When you set up a fixed asset depreciation profile and select in the field in the form, the assets that have this depreciation profile assigned to them are depreciated by the same percentage in each depreciation period.
To set up reducing balance depreciation, you also must make selections in fields on the tab of the form. First, select a year in the field. Depending on your selection, different options appear in the field, as explained below.
You also must enter a value in the field for the depreciation profile. If you select the option, the remaining depreciation basis is taken in the last depreciation period and could be a large amount. Some countries/regions do not use a switchover to a straight line method. Because an asset will never be fully depreciated based on a percentage calculation, you must select this option to fully depreciate an asset.
Select a
depreciation year
You can select either or in the field in the form. Your selection defines the options that are available in the field. The default option is .
Calendar
The option updates the depreciation base – typically net book value minus scrap value – on January 1 each year. In the reducing balance depreciation example below, the depreciation base is the numerator in the first expression in the calculations column.
If you select , you have the following options in the field, which defines the depreciation accrual posting dates and amounts throughout the calendar year:
-
posts on December 31.
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posts a monthly amount at the end of each calendar month.
-
posts a quarterly amount at the end of each calendar quarter (March 31, June 30, September 30, and December 31).
-
posts a half-yearly amount at the end of each calendar half year (June 30 and December 31).
-
posts the depreciation amount for the daily depreciation method using one transaction for each day.
Note
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(THA) This option is available only if the configuration key for Thailand and the Daily depreciation configuration key are selected. |
For example, if you select , the yearly depreciation is posted only once, on December 31 of each year; if you select , the monthly depreciation is posted each month as 1/12 of the yearly depreciation amount.
Fiscal
If you select in the field, the straight line depreciation method is used. It is calculated on the basis of the fiscal year, which is set up in the form.
For example, for fiscal year March 15 through March 14, the depreciation calculation starts on March 15. The fiscal year can be longer or shorter than 12 months. The depreciation is adjusted for each fiscal period. The length of the next fiscal year is based on the fiscal periods that were set up in the form, or the asset calendar that is associated with the value model/depreciation book.
If you select , you have the following options in the field:
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posts the total amount of the depreciation calculated for the fiscal year as one amount on the last day of the fiscal year.
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calculates the total amount of the depreciation for the fiscal year, which is accrued into the fiscal periods that are defined in the form or asset calendar for each fiscal year.
Example of
reducing balance depreciation
Suppose that the fixed asset acquisition price is 11,000, the scrap value is 1,000, and the depreciation percentage factor is 30.
Using the method, 30 percent of the depreciation base (net book value minus scrap value) is calculated at the end of the previous depreciation period. Depreciation for the first three years is shown below.
|
Period |
Calculation of yearly depreciation amount |
Net book value at the end of the year |
|---|---|---|
|
Year 1 |
(11,000-1,000) * 30% = 3,000 |
8,000 (11,000-3,000) |
|
Year 2 |
(8,000-1,000) * 30% = 2,100 |
5,900 (8,000-2,100) |
|
Year 3 |
(5,900-1,000) * 30% = 1,470 |
4,430 (5,900-1,470) |
Calculating
depreciation rates for Germany
The depreciation rates for Germany are calculated as follows:
If triple the depreciation rate of the straight line method is less than the given maximum percentage for the reducing balance, then triple the straight line rate must be used for calculating the depreciation amount.
If triple the depreciation rate of the straight line method is greater than the given maximum percentage for the reducing balance, then this given percentage must be used for calculating the depreciation amount.
