(IND) Straight Line Percent
The Straight Line Percent method that is used in India differs from the Straight Line method. Depreciation is calculated based on rates rather than useful life. In addition, the rates also consider the residual or salvage value at the end of the asset useful life. In India the following assumptions are made:
-
Assets are depreciated as of the in-service date.
-
The minimum rates that are established by statute depreciate 95 percent of the asset cost over the asset useful life.
-
An entity is entitled to depreciate at a higher rate, but not lower.
When using Straight Line Percent as the method, you complete the Percent field with the depreciation rate. The Useful Life field is unavailable. Other fields are ignored for this depreciation calculation. Although residual value is included in the rate, you have to enter salvage value.
Salvage Value acts as a limit. When the NBV reaches this amount, it automatically allocates the rest of the depreciable amount to the last period. Life in Years reflects both years and fractions, such as 8.4. Useful Life and Life in Years are displayed after you save or refresh the page. AM_DEPR_CALC recalculates these fields when it runs. Those assets that are coming from batch processes will calculate only Useful Life and Life in Years when you run AM_DEPR_CALC.
The formula to calculate Useful Life is:
(Cost – Salvage Value) / (Cost x Depr Rate)
For example, an asset that is worth $1,000 and a salvage value of $50, with a 4.75% annual depreciation rate, using the actual month convention, will have a useful life of 20 years or 240 periods. Sometimes useful life may result in fractional periods.
| Year | NBV Begin | Rate | Depr | NBV End |
|---|---|---|---|---|
|
2001 |
1,000.00 |
0.0475 |
47.50 |
952.50 |
|
2002 |
952.50 |
0.0475 |
47.50 |
905.00 |
|
2003 |
905.00 |
0.0475 |
47.50 |
857.50 |
|
2004 |
857.50 |
0.0475 |
47.50 |
810.00 |
|
2005 |
810.00 |
0.0475 |
47.50 |
762.50 |
|
2006 |
762.50 |
0.0475 |
47.50 |
715.00 |
|
2007 |
715.00 |
0.0475 |
47.50 |
667.50 |
|
2008 |
667.50 |
0.0475 |
47.50 |
620.00 |
|
2009 |
620.00 |
0.0475 |
47.50 |
572.50 |
|
2010 |
572.50 |
0.0475 |
47.50 |
525.00 |
|
2011 |
525.00 |
0.0475 |
47.50 |
477.50 |
|
2012 |
477.50 |
0.0475 |
47.50 |
430.00 |
|
2013 |
430.00 |
0.0475 |
47.50 |
382.50 |
|
2014 |
382.50 |
0.0475 |
47.50 |
335.00 |
|
2015 |
335.00 |
0.0475 |
47.50 |
287.50 |
|
2016 |
287.50 |
0.0475 |
47.50 |
240.00 |
|
2017 |
240.00 |
0.0475 |
47.50 |
192.00 |
|
2018 |
192.00 |
0.0475 |
47.50 |
145.00 |
|
2019 |
145.00 |
0.0475 |
47.50 |
97.50 |
|
2020 |
97.50 |
0.0475 |
47.50 |
50.00 |
|
|
|
Total Depreciation |
950.00 |
|
Remaining Value and Life to Date
Two different ways are available to calculate depreciation adjustments under Indian Straight Line Percent Method:
-
Remaining Value
-
Life to Date
For instance, in the preceding example, suppose that in the sixth year, the rate must change to 5.28 percent because the government adopts a new rate according to Schedule XIV. Using Remaining Value, the system calculates the useful life. It takes into account the new rate on the original cost. It calculates depreciation based on the NBV minus any residual value over the remaining new useful life, where remaining new useful life means the new useful life minus periods that are already depreciated.
Revised Useful Life:
(Cost – Salvage Value) / (Cost x Depr Rate) Revised Useful Life: (1000 – 50) / (1000 x .0528) = 17.992424
Rounded up to 18 years or 216 months.
