Depreciation 

Although there is a UK country version for the configuration of fixed assets (see Customizing for Financial Accounting, by choosing Asset Accounting ® Organizational Structures ® Check Country-Specific Settings), the UK accounting requirements do not prescribe in detail specific rules with regard to depreciation of assets. There are no legally defined amounts for low value assets or depreciation changeover rules, for example. However, there are certain common business practices in the UK, as listed below:

·        Depreciation types

The most common depreciation types used in the UK are ordinary depreciation and unplanned depreciation. Special depreciation is not normally used because tax depreciation is not known in the UK. Capital allowances are made for capital expenditure against profit to determine taxable profits.

For more information about depreciation types, see Depreciation Types.

·        Depreciation methods

The most common depreciation method used in the UK is straight-line depreciation, as this is the simplest to implement.

For more information about depreciation methods, see Depreciation Methods.

·        Period control

In the UK, it is usual to start depreciating assets in the month of acquisition and to end depreciation in the month of disposal. Tax rules do not influence period control.

For more information about period control, see Period Control Method.

·        Revaluations

Although company accounts in the UK are prepared under the historical cost convention, UK companies do incorporate revaluations of fixed assets (in particular freehold and leasehold property) into the accounts by allowing revaluations in the book depreciation area or by creating a separate depreciation area (recommended when reporting differences between historical and revalued amounts). Companies in the public sector are often required to revalue assets under indexation (modified historical cost convention) and again usually use a separate depreciation area to store these indexed revaluations.

For more information about depreciation areas, see Depreciation Areas.

For general information about depreciation, see Depreciation.