According to Section 253 (1) of the German Commercial Code (HGB), all assets are to be booked either at acquisition cost or at production cost.
What are acquisition costs exactly?
All expenses that are incurred to acquire an asset and that are also necessary to bring an asset into an operational state are considered expenses. However, only those costs are assessed as acquisition costs that can be added directly to the acquisition of the asset. Overhead costs, such as the accountant’s proportionate wages, are not included in the acquisition costs.
When calculating the acquisition costs, however, the incidental acquisition costs must be included. These include, for example:
- Transportation costs
- Land register entry
- Expenses for exhibitions
- Retrofitting or conversion of the asset.
If further costs are incurred after the acquisition that are related to the asset, then these are to be considered as subsequent acquisition costs. The subsequent acquisition costs are, for example:
- Purchase of additional equipment
- Subsequent development costs for properties.
In addition, a subsequent reduction in acquisition costs is also possible. This can be carried out, for example, on the basis of cash discounts , rebates or even reductions due to defects.
Determine the acquisition costs
As already explained, the acquisition costs include all expenses that are necessary so that the purchased item can be used. The purchase price of the item can also be referred to quite simply here – but in the case of larger purchases, the price reductions, the ancillary acquisition costs and the subsequent acquisition costs must also be taken into account.
If a new vehicle is bought, the selling price is the purchase price that was negotiated with the seller and this will later appear on the invoice. If, for example, a scratch is found in the paint, then the seller gives a price reduction and this must be deducted from the purchase price so that the actual acquisition costs can be determined. The same is also the case if the dealership grants a discount, for example because cash is paid or the invoice is settled very quickly. But before the new car can go on a long journey, it must be registered. Here the registration costs are paid and the license plates are also an expense and this is the incidental acquisition costs, which must be added to the purchase price when determining the acquisition costs. If a trailer coupling is then attached to the vehicle at a later date or a navigation device retrofitted, then these are the subsequent acquisition costs that are added to the acquisition costs again.
What are these not acquisition costs?
According to WHOLEVEHICLES.COM, the operating costs are not acquisition costs and are expenses that ensure that the purchased item is always ready for use. In the example with the vehicle, it would then be the costs for fuel, inspections, TÜV fees and the car washes – costs that are caused by the vehicle during operation. Repairs are usually not part of the acquisition costs, as long as they serve exclusively to maintain the value of the repaired item. However, VAT is a specialty, because it is part of the acquisition costs if the buyer is not entitled to input tax deduction is such as small business owners. However, if the entrepreneur claims input tax from the tax office, then the VAT is a transitory item and is therefore not part of the acquisition costs.
Activate the acquisition costs
According to Section 253 (1) of the German Commercial Code (HGB), it is necessary to capitalize the acquisition costs. To stay with the example with the vehicle: It doesn’t matter whether it is new or used, the activation must be carried out! According to Section 4 (5) No. 7 EStG, expenses that affect the taxpayer’s lifestyle may not reduce profit if they are inappropriate. Whether, as in the example, the acquisition costs of the vehicle are considered reasonable, this always depends on the circumstances of the individual case (BFH, judgment of October 8, 1987; BFH, judgment of January 26, 1988). Should the case arise that the acquisition costs are unreasonable, i.e. that they are too high or that the acquisition of a specific vehicle was largely due to private interest, then in this context only the reasonable acquisition costs need to be taken into account in the annual depreciation. The inappropriate part of the depreciation is to be added to the profit off-balance sheet.