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Depreciation method

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Posted on by STP 168
What are the difference between Straight Line Service Life and Straight Line Life Remaining?
 
Thanks.
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Financial Management
  • Kevin Xia Profile Picture
    Kevin Xia Microsoft Employee on at
    Depreciation method
    Hi,
    Has your problem been solved? If so, you can mark the thread as verified so that other users of the forum can view the post.
    Best regards,
    Kevin
  • Verified answer
    André Arnaud de Calavon Profile Picture
    André Arnaud de Cal... 288,584 Super User on at
    Depreciation method
    Hi STP,
     
    There are already some valuable replies, but I would like to add some details here. I always show the formulas like below to directly show that the base for the depreciation is different
     
    Straight line service life: (Acquisition value - Scrap value) / Total periods during service life
     
    Straight line service remaining: (Net book value - Scrap value) / Remaining number of depreciation periods
     
    Initially, the outcome will be the same in case there are no changes in value or remaining service life. In case you are e.g. halfway through the service life, there can be a change to the asset having an impact on the value or remaining service life. After such a change, the depreciation amounts are different for each of the methods.
     
    In case the initial acquisition value was 40000 with a scrap value of 4000, the depreciation base is 36000. In this example, we can also use a lifetime of 3 years with 36 periods. In the first 18 months, the depreciation amount for both methods was 1000 per month. In case you post an additional acquisition value of e.g. 7200, then the following 18 months, the calculation will be:
     
    Straight line service life: (47200 - 4000) / 36 = 1200
     
    Straight line service remaining: (21200 ) / 18 = 1177,78

    Also, in case you change the remaining number of periods, the outcome of both formulas is different.
     
  • Verified answer
    Kevin Xia Profile Picture
    Kevin Xia Microsoft Employee on at
    Depreciation method
    Hi,
    Straight Line Service Life: This method calculates depreciation based on the total service life of the asset. It evenly distributes the depreciable amount over the entire useful life of the asset. For details, please refer to the official documents provided by Billur.
    Straight Line Life Remaining: This approach calculates depreciation based on the remaining useful life of the asset. You can refer to this official document: Straight line life remaining depreciation - Finance | Dynamics 365 | Microsoft Learn. This article gives an overview of the Straight line life remaining method of depreciation.
    Best regards,
    Kevin
  • Verified answer
    Ramit Paul Profile Picture
    Ramit Paul 18,485 Super User on at
    Depreciation method
     
    The main difference between the two methods is how they calculate the depreciation amount in each period. 
    - Straight Line Service Life uses the total service life of the asset as the basis for depreciation. The depreciation amount is generally the same in each period, unless there is an adjustment posted to the asset. The formula for Straight Line Service Life is:
    Depreciation amount = Depreciation base\Total service life
    where the depreciation base is typically the net book value minus the salvage value of the asset.
    - Straight Line Life Remaining uses the remaining service life of the asset as the basis for depreciation. The depreciation amount changes in each period, depending on the remaining life of the asset. The formula for Straight Line Life Remaining is:
    Depreciation amount= Depreciation base\Remaining service life
    where the depreciation base is the same as in Straight Line Service Life.
  • Verified answer
    BillurSamdancioglu Profile Picture
    BillurSamdancioglu 13,216 Super User on at
    Depreciation method
    Hi,
     
    Have you been able to read this link below.
     
    https://learn.microsoft.com/en-us/dynamics365/finance/fixed-assets/straight-line-service-life-depreciation

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