As fixed assets have a long useful life, you should not post all costs in the year of purchase, but distribute the costs over a number of years using a depreciation method. The depreciation methods you use for your fixed assets are defined on the Depreciation Methods form. You can depreciate fixed assets using the straight-line method or the declining balance method. This is defined in a depreciation method based on the number of depreciation periods or the depreciation percentage.
You can choose from the following depreciation types to depreciate fixed assets:
The straight-line depreciation method depreciates the acquisition cost of fixed assets. The acquisition cost is the purchase price and any additional costs, such as transport costs and installation costs. If you decide to sell a fixed asset after expiry of the depreciation period, you reduce the acquisition cost by the expected sales value (residual value) in order to determine the depreciation.
When using straight-line depreciation, the value of the fixed asset will be reduced evenly, because in each period, the value is reduced by the same amount.
You can specify the number of depreciation periods or the depreciation percentage per fiscal year:
Straight-line depreciation (annual %): Enter the depreciation percentage per fiscal year, for example 10%. The depreciation period in subperiods is filled in automatically. If you enter 10%, the fixed asset will be depreciated over the course of 10 years. If there are 12 periods per fiscal year, 10 *12 = 120 periods will be filled in.
Straight-line depreciation (periods): Enter the depreciation period in subperiods. If you are using a depreciation period of 5 years and 12 periods per fiscal year, enter 5 * 12 = 60 periods. The depreciation percentage per fiscal year is filled in automatically; for a depreciation period of 5 years, it will be 100% / 5 = 20% per year.
When applying the declining balance depreciation method, the book value is calculated annually based on the depreciation percentage. The book value of the fixed asset will decrease fast at first, but will decrease more gradually later (initially, the book value of the fixed asset equals the acquisition cost, in the following fiscal year the book value equals the acquisition cost minus the depreciation percentage, and in the year after that the value of the previous year will be decreased by the depreciation percentage. This continues until the value approximates the residual value.)
You can specify the number of depreciation periods or the depreciation percentage per fiscal year:
Declining balance depreciation (annual %): Enter the depreciation percentage per fiscal year, for example 10%. The depreciation period in subperiods is filled in automatically. If you enter 10%, the fixed asset will be depreciated over the course of 10 years. If there are 13 periods in a fiscal year, 10 *13 = 130 periods will be filled in.
Declining balance depreciation (periods): Enter the depreciation period in subperiods. If you are using a depreciation period of 5 years and 13 periods per fiscal year, enter 5 * 12 = 65 periods. The depreciation percentage per fiscal year is filled in automatically; for a depreciation period of 5 years, it will be 100% / 5 = 20% per year.
You can choose not to depreciate. For example, choose 'No depreciation' if you are registering land as a fixed asset. Land is usually not depreciated.
Enter the depreciation period in subperiods if you selected 'Straight-line depreciation (periods)' or 'Declining balance depreciation (periods)' as the depreciation type. The depreciation percentage per fiscal year will be filled in automatically. See Depreciation types for examples.
Enter the number of periods your company has in a fiscal year. This value is used to calculate the depreciation period in subperiods if you selected 'Straight-line depreciation (annual %)' or 'Declining balance depreciation (annual %)' as the depreciation type. See Depreciation types for examples.
Enter the depreciation percentage per fiscal year if you selected 'Straight-line depreciation (periods)' or 'Declining balance depreciation (periods)' as the depreciation type. The number of periods per fiscal year will be filled in automatically. See Depreciation types for examples.
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