Request for Authority to Change Method of Computing Depreciation Expense for Fixed Assets from Straight Line Method to Declining Balance

April 24, 1996 BIR RULING NO. 052-96 Sec. 109 146-94 052-96 Rohm LSI Design Philippines, Inc. 3/F, 116 Building 116 Herrera St., Legaspi Village Makati City Attention: Mr . Rafael N . V . Mantaring General Manager Gentlemen : This refers to your letter dated February 15, 1995 requesting for authority to change your method of computing depreciation expense for your fixed assets from Straight Line Method to Declining Balance, effective April, 1995. LLjur It is represented that Rohm LSI Design Philippines, Inc. is engaged in research and development in the field of Electronics under BOI Certificate of Registration No. 92-467; that your mother company in Japan, Rohm Company Ltd. adopted a new method of depreciating their fixed assets from Straight Line Method to Declining Balance effective April, 1995; and that all its affiliates and subsidiaries will also be using the said method. In reply, please be informed that on the basis of the above representations, Rohm LSI Design Philippines, Inc. is hereby granted permission to change its method of computing depreciation of its fixed assets from Straight Line Method to Declining Balance, pursuant to the provisions of Section 109 of Revenue Regulations No. 2 which provides viz: "Section 109. Method of Computing Depreciation Allowance . The capital sum to be replaced should be charged off over the useful life of the property, either in equal annual installments or in accordance with any other recognized trade practice, such as an apportionment of the capital sum over units of production. Whatever plan or method of apportionment is adopted must be reasonable and must have due regard to operating conditions during the taxable period. While burden of proof must rest upon the taxpayer to sustain the deductions taken by him, such deductions must not be disallowed unless shown by clear and convincing evidence to be unreasonable. The reasonableness of any claim for depreciation shall be determined upon the conditions known to exist at the end of the period for which the return is made. If it develops that the useful life of the property will be longer or shorter than the useful life as originally estimated under all the then known facts, the portion of the cost or other basis of the property not already provided for through depreciation allowances should be spread over the remaining useful life of the property as reestimated in the light of the subsequent facts, and depreciation deductions taken accordingly. (BIR Ruling No. 146-94, dated September 28, 1994) LLpr Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue