6. How do you determine the useful life of an asset?

To determine the useful life of an asset must be taken into account the deterioration
by use, the action of natural factors, factory specifications the obsolescence by
technological advances and changes in the demand of the goods or services whose
production or supply contributes.

The legal useful life for tax purposes, is the period of recognition of the use of assets,
which is set by article 1.2.1.18.4 of decree 1625 of 2016. To determine the useful
life of an asset, it must be taken into account the deterioration by the use, the action
of natural factors, specifications of the factory, the obsolescence by technological
advances and the changes in the demand of the goods or services to whose
production or supply contributes.

The legal useful life for tax purposes, is the period of recognition of the use of assets,
which is set by article 1.2.1.18.4 of decree 1625 of 2016

7. What is depreciation policy under IFRS?

Depreciation according to IFRS is the systematic distribution of the cost of a fixed

asset between its useful life. (S.17.18). This definition is strictly accounting and
differs from the economic concept that considers it as a deterioration or loss of value
of the good by use, disuse or obsolescence.
The elements that participate in determining depreciation are cost and useful life.
The cost, this is made up of three aspects that can be presented in their entirety in
a fixed asset or not: firstly for the purchase price and its costs related to it; second,
for costs attributable to the installation; and third, the costs of uninstallation.
(S.17.10)
 8. What is estimated useful life?
The financial reporting standards establish that the entity must estimate the useful
life of its depreciable assets, in order to distribute the depreciable amount
throughout that useful life, in a systematic manner, that reflects the contribution of
the asset in the generation of benefits for the entity.
The useful life is the time or the intended use of the asset. The elements to
determine the useful life must be all the following:

First, by the use of the asset, the anticipated capacity of the asset can be obtained
from the manufacturer or from those estimated by management.
Second, the existence or not of maintenance policies of the asset that guarantee the
operation of the asset.
Third, the goods or services obtained from the asset have a market that makes it
necessary to remain operative.
And fourth, legal limitations of the asset. (S.17.21)

9. What items can be depreciated?

Fixed assets with a value equal to or less than 50 Uvt can be depreciated in one year
without considering their useful life.
By legal definition, each type of asset has its useful life which, due to its obligation,
must be considered when depreciating fixed assets.

In the case of vehicles and computers, the useful life was established in 5 years. For
machinery and equipment it is 10 years, and for buildings and constructions it is 20
years.

But in the case of assets of lower value, the tax legislation [which is not countable
[although it can be done in accounting as well] provides for the possibility that
taxpayers depreciate these assets in a single year.
 10. How is the useful life determined for intangibles?

In order to determine the appropriate treatment of these cases in the IFRS, it is

important to establish, in the first moment, in which of the 3 convergence groups is
the company, since there is a very important difference in the useful life of the
intangibles of Group 1 and 2.

If you have a taxi quota, a license to operate a taxi in a capital city, that quota does
not have an expiration date; the taxi has authorization to operate indefinitely, since
there is no rule that says that permission will end at some time; otherwise it happens
when, for example, a franchise is bought for 15 years, that will be the useful life and
the time to be amortized.

If we talk about an intangible asset that has no limit on its useful life, in the IFRS
for SMEs, Section 18, which talks about intangibles, establishes that no intangible
asset can have more than 10 years of useful life; if the useful life is not determined,
the entity must amortize the intangible to 10 years; If the useful life is determined
contractually, those years can be used as useful life. This is going to be very harmful
for certain SMEs that have this type of intangibles, since they will have to punish
their Financial Statements in 10 years to amortize all the intangibles.

In the Full IFRSs, IAS 38 in its paragraph 88 establishes that there may be intangibles
with indeterminate useful lives, and in those cases they are not amortized; the value
in which they are recognized in the Opening Financial Statements will be with which
they will remain over time without having to amortize it.

In short, if there is no limit to the useful life, in Plenas it is not amortized, but in
SMEs it must be done within 10 years.