Change of depreciation method - fixed assets


As a rule, every entrepreneur who has fixed assets in his company has the right to make depreciation write-offs. The depreciation write-offs are made from the initial value of the fixed asset in accordance with the previously selected depreciation method. What if depreciation turns out to be inadequate? Is it possible to change the depreciation method?

Fixed assets according to the Accounting Act

In accordance with the Accounting Act, fixed assets are tangible fixed assets and equivalent assets with an expected useful life longer than one year, complete, fit for use and intended for the needs of the entity.

Change of the depreciation method and fixed assets according to the PIT Act

Fixed assets are also mentioned in the Personal Income Tax Act. It is true that the aforementioned legal act does not provide an unambiguous definition of them. The PIT Act, however, indicates that fixed assets are owned or jointly owned by the taxpayer, acquired or manufactured on their own, complete and fit for use on the date of acceptance for use:

  • structures, buildings and premises owned separately,

  • machines, devices and means of transport,

  • Other items,

with an expected period of use longer than a year, used by the taxpayer for the purposes related to his business activity or put into use on the basis of a rental or lease agreement or an agreement specified in art. 23a point 1.

Changing the method of depreciation - features of fixed assets

Accordingly, a fixed asset is an asset with an expected useful life of more than 1 year, which:

  • is owned or jointly owned by the taxpayer,

  • was purchased or manufactured on its own,

  • it is complete and serviceable,

  • it will be used for business purposes or will be put into use on the basis of a lease, tenancy or lease agreement.

Depreciation of fixed assets

Depreciation of a fixed asset consists in systematically writing off a part of its initial value to costs in connection with its consumption. Depreciation may begin no sooner than after the fixed asset is put into use. The end of depreciation takes place no later than when the value of depreciation is equal to the initial value of the fixed asset or the fixed asset is designated for liquidation or sale.

According to the regulations, there are several methods of depreciation:

  • linear depreciation

  • degressive cushioning

  • progressive depreciation

  • one-time depreciation

The choice of the method of depreciation of the fixed asset should be carefully considered.

Change in the depreciation method

Once selected, the depreciation method cannot be changed. However, by selecting the depreciation method, the first depreciation write-off with the use of a given rate is recognized.

The change of the depreciation method cannot be made also when the entrepreneur inadvertently started depreciation of the fixed asset at a different rate than previously planned. Making the first depreciation write-off is tantamount to making the final decision on the depreciation method, and as already mentioned, this decision cannot be changed.

Change of the depreciation method and the position of the tax authorities

The position presented above is in line with the position of the tax authorities. An example may be the individual interpretation of the Director of the Tax Chamber in Katowice of December 29, 2011 No. IBPBI / 1 / 423-48 / 11 / ZK. The individual interpretation concerned the case of a company which, due to an accounting error, started to depreciate a fixed asset using the straight-line method, despite the fact that, in accordance with the resolution, the company decided to use the individual depreciation rate, which would significantly shorten the depreciation period.

“(...) the taxpayer selects the period for which it will depreciate a given fixed asset. This selection, in accordance with the provisions of tax law, for individual fixed assets is made before the commencement of their depreciation. At the same time, the taxpayer is obliged to use the selected method to fully depreciate a given fixed asset. (...) since the Company started depreciation of the fixed asset indicated in the application using one of the depreciation methods specified in art. 16i-16k above. of the Act, the chosen method should be applied to fully depreciate this fixed asset. (...) The circumstances indicated in the application resulting from the employee's error may not modify the rules resulting from legal provisions, and the consequences thereof must be borne by the taxpayer himself ".