When you set up a fixed asset depreciation profile and select the value in the field on the form, the depreciation of fixed assets that are assigned to this depreciation profile is based on the total service life of the asset. This generally is the same depreciation amount in each depreciation period.
To set up Straight line service life depreciation, you also must make selections in two fields on the tab of the form. First, you make a selection in the field. Depending on your selection, different options appear in the field, as explained below in a separate section.
The only difference in the depreciation amount calculated between straight-line service life remaining and straight-line service life is when there is an adjustment posted to the asset.
Selection of
depreciation year
You can select either or in the field on the form. Your selection defines the options that are available in the field.
Depreciation year: Calendar
You can accept the default value in the field, which is . When you select a calendar, a year of January 1 to December 31 is assumed, even if you have defined the Fixed asset calendar or General ledger periods differently.
The option updates the depreciation base (typically net book value minus scrap value) on January 1 each year. In the examples below, the depreciation base is the numerator in the first expression in calculations in the Calculation column.
If you select , you have four options in the field, which defines the depreciation accrual posting dates and amounts throughout the calendar year:
-
posts December 31
-
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 calendar half year (June 30 and December 31)
-
posts the depreciation amount for the daily depreciation method using one transaction for each day. This option is available only when the Thailand country/region configuration key and the Daily depreciation configuration key are both selected.
For example, for option , the yearly depreciation is posted only once, on December 31 each year, while for option , the monthly depreciation is posted each month as 1/12 of the yearly depreciation amount.
Depreciation year: Fiscal
The second option that you can select in the field is . If you select this option, the Straight line service life depreciation is calculated on the basis of the fiscal year, defined by either a Fixed asset calendar or General ledger periods. Asset calendars are set up in the form and General ledger periods are set up in the form.
For example, for fiscal year March 15, 2007 - March 14, 2008, the depreciation calculation starts on March 15. The fiscal year can be longer or shorter than 12 months. The depreciation automatically is adjusted for each fiscal period, and the length of the next fiscal year is determined by fiscal periods that are set up in the form or the form.
When is selected as the depreciation year, two options are available for the setup of :
Straight-line
depreciation of an unchanged fixed asset
Example: Suppose that the fixed asset has the following characteristics:
|
Acquisition price |
11,000 |
|
Scrap value |
1,000 |
|
Depreciation base |
10,000 |
|
Service life |
5 |
|
Yearly depreciation |
2,000 |
You get the same depreciation amount each year.
(Acquisition cost - Salvage value) / Service life years
|
Period |
Calculation of yearly depreciation amount |
Net book value at the end of the year |
|---|---|---|
|
Year 1 |
(11,000-1,000)/5 = 2,000 |
9,000 |
|
Year 2 |
(11,000-1,000)/5 = 2,000 |
7,000 |
|
Year 3 |
(11,000-1,000)/5 = 2,000 |
5,000 |
|
Year 4 |
(11,000-1,000)/5 = 2,000 |
3,000 |
|
Year 5 |
(11,000-1,000)/5 = 2,000 |
1,000 |
Straight-line
depreciation of a modified fixed asset
Example: Now, suppose that you add an acquisition adjustment of 4,000 in year 2 to the same fixed asset.
The service life of the acquisition adjustment is the same as that of the fixed asset and begins at the time of its acquisition. A net book value remains at the end of year 5, corresponding to the net book value of the acquisition adjustment. The depreciation by period is calculated as shown in the following table.
|
Period |
Calculation of yearly depreciation amount |
Net book value at the end of the year |
|---|---|---|
|
Year 1 |
10,000/5 = 2,000 |
9,000 (11,000 - 2,000) |
|
Year 2 |
4,000 ( ) |
13,000 (9,000 + 4,000) |
|
Year 2 |
14,000/5 = 2,800 |
10,200 (13,000 - 2,800) |
|
Year 3 |
14,000/5 = 2,800 |
7,400 (10,200 - 2,800) |
|
Year 4 |
14,000/5 = 2,800 |
4,600 (7,400 - 2,800) |
|
Year 5 |
14,000/5 = 2,800 |
1,800 (4,600 - 2,800) |
|
Year 6 |
Remaining 800* |
1,000 |
*Since the remaining amount is less than the depreciation amount, only the remaining amount less the salvage value is taken.
