Low-value assets

What are low-value assets?

Low-value assets can be tangible or intangible and have a useful life in the business exceeding 1 year. Another defining criterion is acquisition cost, although this need not always be decisive. The nature of an asset may also determine whether it is classified as low-value (e.g. all mobile phones in the company are automatically low-value assets).

Each company sets its own asset classification thresholds, typically separately for tangible and intangible assets. The table gives an example of limits for company XY, which has decided to record low-value tangible and intangible assets above CZK 20,000 and fixed intangible assets above CZK 120,000. For low-value tangible and intangible assets, it can also choose whether to expense them directly or depreciate/amortise them for both accounting and tax purposes. This decision must then be applied consistently throughout the accounting period and to all assets.

The acquisition cost of low-value assets includes all direct and incidental acquisition costs – for example, the price of a phone including delivery.

Typical examples of low-value tangible assets include phones, computers and furniture. Software is an example of a low-value intangible asset.

Low-value asset register

Business owners must keep a register of low-value assets. For each item, this register must include:

• asset identifier (reference number)
• acquisition date
• name/description
• acquisition cost
• derecognition date (when applicable)

Expenses and depreciation of low-value assets

The full value of low-value assets is expensed in the year of acquisition. However, each company can choose to depreciate/amortise low-value assets for accounting purposes. For low-value assets, accounting depreciation/amortisation equals tax depreciation/amortisation.

For example, if a company buys a mobile phone expected to serve for 3 years, it can set accounting depreciation over 3 years. The cost of buying the phone is then spread over 3 years for both accounting and tax purposes.

Derecognising low-value assets

When a low-value asset is no longer useful, you cannot simply cross it out of the register. 🙂 If, during a tax inspection, you cannot credibly demonstrate how and why it was derecognised, the tax office may require the company to repay the input VAT deduction claimed. It may also refuse to recognise depreciation/amortisation in the year of derecognition as tax-deductible.

For intangible assets, you must prove that their use has ended. Ideally, prepare a detailed derecognition report for the intangible asset concerned. For software, for example, record that on the specified date the asset was derecognised, uninstalled from all devices and will no longer be used.

The useful life of tangible assets in your company can end in several ways, which you must always be able to substantiate:

• disposal (the asset is obsolete, damaged and no longer used) – Prepare a disposal report identifying the low-value assets removed. Take the assets to a recycling centre and have the list of disposed assets confirmed there (proof of disposal for the tax office).
• donation or sale – A sale or gift agreement, or an issued invoice.
• theft – If your company is burgled, it is important to list everything stolen or destroyed in the police report. If a low-value asset has “just disappeared”, you need to carry out a physical inventory of low-value assets identifying the shortage. The employee responsible may be required to reimburse the loss of these low-value assets.

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If you are unsure, do not hesitate to get in touch; we will work it out together. 🙂