Japan Reserve Reduction (Method 39)
For the example that follows, these assumptions apply:
Actual Start Date: May 15, 1997.
Modified Start Date: July 2, 1997.
Cost: 20.000.000 JPY (without tax).
Salvage: 10 percent of cost.
Investment Tax Credit: 10.000.000 JPY (government-subsidized amount for tax depreciation).
Asset Life: 20 years (240 life periods).
These tables show the depreciation of an asset when using depreciation method 39:
Year |
End of Year Date |
Accumulated Depreciation |
Depreciation Expense |
|---|---|---|---|
1997 |
December 31, 1997 |
-1.090.000 |
1.090.000 |
1998 |
December 31, 1998 |
-2.061.190 |
2.061.190 |
1999 |
December 31, 1999 |
-1.836.520 |
1.836.520 |
2000 |
December 31, 2000 |
-1.636.340 |
1.636.340 |
2001 |
December 31, 2001 |
-1.457.979 |
1.457.979 |
... |
N/A |
N/A |
N/A |
2016 |
December 31, 2016 |
-258.176 |
258.176 |
2017 |
December 31, 2017 |
-110.415 |
110.415 |
This table shows the second depreciation:
Year |
2nd Accumulated Depreciation |
2nd Depreciation Expense |
Rule 1 Calculation |
Rule 2 Calculation |
|---|---|---|---|---|
1997 |
-545 |
545 |
20.000.000 * 10.9 percent * (6 / 12) Periods |
20.000.000 - 10.000.000 * 10.9 percent * (6 / 12) Periods |
1998 |
-1.030.595 |
1.030.595 |
(20.000.000 - 1.090.000) * 10.9 percent |
(20.000.000 - 10.000.000 - 545.000) * 10.9 percent |
1999 |
-918.260 |
918.260 |
(20.000.000 - 3.151.190) * 10.9 percent |
(20.000.000 - 10.000.000 - 1.575.595) * 10.9 percent |
2000 |
-818.170 |
818.170 |
(20.000.000 - 4.987.710) * 10.9 percent |
20.000.000 - 10.000.000 - 2.493.855) * 10.9 percent |
2001 |
-728.989 |
728.989 |
(20.000.000- 6.624.050)*10.9 percent |
(20.000.000 - 10.000.000 - 3.312.025) * 10.9 percent |
... |
N/A |
N/A |
N/A |
|
2016 |
-129.088 |
129.088 |
(20.000.000 - 17.631.409) * 10.9 percent |
(20.000.000 - 10.000.000 - 8.815.703) * 10.9 percent |
2017 |
-55.209 |
55.209 |
20.000.000 - 2.000.000-17.889.585 |
20.000.000 - 10.000.000 - 1.000.000 - 8.944.791 |
The SDA and SDE1 AAIs need to be set up for the secondary accounts. The secondary rules could be set up as primary rules so that only the subsidized tax amount is depreciated.
This table explains the requirements for method 39:
Requirement |
Explanation |
|---|---|
Asset life |
The demonstration data includes versions of method 39 for an asset life of 240 life periods. |
Balance adjustments |
Year-end with annual depreciation Apportioned by period in the year, based on percent |
Modified start date |
The modified start date is the midyear, start of period, or half year. |
Conventions |
Disposal conventions are set for the modified start dates of midyear and half-year. Set the convention to allow depreciation beyond the asset life and to exceed remaining basis. |
Life year rules |
Primary life years 1 to 998 use a fixed rate percent of 10.9 percent, including accumulated depreciation. Secondary life years 1 to 998 use a fixed rate percent of 10.9 percent, including accumulated depreciation and tax credit. |
Calculations |
Basis times the percent rate of 10.9 percent. Basis includes the salvage value. Secondary formulas include the investment tax credit for the subsidized government amount. |
Disposals |
Method 39 has no disposal rules. |