Method 08, ACRS Optional Depreciation

If you prefer a slower recovery on the cost of ACRS property than the percentages provided, you might elect to use a straight-line recovery method. This method provides a longer recovery period.

The ACRS optional depreciation method uses one of two methods of computation:

Computation Method	Description
Inception-to-date (I)	(((Cost - (Salvage Value)) / (life months)) * (elapsed months)) - (accumulated depreciation) = (period depreciation) For example, depreciation for January 1997 is calculated as follows: (((100,000.00 - 0) / 60) * 6) - 8,333.00 = 1,667.00
Remaining life (R)	((((Net book value) - salvage) / (Remaining life periods))* (months elapsed year-to-date)) - (year-to-date depreciation) = (period depreciation) For example, depreciation for January 1997 is calculated as follows: (((91,667.00 - 0) / 55) * 1) - 0 = 1,667.00 These rules apply to this calculation: The cost less prior years' accumulated depreciation equals the net book value (NBV). If the NBV less salvage value is greater than zero, it is divided by the remaining life months as of the beginning of the current fiscal year.

Computation Method

Description

Inception-to-date (I)

(((Cost - (Salvage Value)) / (life months)) * (elapsed months)) - (accumulated depreciation) = (period depreciation)

For example, depreciation for January 1997 is calculated as follows:

(((100,000.00 - 0) / 60) * 6) - 8,333.00 = 1,667.00

Remaining life (R)

((((Net book value) - salvage) / (Remaining life periods))* (months elapsed year-to-date)) - (year-to-date depreciation) = (period depreciation)

For example, depreciation for January 1997 is calculated as follows:

(((91,667.00 - 0) / 55) * 1) - 0 = 1,667.00

These rules apply to this calculation:

The cost less prior years' accumulated depreciation equals the net book value (NBV).
If the NBV less salvage value is greater than zero, it is divided by the remaining life months as of the beginning of the current fiscal year.

The calculation for ACRS Optional is the same as Straight Line, except:

The system bases the depreciation calculation on the cost, rather than the adjusted cost (cost less salvage value).
The system uses the mid-year convention for personal property.
The system calculates a full month of depreciation in the month that you acquire the property and no depreciation in the month that you dispose of it for 15-year real property.
The system calculates one-half month of depreciation in the months that you acquire and dispose of 18- and 19-year real property.
If depreciation information is 04 (ACRS method with Basis Reduction), the system reduces the cost by one-half of the Income Tax Credit (ITC) amount that is assigned on Master Information.