afskrivnings

Afskrivnings is a Danish term used in accounting and finance that refers to the systematic allocation of an asset's cost over its useful life. The concept is equivalent to depreciation in English-speaking countries and is a key component of financial reporting, tax calculation, and asset management.

The primary purpose of afskrivnings is to match the expense of using an asset with the revenue it generates. By spreading an asset’s cost across multiple accounting periods, companies obtain a more accurate representation of their profitability and financial position. This approach also reflects the wear, obsolescence, or regulatory changes that reduce an asset's value over time.

In Danish accounting, afskrivnings may be performed using various methods, such as straight‑line, declining balance, or units of production. The choice of method depends on the asset type, expected usage pattern, and statutory requirements. For tax purposes, afskrivnings is regulated by the Danish Income Tax Act, which specifies allowable deduction rules and timeframes. Tax authorities also often impose limits on the maximum annual deduction for specific asset categories.

Although afskrivnings is largely a routine accounting procedure, it can influence investment decisions. Companies may adjust their asset replacement cycles or capital budgeting processes based on expected afskrivnings schedules. Additionally, the treatment of afskrivnings can affect reported earnings, tax liabilities, and thus the overall financial sustainability of a firm.