assimilated income throughout the if ofthe asset. The assimilated income should be equal to the deductible depreciation ofthe revaluation surplus: Illustration 6 Asset: building Useful ite: 50 years(600 months) Acquisition date: 20 September 2008 Acquisition cost: 3,000,000 Lei ‘The monthly deductible depreciation is 3,000,000/600 = 5,000 Leilmonth On 31# December 2008, the building was re-valued at 4,000,000 Lei ‘tthe revaluation date the remaining useful fe ofthe building is 600-3-12 = 585 months and the net fiscal value of the building before revaluation was: 3,000,000 * 585/600 = 2,925,000 Lei ‘The surplis due to revaluation is 4,000,000 ~ 2,925,000 = 1,075,000 Lei (showed by the increase of revaluation reserve) Note: Unless otherwise specie, all references inthis course notes material are from the Fiscal Code as at 30 September 2012. 4on the monthly deductible depreciation charge is 4,000,000/685 838 Lelimonth the company will ncrease its deductible expenses due to depreciation each month by 1,838 Lei ce with the article 22 (5§), an assimilated taxable income should be recognised too, and be equal to the deductible depreciation of the revaluation surplus: (075, 000/585 = 1,838 Lei starting with 1* May 2008, the revaluation will no longer impact the taxable profits because in deductible tax depreciation due to revaluation is cancelled by the assimilated income and it tponing effect discussed in Illustration 6, building 50 years December, 2006 120,000 Lei 130,000 Lei June 2007 December 2010 100,000 Lei 80,000 Lei September 2011 g, the revaluation reserve was transferred to retained earnings. CCaloulate the tax depreciation charges and any assimilated income used in the computation of taxable profits throughout the usage of the building. Calculate any fiscal adjustments related to the sale of the building. Unless othenvise specified, al references in his course notes material ae from the Fiscal Code as at 20 ember 2012. 5———————==<——— i i Solution 2.5 a) += 120,0001600 = 200 Lei/month ‘Monthly deductible depreciation charg “The assets aoquied in December 2006 => no deduce epreicton in 2006 2007 Unt revaluation, deductible depreciation charge = 6° 200 = 1.200 Lei Net tax value before revaluation = 120,000 ~ 1,200 = 118,800 Lei and the remaining useful life = 600 - 6 = 5 months, Tax value after revaluation = 130,000 Lei = “The revaluation surplus = 130,000 - 118,800 = 11,200 Lei ew monthly deductible deprecation charge = 130,000 / 594 = 218 Letimonth Depreciation charge after revaluation in 2007 = 219°6= 1.314 le so total deductible depreciation in 2007 = 1,200 + 1,314 = 2.514 Lel 2008 Deductible depreciation charge = 219 * 12= 2,628 Lei 2008 Deductible depreciation charge = 219 * 12 = 2,628 Lel ‘Assimilated income fram amortisation of revaluation surplus to Be recognised stating with 1* May 2009 = = 11,200 * 81594 = 152 Lei 2010 Deductible depreciation charge = 219° 1 2,628 Lei Assimilated income from amortisation ofrevaiuation surplus = 11,200" 21594 = 228 Lei 2011 Remaining usetl fe aftr revaluation = 594 ~6-12°3 = 582 ‘months Tax valve of the asset = depreciated ial cost + deprecated revaluation surplus = 120,000°552600 + 41, 200°$52!594 = 110,400 + 10.408 = 120,808 Le! Impairment value= 120,808 ~ 100,000 = 20,808 Lei ‘The impact ofthe impainment may nt be above the nt tax val of revaluation surplus = 10,408 Lel=> => the new tax value of the bulling 10,400 Lei ote Ustess cherion spiel timsenemnesinsis comes cts mts > from the Fiscal Code as at 30depreciation charge 10,4001852 = 200 Lei again) charge for 2011 = 200"9 = 1,800 Lei ing wien sold = 110,400 ~ 1,800 = 108,600 Lei sale = 80,000 ~ 108,600 = (28,600) Lei ‘fom transfer of revaluation reserve = (219 ~ 200)(6+12+4) = 418 Lei Seductions in respect of the bulding = * 5°2,628 + 1,800 = deductible depreciation recognised l value ofthe building when sold incomes in respect ofthis building: End of chapter Sines Species al references in tis couse noles mari are om the Fiscal Code a at 30 012. 8