In brief: Accounting depreciation is the systematic allocation of the depreciable amount of a fixed asset over its expected useful life. The CGNC recognises three methods: straight-line (default), declining balance and units of production. Entries are posted through accounts 619x (depreciation charges) and 28xx (accumulated depreciation). When accounting depreciation differs from tax depreciation, the difference is recorded as exceptional depreciation (account 1351).
Definition and Principles of Accounting Depreciation
Accounting depreciation is the recognition of the irreversible loss in value of a fixed asset, resulting from use, the passage of time, technical obsolescence or any other factor. It reflects the prudence principle and the accruals principle (matching principle), two of the seven fundamental accounting principles of the CGNC.
Depreciable Assets
Assets with a limited useful life are depreciable:
- Start-up costs: preliminary expenses, deferred charges, bond redemption premiums
- Intangible assets: patents, licences, software, leasehold rights (if time-limited)
- Tangible assets: buildings, technical installations, vehicles, furniture, IT equipment
Not depreciable: land (except quarries and mineral deposits), goodwill (unless permanently impaired), financial assets.
Depreciable Amount
The depreciable amount is determined as follows:
Depreciable amount = Cost of entry − Estimated residual value
In practice, the CGNC generally considers the residual value as nil or negligible, leading to the depreciation of the entire cost of entry. The cost of entry includes the purchase price (or production cost), ancillary acquisition costs (transport, installation, commissioning) and customs duties.
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Straight-Line Method: The Default Approach
Straight-line (or constant) depreciation is the most commonly used method in Morocco. The annual charge is identical each year throughout the depreciation period.
Formula: Annual charge = Depreciable amount / Useful life
Or equivalently: Annual charge = Depreciable amount × Straight-line rate
Where the straight-line rate = 100% / Useful life in years.
Table of Common Useful Lives and Rates
| Asset category | Common useful life | Straight-line rate |
|---|---|---|
| Buildings | 20 to 25 years | 4% to 5% |
| Technical installations and fixtures | 10 years | 10% |
| Industrial machinery and equipment | 10 years | 10% |
| Vehicles | 5 years | 20% |
| Office furniture | 10 years | 10% |
| IT equipment (hardware) | 5 years | 20% |
| Software | 3 to 5 years | 20% to 33% |
| Start-up costs | 5 years maximum | 20% minimum |
These useful lives are indicative and must reflect the actual useful life of the asset within the business. A different period may be used if justified by operating conditions.
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Declining Balance Method
Declining balance depreciation records higher charges in the early years of use, reflecting faster depreciation at the beginning of the asset’s life.
Calculating the Declining Balance Rate
The declining balance rate is obtained by multiplying the straight-line rate by a coefficient:
| Depreciation period | Coefficient |
|---|---|
| 3 to 4 years | 1.5 |
| 5 to 6 years | 2 |
| More than 6 years | 3 |
Calculation Mechanism
- Year 1: the declining balance rate is applied to the depreciable amount (pro rata temporis if commissioned during the year)
- Subsequent years: the declining balance rate is applied to the net book value (NBV) at the beginning of the year
- Switch: when the declining balance charge becomes lower than the straight-line charge calculated on the residual NBV and remaining useful life, the method switches to straight-line for the remaining years
Example: IT equipment acquired for 100,000 MAD, useful life 5 years, straight-line rate 20%, coefficient 2, declining balance rate 40%.
| Year | Opening NBV | Charge | Closing NBV |
|---|---|---|---|
| 1 | 100,000 | 40,000 | 60,000 |
| 2 | 60,000 | 24,000 | 36,000 |
| 3 | 36,000 | 14,400 | 21,600 |
| 4 | 21,600 | 10,800 (straight-line) | 10,800 |
| 5 | 10,800 | 10,800 (straight-line) | 0 |
From year 4, the straight-line charge (21,600 / 2 = 10,800) exceeds the declining balance charge (21,600 × 40% = 8,640), so the method switches to straight-line.
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Units of Production Method
This less common method is suited to assets whose depreciation is directly linked to their level of use rather than the passage of time.
Formula: Charge for the year = (Depreciable amount × Units produced in the year) / Total estimated units over the useful life
Application examples: quarry equipment (based on tonnage extracted), industrial moulds (based on number of pieces produced), transport vehicles (based on mileage).
This method is accepted by the CGNC provided that the estimate of total units is reliable and verifiable.
