Recovery and Reducing balance: Difference between pages

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1.  
1.


Phase of a business cycle, following a recession, where there is an increase in economic activity.  
A basis of allocating costs or allowances across successive time periods by applying a consistent periodic percentage charge to - for example - the reducing net book value of a fixed asset.




2.  
For example,
a fixed asset has a cost of $12m, to be depreciated on a reducing balance basis at a rate of 40% per year.


<i>Bank recovery</i>
The depreciation charge for Year 1 would be


The process of returning a bank to acceptable financial health if it is threatened with circumstances or events that may cause the failure of the institution or group unless recovery measures are implemented in a timely manner.
$12m x 40%


Recovery is achieving this without imposing losses on the distressed firm's creditors.
= $4.8m.
If recovery is unavailable, "[[resolution]]" will be necessary.


The speed with which financial firms can lose their credit standing is so great that in considering the subject it is very often referred to as bank "recovery and resolution".


The net book value at the end of Year 1 (and the start of Year 2)


3.  
= 12 - 4.8


More generally,a process in which a firm facing financial difficulties is returned to acceptable financial health without imposing losses on the distressed firm's creditors.
= $9.2m.




==See also==
The depreciation charge for Year 2
* [[Cash in the new post-crisis world]]
* [[Credit rating]]
* [[Insolvency]]
* [[L-shaped recovery]]
* [[Living will]]
* [[R&R]]
* [[Recession]]
* [[Recovery plan]]
* [[Resolution]]
* [[RRP]]
* [[U-shaped recovery]]
* [[V-shaped recovery]]
* [[W-shaped recovery]]


[[Category:Risk_frameworks]]
= $9.2m x 40%
[[Category:Treasury_operations_infrastructure]]
 
= $3.68m.
 
 
The net book value at the end of Year 2 (and the start of Year 3)
 
= 9.2 - 3.68
 
= $5.52m.
 
And so on.
 
Using a reducing balance basis of depreciation, the net book value never falls to zero (unless the asset is disposed of).
 
 
2.
 
''UK tax.''
 
UK Writing Down tax Allowances are normally available to be claimed on a reducing balance basis.
 
 
== See also ==
* [[Depreciation]]
* [[Straight line]]
* [[Sum of the digits]]
* [[Writing down allowance]]
 
[[Category:Accounting,_tax_and_regulation]]

Revision as of 15:00, 26 November 2014

1.

A basis of allocating costs or allowances across successive time periods by applying a consistent periodic percentage charge to - for example - the reducing net book value of a fixed asset.


For example, a fixed asset has a cost of $12m, to be depreciated on a reducing balance basis at a rate of 40% per year.

The depreciation charge for Year 1 would be

$12m x 40%

= $4.8m.


The net book value at the end of Year 1 (and the start of Year 2)

= 12 - 4.8

= $9.2m.


The depreciation charge for Year 2

= $9.2m x 40%

= $3.68m.


The net book value at the end of Year 2 (and the start of Year 3)

= 9.2 - 3.68

= $5.52m.

And so on.

Using a reducing balance basis of depreciation, the net book value never falls to zero (unless the asset is disposed of).


2.

UK tax.

UK Writing Down tax Allowances are normally available to be claimed on a reducing balance basis.


See also

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