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Depreciation of office alterations

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Company undertook significant alterations to office space (around £150,000), which in the original budgets I'd treated as Fixtures & Fittings with a 10% annual depreciation rate in line with the company's depreciation policy. The company owns the property and uses it for head office activities.

However, the company obtained a bank loan to cover the works with a 12 year capital repayment period. Seems odd to be paying off finance for assets that will be fully written down in the last couple of years.

Would it be reasonable in such circumstances to match the depreciation to the term of the loan, or should I treat the two as separate and stick with the company's original depreciation policy? 

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By johngroganjga
27th Dec 2021 12:01

If the expenditure is actually on alterations to the building, not movable items contained within the building, I would have depreciated them over the same period as that over which you are depreciating the building. If they are movable items I would depreciate them at your fixtures and fittings rate, as you seem to have done. The period over which the finance will be repaid does not enter into it.

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By 356B
28th Dec 2021 10:17


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