UK Assets and working out depreciation

[nortski]

Hi,
Very shortly I will be opening a retro gaming arcade and I am confused on how to go about accounting for the video arcade machines I will be purchasing.

The machines are all secondhand and will cost between £1000 and £5000 each. These are retro games and don't really lose their value and it's impossible to tell which will be popular and which ones I'll need to replace in 6 months time, or a year, if at all.

How would I go about working out the depreciation?

I'll be operating as a sole trader, maybe there's a simpler method being a sole trade (wishful thinking).

 

[Fidget]

In terms of depreciation, it's not the game that you need to be thinking about, but the machine that it is being played on. Second hand, retro gaming machines that have probably been through the mill in usage already... how long is it going to be before they conk out? Bit like buying a second hand car - how much usage will you get out of it before it dies?

Retro gaming machines might change hands for more than they are worth in a private seller's market, but if you're going to be using them in a business, then they'll depreciate in value.

 

[nortski]

They don't really conk out, individual parts like a button or joystick may break but they are easily repaired. I hear what you're saying though.

 

[bklynboy]

Any asset doesnt need to be fully replaced and can be repaired. They still need to be depreciated over their useful life. The point being you need to assess based on current condition how long will it be available for use and is generally a policy decision you make. For example, we depreciate laptop/desktop computers over 3 years - not that they cant be used longer but that we dont feel that the computer after 3 years has any value left. If it did, we would assign a residual value and depreciate up to that point.

You should do something similar and likely assign a residual value if you think it can still be sold for something at the end of its depreciated life. Useful life is how long you plan to be able to use it your business.

 

[nortski]

I think maybe 2 years would be a good term simply because if I don't replace them then my punters would get bored of playing the same games. Actually; I think one year would be enough.

 

[Marcio]

I think you can take the whole amount of these items as trading expenses.

Look at this Link!

 

[nortski]

I think you can take the whole amount of these items as trading expenses.

Look at this Link!

Thanks for sharing that link. I have just read it but I can not see where I could claim these as trading expenses. I need to do more reading up as this is above my head a little.

 

[bklynboy]

Even if applicable this is a tax rule (not sure I see as trradign either). Accounting would differ under IFRS and cannot be expensed unless below an immaterial level.

 

[Marcio]

Thanks for sharing that link. I have just read it but I can not see where I could claim these as trading expenses. I need to do more reading up as this is above my head a little.

I am sorry I said trading expenses I ment
Annual Investment Allowance.