Discussion On Issues Related To Depreciation Of Fixed Assets And Impairment

The fixed assets, as a kind of fixed costs, directly affect the incomes, risks and cash flows of an enterprise. The finance, investment, distribution, market value and the overall market competition capability will also be affected directly or indirectly by the fixed assets. Therefore, it is very important to reasonably deal with the related problems about the depreciation and the impairment of the fixed assets.In theory, there exists misunderstanding about the relationship between the depreciation and the impairment. The recognition and measurement of the fixed assets depends more on the depreciation accounting theory, which leads it to a dilemma. For instance, the American Internal Revenue Code in 1954 allows the enterprises to adopt the Accelerated Depreciation Method such as the Sum-of-the-years-digits Method and the Double-declining-balance Method. Some opinions believe that the Accelerated Depreciation Method alone has involved the influence of the obsolescence from the technology advancement; other opinions think that the estimation of the depreciation includes the factors of the underutilization and the obsolescence.In practice, the accounting standards about them have some differences from the practice dealings. The knowledge about their relationship hasn't been emphasized. In order to carry out the accounting standards about the depreciation and the impairment better, it is significant to analyze their differences, understand their relationship and learn about the practice dealings.For above reasons, this paper presents the research problems, aim, and the methods firstly, and then studies the researches done by other persons. On the basis of analyzing the asset measurement theory, the asset depreciation theory and the asset impairment theory, this paper studies the affecting factors and the economic outcomes. This paper also discusses their relationships from the two aspects, compares and analyzes the newly-issued Chinese accounting standards about the depreciation and impairment. Moreover, this paper proposes an idea of establishing the Chinese Accounting Standard—the Assets Depreciation, and improving the newly-issued Chinese Accounting Standard—the Assets Impairment.