Depreciation in Switzerland

Depreciation in Switzerland
Amortization is a way for companies in Switzerland to spread the value of their assets over several years. Find out more about how depreciation works in this article brought to you by Fidulex.

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Depreciation: a simple definition

Depreciation in Switzerland: a simple definition

Visit accountingDepreciation represents the reduction in value of an asset over time, whether through wear and tear or obsolescence. It's a way for companies to show the current value of their assets in their accounts.

In addition, on the tax planDepreciation allows companies to reduce their taxable income by deducting the depreciation of their assets. Swiss law defines how assets must be depreciated, and these rules vary according to the type of asset concerned.




Types of depreciation

Direct amortization

Direct depreciation is a method of accounting for asset impairment in which the value of the asset is reduced evenly over its expected useful life. This is the simplest and most commonly used method of calculating depreciation.

Example of direct depreciation

In this example, we are depreciating a business machine.

Indirect amortization

When indirect depreciation is used, the balance sheet shows the acquisition value of the assets. A negative asset account is then used to correct this value. The accounts used for this purpose are FAC s/asset category.

On the balance sheet, it will therefore be possible to see the initial value of the asset account with, below it, the accumulated depreciation fund corresponding to depreciation.

Example of indirect depreciation

In this example, we depreciate a business machine using the indirect method.

Indirect or direct depreciation?

As we have seen, the main difference between direct and indirect depreciation lies in the way the depreciation charge is calculated and spread over the life of the asset.

For assets that depreciate faster (such as machinery), indirect depreciation may be more appropriate. For assets depreciating more slowly (such as office furniture), direct depreciation may be appropriate.

Depreciation methods

Straight-line depreciation

With straight-line depreciation, the depreciation value recorded each year is the same. The percentage is calculated on the basis of the purchase price every year.

Example of straight-line depreciation

Take, for example, a computer purchased by a company for CHF 1,000 in year N and depreciated on a straight-line basis over 5 years.

Declining-balance depreciation

Declining-balance depreciation is calculated on the basis of the residual value in each year. Unlike straight-line depreciation, therefore, the value will always be different.

Example of declining-balance depreciation

Let's take the same example as for straight-line depreciation. We have a computer purchased by a company for CHF 1,000 in year N and depreciated at a rate of 40%.

When using declining-balance depreciation, a large amount is depreciated in the first few years, and then the amount depreciated becomes smaller and smaller. This method is particularly well-suited to cases where an asset is known to depreciate a lot at the outset, but little thereafter.

Current rates

Here are just a few of the current rates for a company's most common assets.

You can find a complete list of depreciation percentages in the notice A/1995 for commercial companies. You can also find amortization rate for self-employed workers on the Confédération website.

Frequently Asked Questions

Depreciation can be defined as an accounting practice that spreads the depreciation of an asset over several years. It reflects the loss in value of an asset over time, due to wear and tear or obsolescence.

Direct depreciation spreads the depreciation of an asset evenly over its lifetime. Indirect depreciation, on the other hand, applies a declining-balance method, resulting in higher deductions in the early years and lower deductions at residual value.

For assets that depreciate rapidly, such as machinery and computers, indirect depreciation may be more appropriate.