---
tags: t1.gl/3Accounting
---
# Fixed Asset Depreciation

:::info
:link: Cite this document via t1.gl/3Accounting-Depreciation
↖️ This document is a part of t1.gl/3Accounting.
:calendar: This is **v1.1** updated on 2021-10-06 by Jennifer.
✔️ CFO Review: **v1.0** approved on 2021-09-27 from Doughty
✔️ CEO Review: **v1.0** appoved on 2021-09-27 from Edwin
Please consider this version to be in **RPRODUCTION**.
:::
:::success
**Important Links**
1. All Fixed Assets must be purchased per t1.gl/Equipment.
2. This [Depreciation GSheet](https://docs.google.com/spreadsheets/d/1pLTy9loccP9Oo09faZinHilOt8pTs_TZl6r9eQiZm3k/edit#gid=1471416895) includes our Fixed Assets and Depreciation Schedules.
:::

[TOC]

## Policy
:::info
Both Hong Kong and Taiwan are covered by this group policy.
:::

The following items are are categorized as Fixed Assets and must be purchased according to our procedures at t1.gl/Equipment and recorded in [Airtable/3Accounting/Fixed Assets](https://t1.gl/Equipment-List):

| # | Category | Notes / Exceptions |
| - | -- | -- |
| 1 | Laptops |
| 2 | Monitors |
| 3 | eBook Readers |
| 4 | Expensive Phones | Except cheap phones <HKD2,000
| 5 | Expensive Headphones | Except cheap headphones <HKD2,000
|| Category Not Listed | Raise request for new category per below.

New categories of Fixed Assets will be considered if they have an estimated useful life of 12+ months and usually cost more than HKD2,000.

To suggest new categories of Fixed Assets, please raise a request to update this document AND t1.gl/Equipment. This is important so we can consider providing standards for the new equipment category.

All Fixed Assets must be capitalized and depreciated (currently straight-line over 2 years with no salvage value.)

#### CHANGELOG

| v | Date | Who? | What? |
| -- | -- | -- | -- |
| v1.1 | 2021-10-06 | Jennifer | Procedures for quarterly asset audits have been added

## Procedures
### 1. Purchase a New Fixed Asset
This must be approved and recorded to airtable per procedures at t1.gl/Equipment.

### 2. After Purchase Accounting

The actual costs (plus all ancillary costs) should be logged to the appropriate account in QBO along with all applicable supporting documentation and invoice (Most likely, it will be a computer equipment and need to be logged to 170-010 Computer Equipment)

### 3. Annual Depreciation

To compute depreciation, we use the straight-line method with an annual rate of 50% and no salvage value.

##### Example

> Asset: MacBook Air 2019
Purchased Price: HK$9,000
Purchased Date: 22 Dec 2020

> 2020 Depreciation:
9,000 * 50% = 4,500

> 2021 Depreciation:
9,000 * 50% = 4,500

#### Calculate Annual Depreciation (DEADLINE 15 Jan)

:::warning
This should be done annually when we are doing yearly closing.
:::

1. Verify that new acquisitions of fixed assets during the year are recorded in [GSheet > 3Accounting > Depreciation](https://docs.google.com/spreadsheets/d/1pLTy9loccP9Oo09faZinHilOt8pTs_TZl6r9eQiZm3k/edit#gid=1471416895).
1. Calculate the yearly depreciation by adding a row and dragging the formula down to the output section (column V to BA), then export as a pdf.
2. Under the 'Depreciation - Accounting' section, obtain the depreciation amount.
3. Separate journal entries should be made for T1HK and T1TW QBO dated as of the last day of that calendar year, attach the PDF, and verify they comply with t1.gl/3Accounting-Journal.
The journal entries should be:
**DR** 666-160 #3IT:Depreciation of Computer Equipment
**CR** 170-011 Fixed Assets:Computer Equipment:Depreciation
5. Send the following email to Brian and Edwin for approval.

---

> TO: [e-mail], [e-mail]
> CC: [e-mail]
> SUBJECT: [t1.gl/DECISION @Doughty @Edwin] t1.gl/3Accounting-Depreciation Entry

Hello,

Per t1.gl/3Accounting-Depreciation, I request creating the following journal entry for depreciation. This [Depreciation Gsheet](https://docs.google.com/spreadsheets/d/1pLTy9loccP9Oo09faZinHilOt8pTs_TZl6r9eQiZm3k/edit#gid=1471416895) contains the calculations.

Brian - Please provide 1st approval to this request.
Edwin - Please provide 2nd approval after Brian's.

This request requires explicit approval. =={Insert any information about deadlines or urgency here.}==

|Proposed Journal | T1HK | T1TW |
| -- | -- | -- |
| Date | {YYYY}/12/31 | {YYYY}/12/31
| Amount | HK${AMOUNT} | TW${AMOUNT}
| DR Account | 666-160 #3IT:Depreciation of Computer Equipment | 666-160 #3IT:Depreciation of Computer Equipment
| CR Account | 170-011 Fixed Assets:Computer Equipment:Depreciation | 170-011 Fixed Assets:Computer Equipment:Depreciation

Thanks,

### Procedures for quarterly asset audits

Audits of assets should be conducted at each quarter's closing to ensure that [Airtable (3accounting / Fixed Assets)](https://airtable.com/shr2Ir73kGqzzihqh) is aligned.
1. Check the number of spare laptops/kindles available and make sure it is correct.
2. Count the total number of monitors available in both the HK and TW offices.
3. Specify the date of the this audit in the 'Last Verified' field.

---

## Tax Ramifications
### Taiwan

According to [Income Tax Act - Article 54](https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?pcode=G0340003)
> - For valuation of depreciable fixed assets, accumulated depreciation accounts must be established and presented as deductions of the respective assets. The depreciation of fixed assets must be presented on an annual basis.
> - When the depreciation of fixed assets is computed, the salvage value must be estimated. The balance after deduction of the salvage value shall be used as the basis for the computation.
>- If a fixed asset continues to be used after expiration of its duration limit, such asset can continue to be depreciated using the salvage value thereof.

[Depreciation table from Taiwan Government](https://law-out.mof.gov.tw/LawContentSource.aspx?id=GL010207) - Chinese only
(Computer equipment falls under 20 - 32002 with a three-year useful life)

#### Current Practice
Due to differences in tax regulations and company policy, depreciation expenses differ both financially and tax-wise. A separate fixed asset register must be prepared by JCK during EIT filing, at a cost of TWD 1,500+.

### Hong Kong
According to [Depreciation Allowance](https://www.ird.gov.hk/eng/tax/bus_pft.htm) from IRD for Plant and Machinery
> * Initial allowance: 60% on the cost
> * Annual allowance: at rates of 10%, 20% or 30% as prescribed by the Board of Inland Revenue in the Inland Revenue Rules, on the reducing value of the asset. Items qualifying for the same rate of annual allowance are grouped under one "pool".
> * A balancing allowance is available only on cessation of a business to which there is no successor. A balancing charge can, however, arise whenever the disposal proceeds of one or more assets exceed the reducing value of the whole "pool" of assets to which the disposed items belong.

According to our HK Auditor

> Based on latest computers innovations and useful life, usually new models of computers released for every 2 years, i.e. 50% per annum. Also, no effect on tax computation and for internal accounting only. As computer hardware and software is 100% deductible when acquired.

#### Current Practice
Our policy aligns with auditor's practice and meets IRD requirements.