Two registers for one asset

Transports Guilbert SAS buys a lorry for 90 000 € excluding tax. Its director asks the accountant not to depreciate it this year, the year already being loss-making. The accountant refuses, citing two texts that do not say the same thing. Before you read: is depreciation a management option, or a duty?

The accounting register: a plan, not a choice

Article R123-179 of the commercial code states the duty in one sentence: fixed assets whose useful life is limited are depreciated over that life according to a depreciation plan.

The verb is indicative, not conditional. An asset whose useful life is limited is depreciated; the text opens no option and makes depreciation conditional neither on the year's result nor on tax convenience.

The second paragraph allows some flexibility, but it is bounded. A regulation of the accounting standards authority may provide different depreciation arrangements for traders not exceeding, at the close, two of the three criteria set at the 2° of article D123-200.

That flexibility bears on the arrangements, not on the principle. It permits other ways of depreciating for the smallest businesses; it does not excuse depreciating an asset whose useful life is limited.

The tax register: a deduction on conditions

The general tax code does not say whether to depreciate: it says what is deductible. The 2° of the 1 of article 39 allows as a deduction the depreciation actually charged by the business, within the limit of what is generally accepted according to the practice of each kind of industry, trade or business.

Three conditions can be read in that single sentence. The depreciation must have been actually charged, therefore recorded in the books. It must stay within the limit of trade practice. And the text immediately adds two cross-references.

Those cross-references are the subjects of the next two modules: having regard to the provisions of article 39 A, which opens the reducing-balance method, and subject to the provisions of article 39 B, which sets a floor.

The condition of actual recording is what closes the door the director wanted to open. Depreciation not entered in the books is not merely undeducted this year: it does not exist for the purposes of article 39.

Practice, not a schedule

The tax limit does not refer to a table of lives fixed by a text. It refers to the practice of each kind of industry, trade or business: a reference to professional practice, not to a regulatory schedule.

That drafting choice has a practical consequence. The lives one sees circulating by category of asset are reported practices, useful as benchmarks, and not durations imposed by law.

The business therefore adopts a life that must match the asset's actual use and stay within its sector's practice. Departing from it is not forbidden, but what exceeds practice falls outside the deduction limit.

The two registers then meet on one point. The commercial code asks for a useful life, the tax code for a life consistent with practice: where the two coincide, one life serves both, which is the ordinary case.

Where they diverge, the books still follow the accounting life and the divergence is handled in the tax computation rather than by rewriting the plan. Keeping that order straight is what stops a tax argument from contaminating the accounts themselves.