Asset Retirements and Transfers 

Use

When you retire part of an asset, or transfer part of it to another asset, the asset’s acquisition and production costs (APC) decrease.

The tax law requires you to recognize such decreases in your property tax declaration. Therefore, when you run the Property Tax Report, it automatically adjusts the starting tax book value and the starting tax evaluation amount proportionately to the decrease in the APC over the course of the year.

Example

On February 1, you purchase an asset for JPY 41,980,000. The asset has an estimated useful life of five years. For the purposes of calculating the tax book value, the prescribed depreciation rate for assets with useful lives of five years is 36.9%.

In the first year, the asset’s tax book value is:

JPY 41,980,000 – (JPY 41,980,000 × 0.369 × 11/12) = JPY 27,780,265

Its tax evaluation amount is:

JPY 41,980,000 × 0.815 = JPY 34,213,700

The next year, you post a partial retirement of JPY 20,990,000, which reduces the asset’s APC by 50%. The asset’s APC minus the partial retirement is therefore also JPY 20,990,000.

When you run the Property Tax Report, it automatically adjusts the starting tax book value (and the tax evaluation amount) in proportion to the change to the asset’s original APC. So instead of JPY 27,780,265, it sets the starting tax book value to JPY 13,890,132.50, and it reduces the starting tax evaluation amount to JPY 17,106,850.