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Tangible fixed assets

Fixed = long term asset

Used during more than one accounting period
Intangible = no physical substance (e.g. patent)
26 Other tangible fixed assets (assets no longer used by the company itself e.g. rent
27 Assets under construction and advance payments (e.g. the company builds a building for
its use)
Belgian chart of accounts (continued)
0 for the cost of acquisition price you paid for the asset
8 for revaluation surpluses related to an increase in value of your asset
9 for accumulated depreciation and amounts written off record a decrease in the value of
your asset
NOTE: this level of detail is required for the notes to the financial statements
tangible fixed assets vs. inventories
the purpose for which the asset is held
(i.e. own use vs. resale) e.g. a company that sells cars -> cars are inventory
Company that uses a car on daily basis -> tangible fixed asset
tangible fixed assets vs. expenses
longer useful life (cf. definition: more than one accounting period)
Expense consumption; not used for more accounting periods;
For small amounts, companies are going to record them as expenses instead of tangible fixed
assets. (e.g. small pocket calculator)

Cost of acquisition account ending in 0

purchased asset
purchase price + additional expenses (e.g., transportation, installation expenses),
excluding refundable taxes
(e.g. VAT) e.g. buying a machine that includes transport or installation
Cost of acquisition (continued)
internally constructed asset

direct expenses (raw materials, labor expenses, etc.) + indirect expenses (i.e.,
overhead administration/administrative personnel)
interest expenses (up to the moment that the asset is ready for use) can be included
offsetting expenses by means of accounts (60, 61, 62, 65, ) part of these relate to
the construction of the building, but there is a difference between expenses and
tangible fixed assets
60, 61, 62 operating expenses
72 Fixed assets Own construction (i.e., in order to offset operating expenses)
6503 Interests capitalized (-) (i.e., in order to offset interest/financial expenses); the minus
refers to a negative expense
Capitalized = recorded as an asset
These corrections are made in order to take them out from expenses, but keep the actual
expenses accurate.
We transfer the assets under construction to the tangible fixed asset account
We credit the account of assets under construction - cost of acquisition to close it
We debit the account of tangible fixed assets (e.g. 2210 buildings), for cost of
The company buys the tangible fixed asset from itself => invoice => VAT paid to
itself => both VAT to be reclaimed and VAT due; you collect VAT from yourself to get
it from tax authorities, but in the end they offset each other so it doesnt matter on
the exam VAT is not expected to be shown
Cost of acquisition (continued)
assets under financial leasing will be discussed in the Liabilities chapter

financial leasing = tangible fixed asset + long-term liability

financial leasing will be discussed in the chapter on liabilities

Depreciation account ending in 9

the systematic allocation of the depreciable amount (= the actual cost) of an asset over its
useful life; spread the cost of the asset;
depreciable amount = normal cost/first cost residual value
useful life estimate (e.g. no. of years, kilometers)
e.g. you buy a car for 25 000 and use it for 5 years and after 5 years you sell it for 5 000.

rational manner (i.e., link with reality)

systematic manner (i.e., consistency!)


depreciable amount

cost of acquisition residual value

with residual value = the net amount which the enterprise expects to obtain for an asset at
the end of its useful life (i.e., after deducting the expected costs of disposal) it is an estimate

useful life
period of time
number of production output

often affected by tax rules

depreciation method
alternative methods have been developed (cf. infra)
the appropriate method should be selected

most frequently used methods

straight-line method each year exactly the same amount of depreciation

depreciation expense = depreciable amount/useful life

[the impact on the income statement is stable over time]
Depreciation table = for each asset: cost of acquisition, (depreciable amount and rate
not necessary), annual depreciation expense, accumulated depreciation, net book value
6302 depreciation of tangible fixed assets; we debit the account at the end of the year
The final netbook value corresponds to the estimated residual value.
declining balance method

depreciation expense = DB rate x net book value

DB rate = 2 x straight-line rate (max. rate = 40%)
[the impact on the income statement decreases over time]
With DB the depreciation expense gets smaller every year.
In Belgian accounting, if the DB depreciation expense is smaller than the SL
depreciation expense, you have to start using the SL method.
When making the table, we have to make sure we never go below the residual value.
With DB, there are at first bigger depreciation expenses and then they get smaller.
6302 debit
29 credit
7601 when you recorded too much depreciation

Revaluation an increase in value

if the value of an asset indisputably and durably exceeds its book value AND justified by the
firms profitability
depreciation should be based on the revalued amount
Belgian chart of accounts
121 Revaluation surpluses credit; part of equity
2..8 - Revaluation surpluses debit; its an increase in tangible fixed assets
You have to be profitable as a company in order to record a revaluation.
We are not recording an equity, but decreasing equity
If the useful life doesnt change, we need to increase the depreciation expenses in order to
obtain the planned residual value.
Disposal of a tangible fixed asset
the asset has to disappear from the firms accounts
i.e., close all accounts related to the asset
gain or loss?
i.e., compare sales price with NBV
663 Loss on disposal of tangible fixed assets we sell our asset for less than the Netbook
763 Gain on disposal of tangible fixed assets
The asset should disappear from the companys accounts. We need to close all the accounts.
When we sell the tangible fixed asset, we cannot use account 400, this is not a regular trade
debtor. We use account 416 other amounts receivable.
Discontinuation of a tangible fixed asset
the asset has to be transferred to the 26-account group
Tangible fixed assets that are no longer used by the company