<![CDATA[Businesses use a variety of fixed assets, such as equipment, furniture, tools, machinery, buildings, and land. Fixed assets are long term or relatively permanent assets. They are tangible assets because they exist physically. They are owned and used by the business and are not offered for sale as part of normal operation. Other descriptive titles for these assets are plant assets or property, plant, and equipment. Fixed assets, except land, such as equipment, buildings and land improvements lose their ability, over time, to provide services. As a result, the costs of equipment, buildings and land improvements should be transferred to expense accounts in a systematic manner during their expected useful lives. This periodic transfer of cost to expense is called depreciation. Factors that cause a decline in the ability of a fixed asset to provide services may be identified as physical depreciation or functional depreciation. Physical depreciation occurs from wear and tear while in use and from the action from the weather. Functional depreciation occurs when a fixed asset is no longer able to provide services at the level for which it was intended.  Pursuant to article 11 of Act No. 17/Year 2000 about Income Tax, tangible assets are grouped as Buildings and Non-Building. Buildings are divided into Permanent and Non-Permanent. The only depreciation method used for Buildings complied with Act No. 17/Year 2000 is Straight Line Method. But there is choice of methods for Non-Building, Straight Line Method or Declining Balance Method. If Declining Balance Method is used, it will accelerate the depreciation. Another way to accelerate the depreciation is to short expected useful life of fixed asset. But this way cannot be done for the assets expected useful life has already been fixed on by government. Is there any benefit of using Declining Balance Method ? ]]>
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