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I don't get it: a salary is a depreciable asset? I thought that only applied to actual tangible things that needed replacement on a schedule. I'll never under
by chuckadams 3y ago
I don't get it: a salary is a depreciable asset? I thought that only applied to actual tangible things that needed replacement on a schedule. I'll never understand accounting... and I'm increasingly thinking that's the point.
- gen220 3y agoThe idea is that you're converting some % of developers' salaries into intellectual property (i.e. code), and that intellectual property is a capital asset that depreciates over time in the same way that a tractor or a widget-making machine would. The salary is not the asset, it's an expense that produces an asset.
- chuckadams 3y agoAh, that makes sense now. The value of the code itself as an asset would be really subjective, but what you pay someone to write it isn't. Thanks :)
- mdavidn 3y agoThe reason amortization exists is to reduce taxes in later years: If a company invests $1 million into an asset that earns $250k each year over 5 years, the company would otherwise see a $750k loss the first year followed by $250k profit for 4 years. By following an amortization schedule, they are taxed on a steady $50k profit each year. In other words, the taxable effect of the expense is "spread" through the years in which that asset is expected to earn income.