How to Account for Employee Expense Reimbursements in the UAE
12/11/2026
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Fixed assets are essential for running a business, whether they include office computers, company vehicles, machinery, or furniture. However, purchasing these assets is only the beginning. Businesses must also record their value correctly, calculate depreciation, and maintain accurate financial records.
Understanding fixed assets and depreciation in UAE businesses helps owners and finance teams prepare reliable financial statements, monitor business investments, and maintain appropriate accounting records.
For companies operating in Dubai and across the UAE, proper fixed asset accounting also supports financial reporting and Corporate Tax compliance.
This guide explains how to record fixed assets, calculate depreciation, prepare journal entries, and manage asset records using practical examples.
Fixed assets are long-term tangible assets used by a business to produce goods, provide services, or support daily operations.
Unlike inventory, fixed assets are generally not purchased for immediate resale. Instead, they are expected to provide economic benefits over more than one accounting period.
Common examples of fixed assets in UAE businesses include:
Office furniture and equipment
Computers and laptops
Company vehicles
Manufacturing machinery
Buildings used for business operations
Warehouse equipment
Office fit-outs and leasehold improvements
Under International Accounting Standard 16 (IAS 16), qualifying tangible assets are recognised as property, plant and equipment when future economic benefits are probable and their cost can be measured reliably.
Depreciation is the systematic allocation of an asset's depreciable amount over its estimated useful life.
Instead of recording the entire cost of a qualifying fixed asset as an immediate operating expense, the business recognises the asset in its financial statements and allocates its depreciable amount over the periods benefiting from its use.
For example, if a UAE company purchases equipment for AED 50,000 and expects to use it for five years, it may recognise depreciation over that period.
The appropriate amount depends on the depreciation method, estimated residual value, and expected useful life.
Depreciation is important because it helps businesses report expenses more systematically and understand the remaining carrying value of their assets.
Proper fixed asset accounting ensures that qualifying asset purchases are recorded in the statement of financial position instead of being incorrectly charged entirely to operating expenses.
Financial accounting records provide the starting point for UAE Corporate Tax calculations. Accurate depreciation records help businesses prepare financial statements and identify any required tax adjustments.
Tracking depreciation and useful lives helps management estimate when equipment, vehicles, or machinery may need replacement.
A well-maintained fixed asset register provides supporting information about asset purchases, depreciation, disposals, and carrying amounts.
Businesses can monitor asset locations, ownership, costs, and condition to reduce errors and improve asset management.
Proper accounting begins when a business purchases an asset and continues throughout its useful life.
Determine whether the item will be used for business operations and is expected to provide benefits beyond one reporting period.
For example, a manufacturing machine may qualify as a fixed asset, while materials purchased for resale would generally be classified as inventory.
Businesses should also establish a consistent capitalisation policy for individually insignificant purchases, applying materiality and the relevant accounting framework.
The initial cost of an asset may include more than its purchase price.
Depending on the circumstances, capitalisable costs may include:
Purchase price after trade discounts
Import duties
Non-refundable taxes
Transportation and delivery costs
Installation expenses
Directly attributable testing costs
Eligible initial dismantling and restoration obligations
General administration expenses and routine operating costs are normally not included unless they meet the applicable recognition requirements.
Example:
A Dubai trading company purchases machinery with the following costs:
| Description | Amount (AED) |
|---|---|
| Machinery purchase price | 40,000 |
| Delivery charges | 2,000 |
| Installation expenses | 3,000 |
| Total asset cost | 45,000 |
The initial recognised cost of the machinery would be AED 45,000, assuming all listed costs qualify for capitalisation and no other adjustments are required.
When the company purchases and pays for the machinery, the accounting entry would be:
| Account | Debit (AED) | Credit (AED) |
|---|---|---|
| Machinery – Fixed Asset | 45,000 | — |
| Bank | — | 45,000 |
This entry increases the company's fixed assets and reduces its bank balance.
The example excludes VAT for simplicity. Any recoverable input VAT should be recorded separately rather than added to the asset's cost.
The useful life represents the period over which the business expects to use an asset or the expected number of production units it will generate.
Residual value is the estimated amount recoverable from disposal at the end of the asset's useful life, after estimated disposal costs.
Useful life should be based on actual business expectations, not an assumed universal UAE depreciation rate.
Choose a method that reflects how the asset's future economic benefits are expected to be consumed.
Common depreciation methods include straight-line, diminishing balance, and units of production.
Depreciation should begin when the asset is available for its intended use, even if commercial use begins later.
The business should record depreciation in the appropriate accounting periods and update the fixed asset register.
The straight-line method allocates an equal depreciation expense each year when the asset's expected consumption pattern is consistent.
Formula:
Annual Depreciation = (Asset Cost − Residual Value) ÷ Useful Life
Example:
A UAE business purchases office equipment for AED 30,000.
