Depreciation and Amortization

By :
Tantri Widya Sari
Oktavika Alrina Mardianti

Depreciation and Amortization

According to Article 6, paragraph (1) of Law
No. 7 of 1983,Law No. 36 Year 2008 on
Income Tax Act the imposition of costs on
acquisition of tangible and intangible assets
that have a useful life of more than 1 year
must be made through depreciation or
amortization.

Depreciation
Depreciation is the allocation of a number of
assets that can be depreciated over the
estimated period.
Depreciation needs to be done because of the
benefits provided and the value of the assets
be reduced.

DEPRECIATION

Tangible fixed asset

Building

Permanent
Non Permanent

Non Building

Useful life of asset 4 year

Useful life of asset 8 years
Useful life of asset 16 years
Useful life of asset 18 years

Time of Depreciation
1 . The month of expenditure; or
2. On the completion of the project an estate so
shrinkage on first year calculated in flattened
3. With approval taxation director general, in the
month of such assets is used to obtain,
demanding, and maintaining income; or
4. With approval taxation director general, in the
month of such assets is start to produce namely
when started production and not when accepted
or procures income

Depreciation and Tangible asset

classes according to Income Tax Act
Group of Tangible Assets Benefit Mass Tarif of Depreciation
Straight
Line
l. Non Building
Group 1
Group 2
Group 3
Group 4

4 Years
8 Years
16 Years
2O Years

25%
12,5%
6.25%
5%

ll.Building
- PERMANENT
- NON PERMANENT

20 Years
10 Years

5%
10%

Declining
Balance
50%
25%
12,5%
10%

Methods of Depreciation
1. Straight Line Method
Straight line depreciation is the simplest
and most often used method. In this method,
the company estimates the salvage value (scrap
value) of the asset at the end of the period
during which it will be used to generate
revenues (useful life).

Sumber Makmur Company purchased an asset that is included in the first

group of tangible assets. The cost is Rp 100,000,000 on July 10, 2009, then
charging for the cost of depreciation of these assets is based on the straightline method is as follows: ??
years

Depreciation
expense

Book value
at year-end

25%

Rp. 12.500.000

Rp. 87.500.000

2010

25%

Rp. 25.000.000

Rp. 62.500.000

2011

25%

Rp. 25.000.000

Rp. 37.500.000

2012

25%

Rp. 25.000.000

Rp. 12.500.000

2013

25%

Rp. 12.500.000

Rp. 0

2009

Original cost

Rp. 100.000.000

Depreciation
rate

 Declining Balance Method

Declining balance method of depreciation
is the depreciation rate by applying the book
value.

Jaya Abadi Company purchased an asset that is included in the first group of tangible
assets. The cost is Rp 100,000,000 on July 10, 2009, then charging for the cost of
depreciation of these assets is based on the declining balance method is as follows:

years

Depreciation
expense

Book value
at year-end

50%

Rp. 25.000.000

Rp. 75.000.000

2010

50%

Rp. 37.500.000

Rp. 37.500.000

2011

50%

Rp. 18.750.000

Rp. 18.750.000

2012

50%

Rp. 9.375.000

Rp. 9.375.000

50%

Rp. 9.375.000

Rp. 0

2009

2013

Original Cost

Rp. 100.000.000

Is Depreciated

Depreciation
rate

Amortization
Amortization is carried out taking depreciation
on the value of intangible fixed assets.
Definition of intangible assets is not current
assets (non-current assets) and amorphous
provide economical and legal rights to their
owners and the financial statements are not
included separately in the classification of
other assets (SFAS No. 19). Included in
intangible assets are patents, Good Will, the
right brand.

Amortization method
1. Straight line method
2. The declining balance method

Taxpayer is allowed to choose one method to

amortize.

Amortization Rates and Classes

of Intangible Assets
Group of Intangible
Assets

Benefit Mass Tarif of Amortization

Straight
Line

l. Non Building
Group 1
Group 2
Group 3
Group 4

4 Years
8 Years
16 Years
2O Years

25%
12,5%
6.25%
5%

Declining
Balance
50%
25%
12,5%
10%

PT Asti Jaya on 4 November 2010 pay Rp. 100,000,000.00 to obtain licensing rights
from Phoenixcyle Ltd. for 4 years to produce Bicycles Phoenix. The calculation of the
amortization of license rights are as follows:

years
2010

Original cost
Rp. 100.000.000

Amortization Rate

Amortization Expense

25%

Rp. 25.000.000

2011

25%

Rp. 25.000.000

2012

25%

Rp. 25.000.000

2013

25%

Rp. 25.000.000

PT Asti Jaya on 4 November 2010 pay Rp. 100,000,000.00 to obtain licensing rights
from Phoenixcyle Ltd. for 4 years to produce Bicycles Phoenix. The calculation of the
amortization of license rights are as follows:

years

Original Cost

Amortization

Amortization Expense

2010

Rp. 100.000.000

50%

Rp. 50.000.000

2011

Rp. 50.000.000

50%

Rp. 25.000.000

2012

Rp. 25.000.000

50%

Rp. 12.500.000

2013

Rp. 12.500.000

50%

Is amortization

Conclusion
Depreciation is the allocation of the acquisition cost of the asset.
Method of depreciation allowed by the tax are (1) Straight-line method and (2)
declining balance method.
Grouping of assets are divided into two main groups are
1. Assets not building divided into 4 groups according to the economic life a.
group 1, the mass of 4 years,
b. group 2, the mass of 8 years,
c. group 3, the mass of 16 years,
d. group 4, the mass of 20 years.
2 . Asset Building divided into 2, are permanent and non permanent
Amortization is depreciation applicable to intangible assets.
The method of amortization is allowed in tax are (1) straight line, (2) declining
balance method
Grouping of intangible assets were divided into 4 groups :
a. group 1, the mass of 4 years,
b. group 2, the mass of 8 years,
c. group 3, the mass of 16 years,
d. group 4, the mass of 20 years