Depreciation Formula
In the Fixed Assets Management SuiteApp, each depreciation method consists of a formula that describes how the amount of monthly or annual depreciation is calculated.
The Depreciation Method page includes a list of available operators and constants that you can use:
-
^ (to the power of, e.g., 5^2 = 5 squared)
-
( ) * / +
-
any number with decimals (e.g., 12345.67)
Note:When creating a custom depreciation formula, you cannot use a comma for decimal places (e.g., 12345,67).
-
IF condition THEN value if true ELSE value if true ENDIF
comparison operators (<=, <, ==, !=, >, >=)
-
~ (maximum of two values, e.g., 2~5 = 5)
-
Original Asset Cost (OC) – The original cost of the asset, usually purchase price.
-
Current Asset Cost (CC) – The current cost of the asset. This will typically be the same as original cost, but it provides an additional cost value to track and use where the cost may vary from the original cost. Write downs affect this value.
-
Net Book Value (NB) – The current depreciated value of the asset.
-
Residual Value (RV) – The minimum value the asset will be reduced to. This is usually zero, unless a residual value has been configured against the asset.
-
Asset Lifetime (AL) – The number of periods an asset will be depreciated for (asset effective life for tax).
-
Current Period or Age (CP) – The current age of the asset.
-
Total Depreciation Amount (TD) – The total amount of depreciation applied to the asset.
-
Current Usage (CU) – The current recorded usage of the asset.
-
Lifetime Usage (LU) – The total usage lifetime configured against the asset.
-
Last Depreciation Amount (LD) – The last depreciation amount.
-
Days held in current period (DH) – The number of days between the asset acquisition date or start date of the current period (whichever comes later) and the end of life (disposal) date or the end of the current period (whichever comes earlier).
-
Prior year net book value (PB) – The closing net book value at the end of the prior financial year as stored on the asset record. The start and end of the year for the method is determined by the Financial Year Start field. The Prior Year NBV is updated when the month being depreciated is the same as the month set as the Financial Year Start. This captures the NBV value as it was for the financial year that ended.
-
Depreciation Period (DP) — The number of days in a period.
-
Fiscal Year (FY) — The number of days in a fiscal year.
-
R1..Rn — A placeholder for values used in the depreciation rate table.
-
ROUND — If the asset’s currency is Japanese Yen, this function rounds a value based on the rounding preference specified in the FAM System Setup page. Otherwise, the ROUND function will round a value based on the asset’s currency precision.
Formula Example: Straight Line Depreciation
Straight line depreciation formula:
(CC-RV)/AL
(Current Asset Cost – Residual Value) / Asset Lifetime
Example:
Current Asset Cost: 20,000
Residual Value: 2,000
Asset Lifetime: 60 months
(20,000 – 2,000) / 60 = 300
As it is a straight line depreciation this will be the same depreciation amount every month.
Formula Example: Maximum of Two Values
The formula can also carry out two different depreciation calculations, and then select the calculation that returns the highest value to use for the deprecation. To use this functionality, the two different formulae are separated by the ~ character.
For example, the formula for the 150DB method is:
((NB-RV)*(1.5/AL))~((NB-RV)/(AL-CP+1))
Fixed Assets Management will calculate the results of ((NB-RV)*(1.5/AL)) and ((NB-RV)/(AL-CP+1)) individually and then use the highest amount for the depreciation. The net effect of this example is that the first formula will return the highest value for the first part of the assets life before switching to the second.
Month 1
Net book value: 20,000
Residual value: 2,000
Asset lifetime: 60 (5 years)
Current period: 1
((20,000 – 2,000)*(1.5/60)) = 450
((20,000 – 2,000)/(60 – 1 + 1)) = 300
Therefore the first formula (450) is used.
Month 30
Net book value: 10,409
Residual value: 2,000
Asset lifetime: 60 (5 years)
Current period: 30
((10,409 – 2,000)*(1.5/60)) = 210
((10,409 – 2,000)/(60 – 30 + 1)) = 271
Now the second formula (271) will be used, and the same amount will be used for the remainder of the lifetime because the second is a straight line depreciation method. In this example, the formula switches a third of the way through at about period 20.
Formula Example: Diminishing Value Method for Tax
You can create a diminishing value method to calculate tax depreciation using a reduced rate in the initial period (year of acquisition). For example:
Formula: (NB)*(DH/365)*(200/(AL/12)/100)
Depreciation Period: Monthly
Net book value is the depreciated value for tax purposes at the end of the prior period. The Prior Year Net Book Value is the depreciated value for tax purposes at the end of the prior year.