Asset cost: AED 30,000
Residual value: AED 5,000
Estimated useful life: 5 years
Annual Depreciation = (30,000 − 5,000) ÷ 5
Annual depreciation = AED 5,000
The company would recognise AED 5,000 in annual depreciation expense, assuming a full year of depreciation and no changes in estimates.
Under the diminishing balance method, depreciation is calculated using a percentage of the asset's remaining carrying amount.
This generally produces higher depreciation charges in earlier years and lower charges in later years.
For example, if an asset costs AED 40,000 and the selected annual depreciation rate is 20%:
Year 1 depreciation: AED 8,000
Year 1 closing carrying amount: AED 32,000
Year 2 depreciation: AED 6,400
Year 2 closing carrying amount: AED 25,600
The method and rate must reflect the asset's expected consumption pattern, with consideration given to its residual value.
This method calculates depreciation based on actual usage rather than simply the passage of time.
Formula:
Depreciation per Unit = (Asset Cost − Residual Value) ÷ Estimated Total Production Units
For machinery costing AED 100,000, with zero residual value and expected production of 50,000 units:
Depreciation per Unit = AED 2
If the machinery produces 8,000 units during the year:
Annual Depreciation = 8,000 × AED 2 = AED 16,000
This method may be appropriate when usage determines how an asset's economic benefits are consumed.
Using the earlier straight-line example, assume the business needs to recognise AED 5,000 in annual depreciation.
The journal entry would be:
| Account | Debit (AED) | Credit (AED) |
|---|---|---|
| Depreciation Expense | 5,000 | — |
| Accumulated Depreciation | — | 5,000 |
Depreciation expense is normally recognised in profit or loss, although certain depreciation costs may form part of another asset's cost.
Accumulated depreciation reduces the carrying amount of fixed assets in the statement of financial position.
For the office equipment example, after one full year:
| Description | Amount (AED) |
|---|---|
| Original asset cost | 30,000 |
| Less: Accumulated depreciation | (5,000) |
| Net carrying amount | 25,000 |
This gives management a clearer picture of the asset's recorded value.
UAE Corporate Tax calculations generally begin with accounting income determined from financial statements prepared under the applicable accounting standards.
Depreciation recognised under those standards may affect accounting profit and, consequently, the Corporate Tax calculation.
However, accounting depreciation should not automatically be treated as a separate, unrestricted tax deduction.
Businesses must consider the Corporate Tax Law, relevant exemptions, expenditure restrictions, applicable elections, and any required adjustments.
For example, where a qualifying business asset is used to generate taxable business income, the related accounting depreciation may generally be reflected in the computation, subject to applicable tax rules.
An accurate fixed asset register and depreciation schedule can help substantiate the amounts recorded in the financial statements.
Businesses should seek professional advice when dealing with complex assets, related-party transactions, impairment, or asset disposals.
A fixed asset register is a detailed record of the assets owned and used by a business.
A practical fixed asset register should contain:
Asset identification number
Asset description
Purchase and available-for-use dates
Supplier details
Original asset cost
Estimated useful life
Residual value
Depreciation method
Accumulated depreciation
Net carrying amount
Asset location
Disposal information, where applicable
Businesses should regularly reconcile the register with general ledger balances and physically verify assets where appropriate.
Qualifying capital expenditure should be evaluated for recognition as an asset.
Depreciation methods and useful lives should reflect expected consumption patterns rather than arbitrary rates.
Recoverable input VAT should generally be accounted for separately, subject to applicable VAT requirements.
When an asset is sold or scrapped, its cost and accumulated depreciation should be removed, with any resulting gain or loss recorded appropriately.
Under IAS 16, useful lives and residual values are reviewed at least at each financial year-end.
A business should assess assets for impairment under applicable accounting standards when relevant indicators arise.
Accurate fixed asset management requires consistent bookkeeping, supporting records, and appropriate accounting treatment.
Young & Right Accounting & Tax Consultancy provides accounting, bookkeeping, financial reporting, and tax advisory services for businesses across the UAE.
Professional accounting support can help businesses organise fixed asset records, prepare depreciation schedules, reconcile asset balances, and maintain reliable financial information.
Whether your company is purchasing new equipment, expanding operations, or preparing year-end financial statements, accurate fixed asset accounting is an important part of effective financial management.
Understanding fixed assets and depreciation in UAE businesses is essential for maintaining accurate accounting records and preparing reliable financial statements.
By correctly capitalising asset purchases, selecting appropriate depreciation methods, and maintaining a detailed fixed asset register, businesses can improve financial transparency and support regulatory compliance.
Regular reviews and professional accounting support can also help prevent reporting errors and improve long-term financial planning.
Manage fixed assets, depreciation schedules, and financial records with professional accounting and bookkeeping support from Young & Right.
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