# Depreciation percentage



## car (23 Nov 2006)

2 people put 15,000 into a business which is renting out entertainment equipment.
1 partner wants out.  The equipment was bought new 2 years ago but wants what he put into the equipment, ie, 7,500.  
Its difficult to put a figure on its market worth as theres a lot of individual pieces of equipment involved so just broadly speaking is there a market depreciation rate for a fixed asset from when bought as new so a fair evaluation can be worked out?   
Is the partner justified in asking for more then its worth as the equipment is being sold as a going concern?


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## ubiquitous (23 Nov 2006)

Items rented out as part of a hire business etc will normally depreciate a lot more rapidly than items used as tools etc in the course of a business. For example an ex-rental car will normally be worth less than an owner-driven car.


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## car (23 Nov 2006)

thanks, i was hoping someone will say its 15 or 20% per year or whatever, the other partner is buying so he knows the condition and maintenance history of the equipment so isnt worried about that, I will say it to him though about the rental element to see if he wants to factor it in to his estimates.

In lieu of there being an exact figure for equpiment in a certain area, is there a basic accountancy figure thats put on assets for yearly depreciation?  I think I remember seeing 20% being mentioned somewhere before, maybe that was for a car (not me, I appreciate yearly  )....


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## ubiquitous (23 Nov 2006)

Basic accountancy figures vary between 10%-20% on average.  The Revenue specify 12.5% as annual wear & tear for tax purposes. 

However, as I said above, hire businesses could easily justify higher %s for accountancy purposes. The 12.5% figure quoted above for Revenue wear & tear % is increased to 40% for taxis & short-term hired cars.

It is possible to justify any or all of the above %s depending on one's viewpoint and the circumstances.


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## extopia (23 Nov 2006)

If the founding partner put in startup capital of 7,500 it would not be unreasonable to expect to get this full amount back from the company at some stage, regardless of what the money was spent on, or depreciation rates.

I don't understand why you are factoring in depreciation unless the partner wants to take some equipment as part of the payment?


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## car (23 Nov 2006)

As I understand it, the only money that was put in was to buy this equipment.  Now that partner A wants out, he wants what he put into the partnership.  However, if the partner B wanted to get out of the whole thing the day after, he would only get the value of the equipment which would not be what he put into it.  Hence the depreciation factor for real worth.


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## extopia (23 Nov 2006)

So there's no cash or other assets in the business?


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## car (24 Nov 2006)

There is some cash and some other assets that there isnt ambiguity over, theyre being split evenly.  
Its just this equipment that theyre unsure of how to cost, partner A wants what he put in when it was purchased new, partner B wants to pay partner A what its worth now.


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## extopia (24 Nov 2006)

OK - so it's a case of the departing partner taking a straight 50% of the total assets of the business.

I think your only real option is to try to get an idea of the equipment's current resale value - depreciation doesn't tell the whole story as it's not uncommon for the resale value to be higher or lower than the depreciated value on the company's books.


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