Examples of Assets that are Amortized

In economics and accounting, it is called amortization to the recording of the loss over time of the value of a given good (that is, asset depreciation), and also to the reduction of a debt contracted through periodic payments (that is, amortization of liabilities). In both cases, it is a negative change in the value of a well (or a debt).

Goods, in general, always have a useful life, that is, a maximum period of usefulness over which begin to lose their validity or decrease in value, due to wear suffered or the simple course of time. weather. And amortization is nothing more than the accounting record of said loss of value. In practice, “depreciation”, “impairment” and “amortization” are used as synonyms, but should not be confused with “depletion”, a term applicable to raw Materials and natural resources.

The amortization process reduces the value of the assets as they are used or as time passes, and once their useful life has elapsed, they are only left with a "residual value", understood as the amount of money that can be obtained through the sale of the good amortized. To calculate the

percentage amortization of an asset, that is, the rate at which its value decreases over time, the following formula is applied:

Amortization percentage = 100 / years of estimated useful life.

For example, if we buy a motorcycle whose estimated useful life is about 10 years, it will have an amortization percentage of 100 / 10, that is, 10%. That means the motorcycle loses 10% of its value due to wear and tear in every year of its life. After 10 years, it will only have a residual value.

What types of assets are depreciated?

In general, all tangible assets are amortized, except those that by their nature are self-replenishing, or are inexhaustible or renewable, or for some other reason do not suffer wear. For example, arable land is not amortized, as long as the necessary crop rotation processes are carried out so as not to deplete the soil. If the latter occurs, however, the land will lose its productive value and therefore also its commercial and real estate value. Nor are works of art, which gain value over time, nor archaeological remains or sites amortized.

Examples of assets that are depreciated

Examples of depreciable assets are the following:

1. Production machinery and tools, whether automated or manual handling, such as harvesters, frayers, textile machines or hydro-pneumatic drills.
2. Vehicles of all kinds and other transportation devices: automobiles, motorcycles, planes, boats, boats, forklifts, among others.
3. Furniture such as tables, chairs, sofas, desks, tables, beds or bookcases.
4. Electronic devices such as computers, cell phones, tablets, televisions, video game consoles, among others.
5. Buildings intended for housing, commerce or production.
6. Refrigeration devices (fridges, freezers, air conditioners) or heating devices (heaters, hot water tanks, kitchens).
7. Lighting devices such as lamps, flashlights, light bulbs, among others.
8. Clothing of all kinds: footwear, garments, ornaments and accessories.

References:

• "Amortization" in Wikipedia.
• "Depreciation of fixed assets" in the University of La Punta (Argentina).
• “Accounting and tax amortization. What are they and what differentiates them? UP Spain (Spain).
• "Valuation of fixed assets"in CREATES.

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