Fixed assets depreciation methods for Hungary

This topic provides information about fixed asset depreciation for legal entities in Hungary.

Overview

In Hungary, there are four country-specific depreciation methods:

  • Straight line (Hungary)
  • Multiplication Factor
  • Factor (Hungary)
  • Sum of years’ digits

In each depreciation method, the depreciation amount is calculated based on calendar days in each period, as required by the Hungarian Company taxation law. Depreciation conventions are disabled in the corresponding depreciation profiles.

Depreciation method: Straight line (Hungary)

When you set up a fixed asset depreciation profile and select Straight line (Hungary) in the Depreciation method field, assets that the depreciation profile is assigned to are depreciated based on the total service life of the asset and the actual number of days in each period.

Example: Straight line (Hungary) depreciation

In this example, a fixed asset has the following characteristics.

Acquisition cost 120,000
Acquisition date January 1
Service life years 5
Service life days 1,826 (= 365 + 365 + 365 + 366 + 365)
Period frequency Yearly

The yearly depreciation amount is based on the calendar days in a year: Depreciation amount = Acquisition cost ÷ Total number of days × Number of days in period The following table shows the calculation results for the Straight line (Hungary) depreciation method and, for comparison, the calculation results for the Straight line service life depreciation method.

Period Number of days Amount for Straight line (Hungary) depreciation Amount for Straight line service life depreciation
Year 1 365 23,986.86 (= 120,000 ÷ 1,826 × 365) 24,000 (= 120,000 ÷ 5)
Year 2 365 23,986.86 (= 120,000 ÷ 1,826 × 365) 24,000 (= 120,000 ÷ 5)
Year 3 365 23,986.86 (= 120,000 ÷ 1,826 × 365) 24,000 (= 120,000 ÷ 5)
Year 4 366 24,052.57 (= 120,000 ÷ 1,826 × 366) 24,000 (= 120,000 ÷ 5)
Year 5 365 23,986.86 (= 120,000 ÷ 1,826 × 365) 24,000 (= 120,000 ÷ 5)

Depreciation method: Multiplication Factor

When you set up a fixed asset depreciation profile and select Multiplication Factor in the Depreciation method field, assets that the depreciation profile is assigned to are depreciated based on individual percentages for each year. You set up these percentages on the Manual schedules FastTab. The sum of the percentages must be 100.

Example: Multiplication Factor depreciation

In this example, a fixed asset has the following characteristics.

Acquisition cost 120,000
Acquisition date January 1
Service life years 2
Period frequency Yearly

The following table shows the manual schedules.

Interval number Percentage Cumulative percentage
2 60% 100%
1 40% 40%

The yearly depreciation amount is based on the manual percentage in a year: Depreciation amount = Acquisition cost × Percentage The following table shows the calculation results for the Multiplication Factor depreciation method when the period frequency is set to Yearly.

Period Amount for Multiplication Factor depreciation
Year 1 48,000 (= 120,000 × 40%)
Year 2 72,000 (= 120,000 × 60%)

If you set the period frequency to a unit that is smaller than a Yearly (for example, Half-Yearly, Quarterly, or Monthly), the yearly depreciation amount is distributed to each period. The distribution is based on the total number of days for the year (365 or 366) and the length of the period. The following table shows the calculation results for the Multiplication Factor depreciation method when the period frequency is set to Half-Yearly.

Period Number of days Amount for Multiplication Factor depreciation
H1, Year 1 181 23,802.74 (= 48,000 ÷ 365 × 181)
H2, Year 1 184 24,197.26 (= 48,000 ÷ 365 × 184)
H1, Year 2 181 35,704.11 (= 72,000 ÷ 365 × 181)
H2, Year 2 184 36,295.89 (= 72,000 ÷ 365 × 181)

Depreciation method: Factor (Hungary)

When you set up a fixed asset depreciation profile and select Factor (Hungary) in the Depreciation method field, assets that the depreciation profile is assigned to are depreciated based on a single percentage that you set up in the Factor field.

Example: Factor (Hungary) depreciation

In this example, a fixed asset has the following characteristics.

Acquisition cost 120,000
Acquisition date January 1
Service life years 2
Period frequency Yearly
Factor 50

The yearly depreciation amount is based on the factor percentage: Depreciation amount = Acquisition cost × Factor (percentage) The following table shows the calculation results for the Factor (Hungary) depreciation method when the period frequency is set to Yearly.

Period Amount for Factor (Hungary) depreciation
Year 1 60,000 (= 120,000 × 50%)
Year 2 60,000 (= 120,000 × 50%)

If you set the period frequency to a unit that is smaller than a Yearly (for example, Half-Yearly, Quarterly, or Monthly), the yearly depreciation amount is distributed to each period. The distribution is based on the total number of days for the year (365 or 366) and the length of the period. The following table shows the calculation results for the Factor (Hungary) depreciation method when the period frequency is set to Half-Yearly.

Period Number of days Amount for Factor (Hungary) depreciation
H1, Year 1 181 29,753.42 (= 60,000 ÷ 365 × 181)
H2, Year 1 184 30,246.58 (= 60,000 ÷ 365 × 184)
H1, Year 2 181 29,753.42 (= 60,000 ÷ 365 × 181)
H2, Year 2 184 30,246.58 (= 60,000 ÷ 365 × 184)

Depreciation method: Sum of years’ digits

When you set up a fixed asset depreciation profile and select Sum of years’ digits in the Depreciation method field, assets that the depreciation profile is assigned to are depreciated based on the acquisition price and a percentage that decreases each year. The percentage depends on the number of service life years.

Example: Sum of years’ digits depreciation

In this example, a fixed asset has the following characteristics.

Acquisition cost 120,000
Acquisition date January 1
Service life years 4
Period frequency Yearly

The yearly depreciation amount is based on the calculated percentage for a year. The following table shows the calculation results for the Sum of years’ digits depreciation method when the period frequency is set to Yearly. Sum of years’ digits = 10 (= 4 + 3 + 2 + 1)

Period Percentage Amount for Sum of years’ digits depreciation
Year 1 40% (= 4 ÷ 10) 48,000 (= 120,000 × 40%)
Year 2 30% (= 3 ÷ 10) 36,000 (= 120,000 × 30%)
Year 3 20% (= 2 ÷ 10) 24,000 (= 120,000 × 20%)
Year 4 10% (= 1 ÷ 10) 12,000 (= 120,000 × 10%)

If you set the period frequency to a unit that is smaller than a Yearly (for example, Half-Yearly, Quarterly, or Monthly), the yearly depreciation amount is distributed to each period. The distribution is based on the total number of days for the year (365 or 366) and the length of the period. The following table shows the calculation results for the Sum of years’ digits depreciation method for year 1 when the period frequency is set to Half-Yearly.

Period Percentage Number of days Amount for Sum of years’ digits depreciation
H1, Year 1 40% (= 4 ÷ 10) 181 23,802.74 (= 48,000 ÷ 365 × 181)
H2, Year 1 40% (= 4 ÷ 10) 184 24,197.26 (= 48,000 ÷ 365 × 184)