Query in reducing balance depreciation posting

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Posted on by SJ-16091251-0

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I am calculating a deprecation for a fixed asset that has a acquisition value of 450,430.00. The reducing balance method is used. The depreciation percentage is 93.7% and the life of the asset is 13 months. We are using financial year from April to Mar.
The asset is acquired and placed in service on 01/08/2025. We calculated the depreciation (last run was on 31st Oct 2025 for inventory closing) and it shows as the image attached. The depreciation for the financial year 2026 i.e., from April 2026 does not show the equal amounts in depreciation column as it accumulates the remaining amount for the month of September 2026. We usually would expect that the equal distribution of amounts should happen. Why is it happening like this? Does the reducing balance method work this way?

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Dynamics 365 Finance

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H.M.Burhan 476 Super User 2026 Season 1 on at

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Hi,

Could you please provide a screenshot showing the depreciation profile and book details of this fixed asset?

Cheers,

Burhan

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André Arnaud de Cal... 306,230 Super User 2026 Season 1 on at

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Hi,

What are the dates for your fiscal year? Is it running from April to March? If so, a similar profile is expected. You can read about the reducing balance method on Microsoft Learn: Reduce balance depreciation - Finance | Dynamics 365 | Microsoft Learn

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SJ-16091251-0 383 on at

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@H.M.Burhan @André Arnaud de Calavon - Here are the additional details:
Book is configured as below:

Depreciation profile:

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H.M.Burhan 476 Super User 2026 Season 1 on at

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Hi SJ,

I have created the same scenario in my environment. Based on Microsoft’s documentation, the depreciation amount should be recalculated at the beginning of the fiscal year. This is exactly what the system does in the case of a Reducing rate depreciation profile. However, once the depreciation is calculated at the beginning of the fiscal year, the amount is then distributed on monthly basis if you have set up a monthly depreciation calendar. Same procedure applies for the next fiscal period as well.

Here is the outcome.

Here is the FA Book configuration.

In the scenario below, I increased the service life to cover the complete fiscal year of 2026 (my fiscal year runs from January to December). Here, you can see the calculation. The system calculates depreciation for the entire year by taking the net book value from the previous year and applying 93.7% to determine the full-year depreciation, which is then distributed on a monthly basis.

But in case you acquire the fixed asset (FA) during the fiscal period and the FA’s life is set to end in between the fiscal period, the depreciation is calculated and applied on a prorated basis. Additionally, at the end of the asset’s life in a reducing balance depreciation profile, the system depreciates the remaining net book value, as you can see in my example and in your scenario as well.

However, if you want the system to calculate the same depreciation across the FA’s service life, use the "Straight Line – Life Remaining" or "Straight Line – Service Life" method instead.

Cheers,

Burhan

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SJ-16091251-0 383 on at

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@H.M.Burhan - Thanks a lot for this great help. It is clear to me now.

Just to reiterate, the remaining amount for next year will be pro-rated monthly and distributed. Since it is pro-rated for entire year, if the life ends in between, the remaining amount will be entirely shown for the last month. Can you confirm for the one last time?

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H.M.Burhan 476 Super User 2026 Season 1 on at

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Hi,

Since the total useful life of the fixed asset is 18 months and will end in January 2027 (as mentioned in my example, where the fiscal year runs from January to December), the remaining net book value of 17,298.20 as of December 2026 will be fully depreciated by the system in January 2027, the final month of the asset’s life, in order to complete its depreciation.

However, if the fixed asset’s useful life is 19 months instead of 18, the system calculates the depreciation for fiscal year 2027 as (17,298.20 × 93.70% ÷ 12 months = 1,350.70) and applies this depreciation for January 2027. Since February 2027 is the final month of the fixed asset’s useful life, the system depreciates the remaining net book value in February 2027 to retire the fixed asset, as shown in the screenshot below.

Cheers,

Burhan

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SJ-16091251-0 383 on at

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@H.M.Burhan - Re-opening the thread, just for one additional query -

Your explanation above is perfectly fine - but I want to understand WHY system behaves this way?

For your example above - if the fixed asset’s useful life is 19 months instead of 18, the system calculates the depreciation for fiscal year 2027 as (17,298.20 × 93.70% ÷ 12 months = 1,350.70) and applies this depreciation for January 2027. Since February 2027 is the final month of the fixed asset’s useful life, the system depreciates the remaining net book value in February 2027 to retire the fixed asset, as shown in the screenshot below.

Why cannot system divide the depreciation amount in 2 months equally rather than dumping it in the last month? I would really appreciate if you could help me in understanding the same.

FYI - @André Arnaud de Calavon

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H.M.Burhan 476 Super User 2026 Season 1 on at

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Hi @SJ-16091251-0,

I have already explained the calculation behind the system's behaviour in previous comments. However, if you couldt share the relevant transactions and then explain your question, we will be able to understand it better and provide a more accurate response.

Cheers,

Burhan

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