How to calculate the evaluation and depreciation of mold assets

How to calculate the evaluation and depreciation of mold assets
Molds are often depreciated over 3-5 years in finance, but their actual lifespan is calculated based on the number of molds. When two sets of molds have different diameters, cost accounting can easily become distorted.
Accounting and Engineering Standards
Accounting depreciates based on years, typically 3-5 years, with a residual value rate of 5% -10%.
Engineering is calculated based on the number of molds, with metal molds typically having 30000 to 50000 molds.
The difference between the two calibers lies in the output. When producing 100000 pieces per year, the mold may run out of service life in just one year, but it is still depreciating in accounting.
Selection of Depreciation Methods
The straight-line method is the simplest, with the same annual depreciation amount. Suitable for projects with stable output.
The workload method is allocated based on actual production, which is closer to the actual consumption of molds. Suitable for projects with large fluctuations in production volume.
Xinfeng Mold will provide cost reference converted by mold number in the wheel hub mold project, which is convenient for customers to calculate the cost of individual pieces.
Amortization of mold costs
The mold fee can be included in the current period at once or allocated to the product unit price.
Mass production projects often use allocation, which is spread out to each item based on the expected output. When the expected production deviation is large, the allocation will be distorted.
Small batch projects often have the brand bear the mold cost at once, and the product unit price only includes materials and processing.
Residual value and disposal
The residual value of molds mainly comes from scrap steel and reusable components. The mold frame, guide column, etc. can be reused, but the mold cavity is often scrapped.
The residual value rate is often estimated at 5% -10%, and the actual disposal price depends on the scrap steel market.
The transfer of second-hand molds can lead to more recycling, but it requires finding a matching buyer.
evaluation method
Cost method: Reduce depreciation based on replacement cost. Suitable for specialized molds, with poor market comparability.
Market approach: Refer to the transaction price of similar second-hand molds. Suitable for molds with strong universality.
Income method: discount the future income generated by the mold. Suitable for leasing or sharing modes.
tax treatment
Molds, as fixed assets, can be depreciated before tax. The depreciation period shall be implemented in accordance with tax laws.
The one-time deduction policy applies to equipment and appliances below a specific amount, and specific application needs to be consulted with a tax advisor.
The caliber of single item cost
The cost of a single mold is equal to the original value of the mold minus the residual value, divided by the estimated total production. When there is a large deviation in the production forecast, this number will be distorted.
It is recommended to calculate the output separately for optimistic, neutral, and conservative levels, based on the cost range rather than individual values.
Relationship with quotation
When customers inquire, they should explain the allocation method between mold costs and product unit prices. If the caliber is unclear, comparing prices is meaningless.
Export projects also need to consider the impact of exchange rates and shipping costs on mold costs.
The capitalization and expensing of molds should be carried out in accordance with the accounting policies of the enterprise and cannot be chosen arbitrarily.
The depreciation period of the mold can be aligned with the customer's contract period to avoid the end of the contract without fully offsetting the account.
The impairment test of molds is conducted once a year, and long-term idle molds need to be evaluated whether they need to be provisioned.
Once the depreciation method is determined, it cannot be changed arbitrarily, and any changes must be explained in the notes to the financial statements.
Frequently Asked Questions
Q: How many years does mold depreciation last?
Answer: Commonly 3-5 years, residual value rate of 5% -10%.
Question: By year or by module?
Answer: Accounting is based on years, and cost accounting is more accurate based on module numbers.
Q: How to amortize the mold fee?
Answer: Allocate the expected output to individual units or include it in a lump sum.
Question: How to estimate residual value?
Answer: Usually priced at 5% -10%, depending on the actual situation of scrap steel and second-hand market.
Q: What method is used for evaluation?
Answer: The cost method can be used for specialized molds, while the market method can be used for general molds.
Q: Can depreciation be tax deductible?
Answer: Yes, it can be deducted according to the tax law for a certain period of time.
Recommended search keywords
Mold depreciation, mold asset evaluation, mold amortization, mold residual value, wheel hub mold manufacturer, fixed asset depreciation, mold cost accounting, second-hand mold valuation, mold finance, casting mold manufacturer