Jasper Janssen wrote:
> On Sun, 16 Oct 2005 01:38:02 GMT, Neil Brooks <[email protected]> wrote:
>
>
>>[as to the graph, I'm squarely in the camp that believes you should
>>only be expensing the depreciation of the capital expenses (fixed
>>assets) like the bike, but .....]
>
>
> A bike's not a fixed asset. Theft, accident, simple bad luck. Much better
> to write it off all at once. Even if you do go for 'only depreciation',
> depreciation on a bike is much, much worse than on a car. A bike loses
> more of its value being rolled off the lot and after a few years it can be
> entirely functional and well maintained and still only fetch a small
> fraction of the purchase price.
A fixed asset, which is something you own, that is intended to be kept
for a period longer then one year. This is opposed to liquid assets,
like business inventory, that are intended on being resold, over a term
of less then one year. Of course the ultimate liquid asset is cash.
An expense is something you use up, and should be simply expensed when
obtained.
Very few people need a new bike every year, well some of the trick
riders, and the guys who jump off 5m cliffs, might, a decent Al framed
MTB used for technical off-roading probably will last 2 - 3 years, same
bike used for non-technical off roading probably 3 - 5 years, used for
mostly road riding, and you could stretch that to 10 - 15 years quite
easily.
Some of it has to do with the type of bike too, an X-mart special using
cheap components will last a considerably shorter period of time, then a
high end bike using top of the line components. Of course like many
other things, there are middle of the road brands, that use mid range
components, and will last a moderate amount of time.
> It is most especially not realistic to quantify the depreciation as
> purchase price divided by expected lifespan -- that is in fact much less
> realistic than writing it off all at once.
Bikes are like cars, a $15,000 car is worth $10,000 the moment you drive
off the lot, and each year it drops a little less, until you get to a
value of around $1,500, when it seems to stay around there, until it's
ready for the wrecking yard.
Bikes are the same, just the numbers are different, but the ratios are
similar, a bike that was new at $500, will probably be worth $250 at the
end of a year, $150 at the end of 2 years, $100 at the end of 3 years,
and $50, at the end of 4 years. It will likely stay at around $50,
until it becomes $5 worth of scrap metal. So a reasonable depreciation
would be 4 years. If your figuring out the cost of biking, the bike
depreciates by $112.50 per year for 4 years ( (500-50)/4 = 112.50 ), it
stops being part of the equation after 4 years, but stays on the books
at $50 value.
Now if you buy accessories that are intended to be attached to the bike,
but have different rates of depreciation, they should be considered
separately, unless they have a value so low, that it's too small to be
considered (a $7.50 kickstand, or a $5 bottle cage for example). A $400
lighting system, would be considered separately.
Items like tires, brake pads and chains would simply be an expense.
W
