Fixed assets of an enterprise: types and valuation
The purchase of property, machinery or a company car will also be reflected in your financial statements. How to value and account for the assets correctly so that everything stands up to scrutiny from the tax office? Just keep a few principles in mind.
What is a fixed asset?
According to them, fixed assets are generally considered to be such assets of a company whose expected useful life is longer than 1 year and whose purchase price exceeds a certain limit.
Fixed assets are divided into 3 categories:
Property, plant and equipment (PP&E)
From a tax perspective, most real estate and separate movable assets (e.g. machinery and cars) with a value of more than CZK 80 000 (if they have operational and technical functions for more than 1 year) are considered fixed assets. Furthermore, this group includes their technical improvements (e.g. reconstructions or extensions), adult animals and their groups with a value exceeding CZK 80,000 and several other types of property listed in §26 of the ITA.
From the point of view of corporate accounting, this group generally includes assets with a useful life of more than 1 year - the minimum value for inclusion of assets in this category is determined by the company itself on the basis of internal regulations.
Tangible fixed assets are further divided into 2 types:
These are assets that wear out over time and lose their value. These are typically buildings, vehicles, livestock or fruit trees. Their wear and tear is accounted for by depreciation.
Depreciation both reduces the book value of the asset and, under certain conditions, can be claimed as a tax deductible expense.
2) Not depreciated
These are assets that in turn appreciate in value over time. This includes land, artwork and collections. These assets are not depreciated.
Tangible fixed assets are most often accounted for in accounting groups 02 (depreciated tangible fixed assets) and 03 (non-depreciated tangible fixed assets). They then appear in the balance sheet as assets, just like other types of fixed assets.
In addition to these categories, in practice we also see so-called small tangible fixed assets. This has a useful life of more than 1 year but a value of less than the statutory CZK 80 000.
From a tax point of view, it is accounted for as a one-off tax expense (until consumption) or it is depreciated and accounting depreciation is used as a tax expense.
Intangible fixed assets (DNM)
Intangible fixed assets is a slightly more abstract concept. These are things that are intangible in nature but have a book value.
These include software, research and development results (such as patents), valuation rights or brand goodwill, i.e. the difference between the market value of a business and the value of its assets.
Accounting for DNM is carried out in account group 01.
Fixed financial assets (DFM)
Long-term financial assets include mainly securities, shares in other companies, loans and the like (all with a maturity of more than 1 year).
DFM is not used for operating activities, but it provides the enterprise with various revenues or influence in other companies. DFM is accounted for in account group 06.
|Type of fixed asset
|Classification criterion (useful life/value)
|>1 year / over 80 000 CZK
|buildings, machines, vehicles
|yes, accounting and tax depreciation
|tangible not depreciated
|>1 year / over CZK 80 000
|land, works of art
|>1 year / under CZK 80 000
|is depreciated if it is not included in consumption
|according to the company's internal regulations (groups for DHM or inventories)
|mostly yes, only accounting amortisation
Valuation of fixed assets
The correct valuation of assets in the company's accounts is also important. This is because it must, by law, faithfully reflect the current condition and value of the company's assets. Fixed assets are valued in one of 4 ways:
This is the price at which you purchased the asset. This is the cost of acquisition + incidental acquisition costs (e.g. shipping, assembly, duty).
On the other hand,you do not include exchange rate differences or repair costs.
This is the price at which the asset would have been acquired at the time it is accounted for. It is determined by professional appraisal. Reproduction cost is used to value donations or assets for which the original cost cannot be determined.
Have you manufactured the asset directly in your business? Then its book value takes into account all direct (e.g. materials, workers' wages) and indirect (e.g. energy, production hall rent) costs of its production.
You usually value financial assets, typically securities, at their nominal value. However, as their value often fluctuates, some securities must be revalued to fair (market) value at the balance sheet date in accordance with Section 27 of the Accounting Act.
Accounting on the left
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