Japan Salvage (Method 38)

For the example that follows, these assumptions apply:

Actual Start Date: May 15, 1997.
Modified Start Date: July 2, 1997.
Cost: 10.000 JPY (without tax).
Salvage: 5 percent of cost.
Asset Life: 5 years (60 life periods).

This table shows the depreciation of an asset when using depreciation method 38:

Year	End of Year Date	Accumulated Depreciation	Depreciation Expense	Calculation
1997	December 31, 1997	-1.845	1.845	10.000 * 36.9 percent * (6 / 12) Periods
1998	December 31, 1998	-3.009	3.009	(10.000 - 1.845) * 36.9 percent
1999	December 31, 1999	-1.899	1.899	(10.000 - 4.854) * 36.9 percent
2000	December 31, 2000	-1.198	1.198	(10.000 - 6.753) * 36.9 percent
2001	December 31, 2001	-756	756	(10.000 - 7.951) * 36.9 percent
2002	December 31, 2002	-477	477	(10.000 - 8.707) * 36.9 percent
2003	December 31, 2003	-301	301	(10.000 - 9.184 * 36.9 percent
2004	December 31, 2004	-15	15	(10.000 - 9.485) - 500

This example stops at 5 percent of cost with the current year compute direction. The demonstration data also includes a depreciation version to 1 yen past the 5 percent salvage value, using the remaining compute direction.

Note: Depreciation to 1 yen can be accomplished by using remaining compute direction. The asset's life is 5 years, but depreciation of salvage continues beyond the asset's life.

This table explains the requirements for method 38:

Requirement	Explanation
Asset life	The demonstration data includes versions of method 38 for an asset life of 60 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 but not to exceed remaining basis.
Life year rules	Life year 1 to 1 uses a fixed rate percent of 36.9 percent with the initial periods apportionment. Life years 2 to 8 uses fixed rate percent of 36.9. Life years 9 to 10 uses formulas to depreciate the 5 percent of salvage for three years (DIR1 = Remaining). Life years 11 and onward depreciate to remaining basis of 1 year (DIR1 = Remaining).
Calculations	Basis times the percent rate of 36.9 percent. Basis includes the salvage value.
Disposals	Method 38 has no disposal rules.