**Book value is purchase cost minus accumulated depreciation, floored at salvage
value, and it is the number that actually gets asked for.** Purchase cost tells
you what you spent. Book value tells you what you have.
Most UAE SMEs track the first and not the second, usually because depreciation
lives in the accountant's spreadsheet and equipment lives in a different one, if
it lives anywhere.
Why anyone needs the number
Three moments, and they arrive without warning.
The balance sheet. Fixed assets appear at written-down value, not what you
paid. If the register and the accounts disagree, somebody has to reconcile them,
and that somebody usually reconstructs the register from invoices.
Insurance. Underinsuring is expensive at claim time and overinsuring is
expensive every month. Both happen when the sum insured is a guess based on what
things cost rather than what they are worth.
The repair decision. Whether to fix a three-year-old laptop is a different
question depending on whether it is worth 2,000 dirhams or 200. Without book
value that decision gets made on feel.
The two methods worth knowing
There are several. In practice, two cover almost everything an SME owns.
Straight line
The loss is spread evenly across the useful life.
```
annual depreciation = (purchase cost − salvage value) ÷ useful life in years
```
A laptop at 6,000 dirhams, three year life, zero salvage: 2,000 a year. After
eighteen months it is worth 3,000.
Straight line is simple, predictable, and right for most office equipment,
furniture and IT. If you are unsure which to use, this is the answer.
Declining balance
A fixed percentage of the remaining value comes off each year, so the loss is
front-loaded.
The same 6,000 dirham laptop at 40 percent declining balance loses 2,400 in year
one, 1,440 in year two, 864 in year three. It never quite reaches zero, which is
why a salvage floor matters.
This better reflects assets that lose most value early. Vehicles are the obvious
case: a car is worth noticeably less the day after purchase in a way that a desk
is not.
Useful life, and the trap in choosing it
Common conventions:
The trap is not picking the wrong number. It is picking different numbers for the
same class of thing, which happens when each asset is entered by whoever bought
it. Once half your laptops are on three years and half on five, the register's
total is not a figure anyone should rely on.
Pick a convention per category, write it down, and apply it. Consistency is worth
more than precision here.
Salvage value
The floor below which depreciation stops. Zero is fine for IT equipment, which
genuinely is worth nothing to you at end of life.
It matters for vehicles. A five-year-old pickup with a salvage value set to zero
shows as worthless in the register while being demonstrably saleable, which
undermines confidence in every other number on the page.
Keeping it attached to the thing
The reason to hold this on the asset rather than in a separate spreadsheet is
that the spreadsheet does not know where anything is.
In Wurxa, purchase cost, salvage value, useful life and method sit on the asset
itself, and current book value is calculated from them, per asset and across the
whole register. Both methods are supported, and depreciation stops at salvage
rather than running past it, which is the detail most hand-built spreadsheets get
wrong in year four.
That gives you two things worth having: a total for the accountant, and a value
attached to a thing you can walk over and look at.
A reasonable starting point
You do not need to backfill years of history. Set cost, life and method on
anything above a threshold that matters to you, five thousand dirhams is a common
line, and let smaller items sit at cost.
The register does not have to be perfect to be more useful than not having one.
It has to be consistent enough that the total means something.
A worked example
A company buys ten laptops at 6,000 dirhams each, total 60,000, in January 2024.
Three year life, zero salvage, straight line.
Two things fall out of that table which are easy to miss.
The insurance figure changes every year. A policy written for 60,000 in 2024
is covering 20,000 of equipment by 2026. Either the premium is wrong or the
schedule is.
The replacement decision has a date. These machines reach zero in January
2027, and the budget conversation should happen in 2026 rather than when they
start failing. A register that knows the useful life is a register that can tell
you what falls off the books next year.
The UAE specifics worth knowing
Corporate tax applies at 9 percent on taxable income above 375,000 dirhams under
Federal Decree-Law No. 47 of 2022. That makes depreciation a deduction that
matters rather than a bookkeeping formality, and it makes consistency between
your register and your accounts something a tax adviser will ask about.
Two practical consequences:
record is worth more at audit time than an invoice in a folder organised by
supplier.
from straight line to declining balance to improve a year's figures is exactly
the pattern that draws attention.
None of this is advice about your tax position, which depends on facts this
article does not know. It is a reason to keep the register tidy.
When not to bother
Depreciating everything is a trap. A register where somebody has assigned a
useful life to a 90 dirham keyboard is a register that took three times as long
to build and tells you nothing extra.
Set a threshold and hold it. Five thousand dirhams is a common line for an SME;
some use one thousand. Below it, record the asset because you want to know where
it is and who has it, and leave the cost at purchase price with no schedule.
The point of the threshold is not accounting purity. It is that somebody has to
maintain this, and the maintenance burden should fall on the items where the
answer changes a decision.
Getting the first numbers in
If you already have a register without costs, you do not need to backfill
everything. Work down from the most valuable.
Vehicles first, because they are individually significant and their book value
diverges fastest from purchase price. Then IT in bulk, which is usually a handful
of purchase orders covering many identical machines, so one invoice populates
twenty assets. Then furniture and fit-out, which are frequently one large number
that nobody has ever split.
Two afternoons gets most SMEs to a register whose total is defensible, which is
the standard worth aiming at. Perfect is not on the table and was never needed.
Two decisions that turned out to matter
We built the depreciation engine twice, and the second version exists because of
a problem that only appears when you stop showing one number and start showing a
schedule.
The first version counted time in average months. A month was 30.44 days,
which is 365.25 divided by twelve. That is perfectly good for a single book value
on a card: nobody checks whether the figure is a day out.
It falls apart the moment you print a year-by-year table. An average month drifts
against the calendar, so year boundaries arrive a day or two early, and the
closing balance of one row stops matching the opening balance of the next. The
numbers are all nearly right and the table does not add up, which is the worst
possible outcome for a document somebody is going to hand an accountant.
The fix was to count in calendar months, not average ones. Which then exposed
a second problem, because adding months to a date is not as simple as it sounds:
30 November plus three months is 28 February, but ask a computer to do it
naively and you get 2 March, because February has no 30th. Every asset bought on
the 29th, 30th or 31st of a month would have drifted forward a little more each
year. The engine clamps to the last valid day instead.
The second decision was the fiscal year. The first version assumed January.
Plenty of UAE businesses do not run on a January year, so the schedule is built
against the workspace's own financial year start. A depreciation table that sums
into the wrong twelve months is not a rounding error; it is the wrong answer, and
it is wrong in a way that only surfaces at year end when it is least welcome.
Neither decision is visible in the product. Both are the difference between a
number and a number somebody can file.
The general point, if you are doing this in a spreadsheet: pick calendar months,
anchor to your own financial year, and check that each year's closing balance is
the next year's opening. If those three hold, the arithmetic is probably fine. If
they do not, no amount of care about useful lives will save the table.
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