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Start Date and Pro Rata Temporis
Depreciation begins from the date of commissioning of the asset, not the date of acquisition or invoicing. This distinction is important:
- An asset acquired on 15 March but commissioned on 1 May: the first year’s charge is calculated over 8 months (May to December for a calendar fiscal year)
- An asset still being installed at 31 December: no depreciation is recognised for the year; it remains in account 239x “Tangible assets in progress”
Pro rata temporis is calculated in days or months, depending on the convention adopted by the company (the monthly method is most common in Morocco).
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Standard Journal Entries
Operating Depreciation Charge
The standard depreciation entry is as follows:
| Account | Description | Debit | Credit |
|---|---|---|---|
| 6193 | Operating depreciation charges for tangible assets | X | |
| 6192 | Operating depreciation charges for intangible assets | X | |
| 6191 | Operating depreciation charges for start-up costs | X | |
| 2831x | Accumulated depreciation — buildings | X | |
| 2833x | Accumulated depreciation — technical installations | X | |
| 2834x | Accumulated depreciation — vehicles | X |
Class 28 accounts are contra accounts that reduce the gross value of fixed assets on the balance sheet.
Exceptional Depreciation (Account 1351)
When tax depreciation differs from accounting depreciation (for example, a shorter tax useful life than the actual useful life), the difference is recorded as exceptional depreciation:
Provision (tax depreciation > accounting depreciation):
| Account | Description | Debit | Credit |
|---|---|---|---|
| 65941 | Non-recurring charges — exceptional depreciation | X | |
| 1351 | Provisions for exceptional depreciation | X |
Reversal (when cumulative tax depreciation exceeds cumulative accounting depreciation in subsequent years, or at the end of the plan):
| Account | Description | Debit | Credit |
|---|---|---|---|
| 1351 | Provisions for exceptional depreciation | X | |
| 75941 | Reversals of exceptional depreciation | X |
This mechanism allows simultaneous compliance with economic reality (accounting depreciation) and tax advantage (tax depreciation), without distorting the financial statements. For specific tax depreciation rules, see our dedicated guide on tax depreciation in Morocco.
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Fully Depreciated Assets
A fully depreciated asset remains on the balance sheet as long as it is held and used by the company. Its net book value is nil (or a token 1 MAD), but:
- No further depreciation charge may be recognised
- The asset continues to appear at gross value on the asset side, offset by accumulated depreciation of equal amount
- Upon disposal, the gain is calculated on the full sale price (since the NBV is nil)
- Derecognition from the balance sheet only occurs upon scrapping, disposal or destruction
For a chartered accountant in Morocco, reviewing the register of fully depreciated assets is part of the closing procedures, to ensure that recorded assets still physically exist.
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Frequently Asked Questions
What is the difference between accounting depreciation and tax depreciation?
Accounting depreciation aims to reflect the actual economic wear of the asset over its useful life. Tax depreciation follows the rates and rules set by the CGI (Art. 10-I-F-1°) to determine the deductible charge for tax purposes. When the two differ, the gap is recorded as exceptional depreciation. For details on tax rules, see our article on tax depreciation in Morocco.
Can the depreciation period be changed during the schedule?
Yes, but this constitutes a change in estimate that must be justified by a modification in the asset’s conditions of use (change in production pace, accelerated obsolescence). The change is applied prospectively: the residual NBV is depreciated over the new remaining useful life. This is not a change in accounting method.
Must start-up costs be depreciated over 5 years?
Start-up costs (incorporation costs, capital increase costs, prospecting costs) must be depreciated over a maximum of 5 years. The company may choose a shorter period (3 or 4 years). The CGNC and the CGI prohibit the distribution of dividends as long as start-up costs are not fully depreciated, unless free reserves exist in an amount at least equal to the unamortised balance.
Legal references:
- CGNC — Titre IV, Section 3 (depreciation rules)
- Loi 9-88 — Art. 14 to 17 (valuation of assets)
- CGI 2026 — Art. 10-I-F-1° (tax depreciation)
- PCGE — Accounts 28xx (depreciation), 619x (charges), 1351 (exceptional)
READ ALSO:
- Tax Depreciation in Morocco: Rates, Useful Lives and Corporate Tax Rules
- CGNC in Morocco: Fundamental Accounting Principles
- Accounting Provisions in Morocco: Risks, Charges and Impairment
- General Chart of Accounts for Enterprises (PCGE)
Need to optimise your accounting and tax depreciation policy? Contact Upsilon Consulting, a chartered accountancy firm in Casablanca, for a complete review of your fixed asset register.
