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Impairment of fixed assets

This paper analyses accounting and tax procedures and records related to the impairment of fixed assets and revaluation. Revaluation of tangible assets is the reduction of the asset's book value to market value, which may be higher or lower. However, the term ″revaluation″ in practice is typically used when the value of assets increases and for the revaluation on lower value terms, like "impairment" and "value adjustment". The consequences of the economic crisis are still present, so market value (fair value) of assets often decreases. The Republic of Croatia adopted the amendments to the Law on Profit Tax in 2014, and they have resulted in changes in the tax recognition of expenses that occur when the value of assets decreases. Regarding the above changes, this paper will show the calculation of profit tax and booking models related to non-deductible expenses from value adjustments of fixed assets, which lead to temporary differences, and deferred tax assets. Furthermore, procedures and records related to the impairment of revalued fixed assets will be shown.


Dijana Perkušić    
Sveučilište u Splitu, Sveučilišni odjel za stručne studije


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