New Depreciation Amount:
(Net Book Value - Limiting Value) / (Revised useful life - Years Depreciated)
New Depreciation Amount:
(762.5 – 50) / (18 – 5) = 54.8076
In the last period, the remaining value will be residual value.
The following table shows the depreciation with the adjustment in the sixth year.
| Yearly Start Date | Original Cost | Schedule XIV Rates | Effective Depreciation | Net Book Value | Number of Years |
|---|---|---|---|---|---|
|
01 JAN 2003 |
1000.00 |
0.0475 |
47.50 |
952.50 |
1 |
|
01 JAN 2004 |
952.50 |
0.0475 |
47.50 |
905.00 |
2 |
|
01 JAN 2005 |
905.00 |
0.0475 |
47.50 |
857.50 |
3 |
|
01 JAN 2006 |
857.50 |
0.0475 |
47.50 |
810.00 |
4 |
|
01 JAN 2007 |
810.00 |
0.0475 |
47.50 |
762.50 |
5 |
|
01 JAN 2008 |
762.50 |
0.0528 |
54.81 |
707.69 |
6 |
|
01 JAN 2009 |
707.69 |
0.0528 |
54.81 |
652.88 |
7 |
|
01 JAN 2010 |
652.88 |
0.0528 |
54.81 |
598.08 |
8 |
|
01 JAN 2011 |
598.08 |
0.0528 |
54.81 |
543.27 |
9 |
|
01 JAN 2012 |
543.27 |
0.0528 |
54.81 |
488.46 |
10 |
|
01 JAN 2013 |
488.46 |
0.0528 |
54.81 |
433.65 |
11 |
|
01 JAN 2014 |
433.65 |
0.0528 |
54.81 |
378.85 |
12 |
|
01 JAN 2015 |
378.85 |
0.0528 |
54.81 |
324.04 |
13 |
|
01 JAN 2016 |
324.04 |
0.0528 |
54.81 |
269.23 |
14 |
|
01 JAN 2017 |
269.23 |
0.0528 |
54.81 |
214.42 |
15 |
|
01 JAN 2018 |
214.42 |
0.0528 |
54.81 |
159.62 |
16 |
|
01 JAN 2019 |
159.62 |
0.0528 |
54.81 |
104.81 |
17 |
|
01 JAN 2020 |
104.82 |
0.0528 |
54.81 |
50.00 |
18 |
In the case of Life to Date, the useful life is again recalculated. This method takes into account the new rate on the original cost. Depreciation is based on what the system had calculated if the rate would have been the new rate from the beginning. An adjustment to the prior depreciation amounts is required in this method to reflect the change retroactively. It consists of summarizing all depreciation amounts until the change and comparing with the amount that would have been obtained if the asset had always been calculated based on the new rate.
Useful Life:
(Cost – Salvage Value) / (Cost x Depr Rate)
Useful Life:
(1000 – 50) / (1000 x .0528) = 17.992424
Rounded up to 18 years or 216 months.
The following table depicts the depreciation if the rate had always been 5.28 percent.
