A doubt for many fixed asset managers is whether assets with values ​​above the minimum fixed asset value, which is currently R$ 1,200.00, must be accounted for as an asset and not as an expense.

To better understand the issue, we first need to separate the two existing approaches here, Accounting and Taxation, and understand that there is no perfect harmony between them.

Let’s start with the accounting approach. Today we have a convergence towards international accounting standards (IFRS), focusing on the fair value of assets, which guide the accountant in the adoption of immobilization criteria according to the company’s operation. And eventually it may be that for a given company, taking into account the materiality criterion, an asset value that would normally be immobilized, is immaterial and accounted for as an expense. We have a case of a client in which the immobilization criterion was above US$ 10,000.00 – because, according to the global company’s rule, this was the materiality criterion. It would not justify the cost of maintaining property, plant and equipment records and controls, such as labeling, location recording, etc. for these goods. So far, accountingly speaking, so good.

But now comes the fiscal approach. The current legislation, law 9580/18, says that:

“The cost of acquisition of fixed non-current assets cannot be deducted as an operating expense… if the purchased asset has a unit value greater than R$ 1,200.00”

That is, it can only be accounted for as an expense up to a maximum amount of R$ 1,200.00, as above that amount, it must be immobilized and incur depreciation. Note that the law does not require accounting for items with higher values ​​as fixed assets, but rather prohibits accounting as an expense, due to the impact on the calculation of taxable income and income tax.

Therefore, if the company chooses not to record it in property, plant and equipment, as our client exemplified above, it would have to be careful to adjust the entry of the corresponding expense in calculating the Taxable Income. In fact, in this situation the company would no longer benefit from both the expense and the depreciation of the asset, which is not smart, which is why every company ends up activating the asset in question.

And here’s a complement. In the Assumed Profit regimes and even Simples, as there is no calculation based on the actual profit, the impact would then not exist and the company could decide whether to immobilize or not without major consequences.