The following article demonstrates how to suspend depreciation of tangible fixed assets (TFA). In ABRA Flexi, navigate to the "Assets" module.
General information about suspending depreciation
The Income Tax Act permits the suspension of tax depreciation for tangible assets. Tax depreciation represents a certain "limit" that a taxpayer may claim as a tax expense in accordance with applicable legislation. For tangible assets, accounting entities may suspend tax depreciation, with the exception of time-based and extraordinary depreciation.
Given the nature of accounting depreciation, which reflects physical and functional wear and tear, it is not possible to suspend accounting depreciation — i.e., to leave it unapplied. In such cases, it may be reduced through a properly justified change to the depreciation plan, but it cannot be reduced to zero.
Suspending depreciation for straight-line depreciated assets
Open a new asset card using the "New" button and, in the "Basic Sheet" tab, fill in the asset type and category, the acquisition cost, the purchase date, the acquisition method, and, if applicable, the acquisition document.
Next, navigate to the "Depreciation" tab, where you select whether to generate accounting depreciation and enter the number of depreciation months. From the menu, select the depreciation method — straight-line and the applicable depreciation group.
Click "Generate Depreciation" in the upper right corner of the asset card. The result is a set of accounting and tax depreciation entries generated according to the configured parameters.
After checking "Post classification", an entry will be recorded in the "Events" tab.
To suspend tax depreciation, go to the "Events" tab and select "Suspend Tax Depreciation". The entered suspension date must not be the same as the asset's classification date.
To create an event in a specific year, you must have the relevant accounting period set up, and the event must be recorded within the accounting period to which it relates. For example, a suspension dated 01/01/2022 should be entered in the 2022 accounting period. You can create an accounting period via the top menu under Company / Change or Add Accounting Period / Manage Accounting Periods.
In our example, we suspended depreciation for the year 2022.
The asset's depreciation period is automatically extended by the number of tax periods during which depreciation was suspended.
To recalculate the remaining depreciation schedule (after the suspension), you must create a new "Event" of type "Resume Tax Depreciation".
Suspending depreciation for accelerated depreciated assets
Open a new asset card using the "New" button and, in the "Basic Sheet" tab, fill in the asset type and category, the acquisition cost, the purchase date, the acquisition method, and, if applicable, the acquisition document.
Next, navigate to the "Depreciation" tab, where you select whether to generate accounting depreciation and enter the number of depreciation months. From the menu, select the depreciation method — accelerated, the depreciation % in year 1, and the applicable depreciation group.
Click "Generate Depreciation" in the upper right corner of the asset card. The result is a set of accounting and tax depreciation entries generated according to the configured parameters.
After checking "Post classification", an entry will be recorded in the "Events" tab.
To suspend tax depreciation, go to the "Events" tab and select "Suspend Tax Depreciation". The entered suspension date must not be the same as the asset's classification date.
To create an event in a specific year, you must have the relevant accounting period set up, and the event must be recorded within the accounting period to which it relates. For example, a suspension dated 01/01/2022 should be entered in the 2022 accounting period. You can create an accounting period via the top menu under Company / Change or Add Accounting Period / Manage Accounting Periods.
In our example, we suspended depreciation for the year 2022.
The asset's depreciation period is automatically extended by the number of tax periods during which depreciation was suspended.
To recalculate the remaining depreciation schedule (after the suspension), you must create a new "Event" of type "Resume Tax Depreciation".
More examples of asset record-keeping can be found here.