| Yearly Start Date | Original Cost | Schedule XIV Rates | Effective Depreciation | Net Book Value | Number of Years | Total Depreciation |
|---|---|---|---|---|---|---|
|
01 JAN 2003 |
1000.00 |
0.0528 |
52.80 |
947.20 |
1 |
|
|
01 JAN 2004 |
947.20 |
0.0528 |
52.80 |
894.40 |
2 |
|
|
01 JAN 2005 |
894.40 |
0.0528 |
52.80 |
841.60 |
3 |
|
|
01 JAN 2006 |
841.60 |
0.0528 |
52.80 |
788.80 |
4 |
|
|
01 JAN 2007 |
788.80 |
0.0528 |
52.80 |
736.00 |
5 |
264.00 |
|
01 JAN 2008 |
736.00 |
0.0528 |
52.80 |
683.20 |
6 |
|
|
01 JAN 2009 |
683.20 |
0.0528 |
52.80 |
630.40 |
7 |
|
|
01 JAN 2010 |
630.40 |
0.0528 |
52.80 |
577.60 |
8 |
|
|
01 JAN 2011 |
577.60 |
0.0528 |
52.80 |
524.80 |
9 |
|
|
01 JAN 2012 |
524.80 |
0.0528 |
52.80 |
472.00 |
10 |
|
|
01 JAN 2013 |
472.00 |
0.0528 |
52.80 |
419.20 |
11 |
|
|
01 JAN 2014 |
419.20 |
0.0528 |
52.80 |
366.40 |
12 |
|
|
01 JAN 2015 |
366.40 |
0.0528 |
52.80 |
313.60 |
13 |
|
|
01 JAN 2016 |
313.60 |
0.0528 |
52.80 |
260.80 |
14 |
|
|
01 JAN 2017 |
260.80 |
0.0528 |
52.80 |
208.00 |
15 |
|
|
01 JAN 2018 |
208.00 |
0.0528 |
52.80 |
155.20 |
16 |
|
|
01 JAN 2019 |
155.20 |
0.0528 |
52.80 |
102.40 |
17 |
|
|
01 JAN 2020 |
102.40 |
0.0528 |
52.40 |
50.00 |
18 |
|
Compare the preceding table that shows what the amount would have been with a constant rate of 5.28 percent versus the following table that shows what the amounts are with a change and an adjustment in the sixth year.
| Yearly Start Date | Original Cost | Schedule XIV Rates | Effective Depreciation | Net Book Value | Number of Years | Adjustment |
|---|---|---|---|---|---|---|
|
01 JAN 2003 |
1000.00 |
0.0475 |
47.50 |
952.50 |
1 |
|
|
01 JAN 2004 |
952.50 |
0.0475 |
47.50 |
952.50 |
2 |
|
|
01 JAN 2005 |
905.00 |
0.0475 |
47.50 |
905.00 |
3 |
|
|
01 JAN 2006 |
857.50 |
0.0475 |
47.50 |
857.50 |
4 |
|
|
01 JAN 2007 |
810.00 |
0.0475 |
47.50 |
762.50 |
5 |
237.50 |
|
31 DEC 2007 |
26.50 |
736.00 |
|
264.00 |
||
|
01 JAN 2008 |
736.00 |
0.0528 |
52.77 |
683.23 |
6 |
|
|
01 JAN 2009 |
683.23 |
0.0528 |
52.77 |
630.46 |
7 |
|
|
01 JAN 2010 |
630.46 |
0.0528 |
52.77 |
577.69 |
8 |
|
|
01 JAN 2011 |
577.69 |
0.0528 |
52.77 |
524.92 |
9 |
|
|
01 JAN 2012 |
524.92 |
0.0528 |
52.77 |
472.15 |
10 |
|
|
01 JAN 2013 |
472.15 |
0.0528 |
52.77 |
419.38 |
11 |
|
|
01 JAN 2014 |
419.38 |
0.0528 |
52.77 |
366.62 |
12 |
|
|
01 JAN 2015 |
366.62 |
0.0528 |
52.77 |
313.85 |
13 |
|
|
01 JAN 2016 |
313.85 |
0.0528 |
52.77 |
261.08 |
14 |
|
|
01 JAN 2017 |
261.08 |
0.0528 |
52.77 |
208.31 |
15 |
|
|
01 JAN 2018 |
208.31 |
0.0528 |
52.77 |
155.54 |
16 |
|
|
01 JAN 2019 |
155.54 |
0.0528 |
52.77 |
102.77 |
17 |
|
|
01 JAN 2020 |
102.77 |
0.0528 |
52.77 |
50.00 |
18 |
Adjustment PDP:
Total Depreciation at new rate – Total Depreciation at former rate
Adjustment PDP:
264 – 237.50 = 26.50 for the first 5 years.
New Depreciation Amount:
(Net Book Value – Adj PDP - Limiting Value) / (Revised useful life – Years Depreciated)
New Depreciation Amount:
(762.5 – 26.5 - 50) / (18 – 5) = 52.7692