Calculating depreciation costs in H2020 project

Are you correctly calculating the depreciation costs in your H2020 project?

At some point everyone has faced this doubt because it is an important concept which must follow the rules of the Horizon 2020 programme, like any other cost.

Eligibility of the costs

According to the Annotated Model Grant Agreement (AMGA) Article 6.2.D.2: ‘’equipment costs’’ budget category covers ‘’the depreciation costs of equipment, infrastructure or other assets used for the action. In some cases (e.g. infrastructure), equipment costs may also include the costs necessary to ensure that the asset is in good condition for its intended use (e.g. site preparation, delivery and handling, installation, etc.).’’

To begin, consider that these costs must also:

  • Comply with the eligibility conditions
  • Ensure best value for money
  • Be written off in accordance with the beneficiary’s usual accounting practices and with international accounting standards

So, the guidelines state that entities should follow their own depreciation policies. In other words, you should carry on as usual. But there is more than that. How do you calculate the amount you need to declare according to how much you used the equipment?

What is new in H2020?

Before H2020, the principle of calculating the depreciation of equipment considered the total hours of the equipment’s use in the project, dividing them into the total “real” hours of use.

More concretely, if you bought equipment and only used it for a certain project, you could incur 100% of the depreciation costs of that equipment during the lifetime of the project.

The H2020 program attempts to encourage entities to take more advantage of equipment by reducing the depreciation amount that can be incurred to a project if the equipment hasn’t been used at full capacity.

So, if you bought equipment and only used it for a certain project, you won’t incur 100% of its depreciation costs. When calculating usage to be incurred to the project, you now only report the time actually used in the project, instead of the total potential hours of equipment use.

What else to consider?

It is of course important to correctly establish the lifespan of the equipment from the start, and how you will demonstrate to an auditor the number of the hours used for that equipment in the project.

 A number of questions may arise when deciding on which time recording system to implement in order to accurately present the number of hours a given piece of equipment is used in different projects.

There are other issues to consider, such as establishing the correct lifespan of an equipment and the potential hours it could have been used, as they influence the amount to be declared for the project. For example, how to declare “low value assets” and how to consider equipment bought before the start of the project may also be subject to debate.

Would you like to know more about how to calculate your depreciation costs in H2020 SME Instrument projects? Contact hello@getpolite.eu for more information and guidance.

 

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