The Place Of Amortization Among Costs, As Well As Effect Of Different Deprecation Calculation Methods On Management From Business Economic And Financial View Of Point

Due to the accelerated inflation in the past year, the attention focused on the risk of replacement of assets. It is a well-known fact that after the wear and tear of the fixed assets, their replacement is a serious task for the companies. During the functioning, the fixed asset provides resources (financial) on two branches, respectively it will pay off. One direction is the amortization, which reduces the profit as a cost, but does not involve (cash flow) expenses. The other direction of return is the profit, which provides the necessary amount for the development after having payed the taxes. The source of the profit sector increases in value in the event of an increase in inflation, since the source of amortization continuously generated during the period of operation has been devaluing by the end of the functioning period. In our article, we try to present the place of amortization (depreciation) among costs, based on several aspects. After that, we will present the different description methods based on their characteristics, giving priority to what their use means for the entrepreneur. We support this with the help of model calculations. We present what mean the amortization accounting methods assuming that management is without inflation or between inflationary conditions. Based on this, we try to formulate proposals on how state intervention how could help businesses in inflationary economic conditions beyond that it would be more permissive in the choice of description method. Following the business economics approach to the question, we will examine the effect of amortization on tax base and the income, taking into consideration financial and accounting aspects. Considering that the use of the fixed assets and thus the expected return period takes several years, we must attention to the careful planning of the amount of replacement costs. When determining the required capital value, we cannot ignore the time factor, the time value of money. The required value of capital accumulation supplementing amortization per period is determined using the annuity method. In our article, we demonstrate what kind of loss inflation causes and to what extent it is necessary to create a source from the generated profit. Dealing with the topic can be considered relevant for two reasons: on the one hand, it is justified by the high inflation experienced in 2022-2023, and, on the other hand, we are missing taking into consideration the time value of money in the Hungarian accounting and planning system.