Depreciation Formula

In the Fixed Assets Management SuiteApp, each depreciation method uses a formula to show how the monthly or annual depreciation is calculated.

The Depreciation Method page shows a list of available operators and constants that you can use:

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 perform two separate depreciation calculations, and then apply the one that results in the higher depreciation amount. To use this functionality, separate the two formulas 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 calculates the results of both expressions individually and then uses the higher amount for the depreciation. In this case, the first formula returns the highest value for the first part of the asset's 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) is used, and that same amount applies for the rest of the asset's life because the second is a straight line depreciation method. In this example, the formula switches a third of the way through, around 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.

Related Topics

General Notices