RE: Diminishing value - depreciation
Julia,
Have you tested and used Declining-Balance 1 or Declining-Balance 2? The difference is as follows:
Declining-Balance 1 Depreciation
This accelerated depreciation method allocates the largest portion of the cost of an asset to the early years of its useful lifetime. If you use this method, you must enter a fixed yearly percentage.
The following formula calculates depreciation amounts:
Depreciation Amount = (Declining-Bal. % x Number of Depreciation Days x Depr. Basis) / (100 x 360)
The depreciable basis is calculated as the book value less posted depreciation since the starting date of the current fiscal year. The posted depreciation amount can contain entries with various posting types (write-down, custom1, and custom2) posted since the starting date of the current fiscal year. These posting types are included in the posted depreciation amount if there are check marks in the Depreciation Type and the Part of Book Value fields in the FA Posting Type Setup window.
Example - Declining-Balance 1 Depreciation
A fixed asset has an acquisition cost of LCY 100,000. The Declining-Balance % field is 25. The Calculate Depreciation batch job is run biannually.
The following table shows how the fixed asset ledger entries look.
| Date |
FA Posting Type |
Days |
Amount |
Book Value |
| 01/01/10 |
Acquisition Costs |
* |
100,000.00 |
100,000.00 |
| 06/30/10 |
Depreciation |
180 |
-12,500.00 |
87,500.00 |
| 12/31/10 |
Depreciation |
180 |
-12,500.00 |
75,000.00 |
| 06/30/11 |
Depreciation |
180 |
-9,375.00 |
65,625.00 |
| 12/31/11 |
Depreciation |
180 |
-9,375.00 |
56,250.00 |
| 06/30/12 |
Depreciation |
180 |
-7,031.25 |
49,218.75 |
| 12/31/12 |
Depreciation |
180 |
-7,031.25 |
42,187.50 |
| 06/30/13 |
Depreciation |
180 |
-5,273.44 |
36,914.06 |
| 12/31/13 |
Depreciation |
180 |
-5,273.44 |
31,640.62 |
| 06/30/14 |
Depreciation |
180 |
-3,955.08 |
27,685.54 |
| 12/31/14 |
Depreciation |
180 |
-3,955.08 |
23,730.46 |
-
Depreciation starting date
Calculation Method:
1st Year: 25% of 100,000 = 25,000 = 12,500 + 12,500
2nd Year: 25% of 75,000 = 18,750 = 9,375 + 9,375
3rd Year: 25% of 56,250 = 14,062.50 = 7,031.25 + 7,031.25
The calculation continues until the book value equals the final rounding amount or the salvage value that you entered.
Declining-Balance 2 Depreciation
The Declining-Balance 1 and Declining-Balance 2 methods calculate the same total depreciation amount for each year. However, if you run the Calculate Depreciation batch job more than once a year, the Declining-Balance 1 method will result in equal depreciation amounts for each depreciation period. The Declining-Balance 2 method, on the other hand, will result in depreciation amounts that decline for each period.
Example - Declining-Balance 2 Depreciation
A fixed asset has an acquisition cost of LCY 100,000. The Declining-Balance % field is 25. The Calculate Depreciation batch job is run biannually. The fixed asset ledger entries look like this:
| Date |
FA Posting Type |
Days |
Amount |
Book Value |
| 01/01/10 |
Acquisition Costs |
* |
100,000.00 |
100,000.00 |
| 06/30/10 |
Depreciation |
180 |
-13,397.46 |
86,602.54 |
| 12/31/10 |
Depreciation |
180 |
-11,602.54 |
75,000.00 |
| 06/30/11 |
Depreciation |
180 |
-10,048.09 |
64,951.91 |
| 12/31/11 |
Depreciation |
180 |
-8,701.91 |
56,250.00 |
- Depreciation starting date
Calculation Method:
- BV = Book value
- ND = Number of depreciation days
- DBP = Declining-balance percent
- P = DBP/100
- D = ND/360
The formula for calculating the depreciation amounts is:
DA = BV x (1 – (1 –P)D
The depreciation values are:
| Date |
Calculation |
| 06/30/10 |
DA = 100,000.00 x (1 -(1 - 0.25)0.5) = 13,397.46 |
| 12/31/10 |
DA = 86,602.54 x (1 - (1 - 0.25)0.5) = 11,602.54 |
| 06/30/11 |
DA = 75,000.00 x (1 - (1 - 0.25)0.5) = 10,048.09 |
| 12/31/11 |
DA = 64,951.91 x (1 - (1 - 0.25)0.5) = 8,701.91 |
Test this out and it should meet your requirement.
Hope this helps.
Thanks,
Steve
