Fixed Assets and Depreciation Schedules

Fixed assets are the long-term backbone of most businesses, premises, equipment, vehicles, furniture. Accounting for them well means a clear register, sensible useful lives, and disciplined depreciation that matches the assets' actual consumption.

What qualifies as a fixed asset

An item is a fixed asset if it is held for use in the business (not for resale), expected to be used for more than one year, and material in cost. Most UAE SMEs apply a capitalisation threshold of AED 5,000-10,000 per item, below that, items are expensed directly.

Repairs and maintenance that simply preserve the asset are expensed. Improvements that extend useful life or capacity are capitalised and added to the asset's cost basis. The line is sometimes blurry, document the rationale for each material item.

Useful lives

Common useful lives in the UAE: buildings 25-50 years, leasehold improvements over the lease term, motor vehicles 4-5 years, computers and IT 3-4 years, office furniture 7-10 years, machinery and plant 7-15 years depending on type, intangible software 3-5 years.

Useful life is an estimate, not a rule. Update it if circumstances change. Document the basis (industry practice, manufacturer warranty, internal experience). The FTA accepts reasonable useful lives that match accounting standards.

Depreciation methods

Straight-line: divide cost (less salvage value) by useful life and charge equally each period. The most common method. Suitable when an asset's economic benefit is consumed evenly over its life.

Reducing balance: a fixed percentage applied to the carrying value each period. More aggressive in early years, lower charge later. Suitable for assets that lose value faster early on (vehicles, computers).

The fixed asset register

Maintain a register with: asset code, description, acquisition date, supplier, cost, useful life, depreciation method, salvage value, location, custodian, and accumulated depreciation per period. The register is your audit trail and your basis for insurance.

Reconcile the register to the general ledger monthly. Run physical verification annually for material assets (count and check condition). Disposed assets must be removed from the register and any gain/loss recognised in P&L.

This guide is general information, not professional advice. For situations that involve specific facts, talk to your accountant, or hire one of ours from the marketplace.