There are eight methods of depreciation available in the default version of Business Central:

Straight-Line

Declining-Balance 1

Declining-Balance 2

DB1/SL

DB2/SL

User-defined

Note

Specify your own depreciation method by defining depreciation tables. For information about applying a user defined depreciation method, see Set Up User-Defined Depreciation Method.

Manual

Note

Use this method for assets that are not subject to depreciation, for example, land. You must enter depreciation in the fixed asset G/L journal. The Calculate Depreciation batch job omits fixed assets that use this depreciation method.

Half-Year Convention

Note

When you use this method, a fixed asset is depreciated by the same amount each year.

When you use the straight-line method, you must specify one of the following options in the fixed asset depreciation book:

If you enter the depreciation period (the number of depreciation years, the number of depreciation months, or the depreciation ending date), the following formula calculates the depreciation amount:

Depreciation Amount = ((Book value - Salvage Value) x Number of Depreciation Days) / Remaining Depreciation Days

Remaining depreciation days are calculated as the number of depreciation days minus the number of days between the depreciation starting date and the last fixed asset entry date.

Book value may be reduced by posted appreciation, write-down, custom 1 or custom 2 amounts, depending on whether the Include in Depr. Calculation field is deactivated and whether the Part of Book Value field is activated on the FA Posting Type Setup page. This calculation ensures that the fixed asset is fully depreciated at the depreciation ending date.

If you enter a fixed yearly percentage, application uses the following formula to calculate the depreciation amount:

Depreciation Amount = (Straight-Line % x Depreciable Basis x Number of Depr. Days) / (100 x 360)

If you enter a fixed yearly amount, application uses this formula to calculate the depreciation amount:

Depreciation Amount = (Fixed Depreciation Amount x Number of Depreciation Days) / 360

A fixed asset has an acquisition cost of LCY 100,000. The estimated life is eight years. The Calculate Depreciation batch job is run biannually.

For this example, the fixed asset ledger entry looks like this:

This accelerated depreciation method allocates the largest portion of the cost of an asset to the early years of its useful lifetime. If you use this method, you must enter a fixed yearly percentage.

The following formula calculates depreciation amounts:

Depreciation Amount = (Declining-Bal. % x Number of Depreciation Days x Depr. Basis) / (100 x 360)

The depreciable basis is calculated as the book value less posted depreciation since the starting date of the current fiscal year.

The posted depreciation amount can contain entries with various posting types (write-down, custom1, and custom2) posted since the starting date of the current fiscal year. These posting types are included in the posted depreciation amount if there are check marks in the Depreciation Type and the Part of Book Value fields on the FA Posting Type Setup page.

A fixed asset has an acquisition cost of LCY 100,000. The Declining-Balance % field is 25. The Calculate Depreciation batch job is run biannually.

The following table shows how the fixed asset ledger entries look.

Calculation Method:

Year 1: 25% of 100,000 = 25,000 = 12,500 + 12,500

Year 2: 25% of 75,000 = 18,750 = 9,375 + 9,375

Year 3: 25% of 56,250 = 14,062.50 = 7,031.25 + 7,031.25

The calculation continues until the book value equals the final rounding amount or the salvage value that you entered.

The Declining-Balance 1 and Declining-Balance 2 methods calculate the same total depreciation amount for each year. However, if you run the Calculate Depreciation batch job more than once a year, the Declining-Balance 1 method will result in equal depreciation amounts for each depreciation period. The Declining-Balance 2 method, on the other hand, will result in depreciation amounts that decline for each period.

A fixed asset has an acquisition cost of LCY 100,000. The Declining-Balance % field is 25. The Calculate Depreciation batch job is run biannually. The fixed asset ledger entries look like this:

Calculation Method:

The formula for calculating the depreciation amounts is:

DA = BV x (1 – (1 –P)D)

The depreciation values are:

DB1/SL is an abbreviated combination of Declining-Balance 1 and Straight-Line. The calculation continues until the book value equals the final rounding amount, or the salvage value that you entered.

The Calculate Depreciation batch job calculates a straight-line amount and a declining balance amount, but only the greater of the two amounts is transferred to the journal.

You can use various percentages to calculate declining-balance.

If you use this method, you must enter the estimated useful lifetime and a declining balance percentage on the FA Depreciation Books page.

A fixed asset has an acquisition cost of LCY 100,000. On the FA Depreciation Books page, the Declining-Balance % field contains 25 and the No. of Depreciation Years field contains 8. The Calculate Depreciation batch job is run biannually.

The fixed asset ledger entries look like this:

SL after the book value means that the straight-line method has been used.

Calculation method:

Year 1 (2020):

Declining-balance amount: 25% of 100,000 = 25,000 = 12,500 + 12,500

Straight-line amount = 100,000 / 8 = 12,500 = 6,250 + 6,250

The declining-balance amount is used because it is the greater amount.

Year 5 (2025):

Declining-balance amount: 25% of 23,730.46 = 4,943.85= 2,471.92 + 2,471.92

Straight-line amount = 23,730.46/3 = 7,910.15 = 3,995.07 + 3,995.08

The straight-line amount is used because it is the greater amount.

The Half-Year Convention method will only be applied if you have placed a check mark in the Use Half-Year Convention field in the fixed FA Depreciation Book page.

This depreciation method can be used in conjunction with the following depreciation methods in application:

When you apply the Half-Year Convention, a fixed asset has six months of depreciation in the first fiscal year, regardless of the contents of the Depreciation Starting Date field.

Note

The estimated life of the fixed asset that is remaining after the first fiscal year will always contain a half-year using the Half-Year Convention Method. Thus, for the Half-Year Convention method to be applied correctly, the Depreciation Ending Date field on the FA Depreciation Book page must always contain a date which is exactly six months before the final date of the fiscal year in which the fixed asset will fully depreciate.

A fixed asset has an acquisition cost of LCY 100,000. The Depreciation Starting Date is 03/01/20. The estimated life is five years, so the Depreciation Ending Date must be 06/30/25. The Calculate Depreciation batch job is run annually. This example is based on a calendar fiscal year.

The fixed asset ledger entries look like this:

A fixed asset has an acquisition cost of LCY 100,000. The Depreciation Starting Date is 11/01/20. The estimated life is five years, so the Depreciation Ending Date must be 06/30/25. On the FA Depreciation Books page, the Declining-Balance % field contains 40. The Calculate Depreciation batch job is run annually. This example is based on a calendar fiscal year.

The fixed asset ledger entries look like this:

SL after the book value means that the straight-line method has been used.

Calculation method:

Year 1:

Declining-balance amount = Full year amount = 40% of 100,000 = 40,000. Thus, for half a year 40,000 / 2 = 20,000

Straight-line amount = Full year amount = 100,000 / 5 = 20,000. Thus, for half a year = 20,000 / 2 = 10,000

The declining-balance amount is used because it is the greater amount.

Year 5 (2024):

Declining-balance amount = 40% of 17,280.00 = 6,912.00

Straight-line amount = 28,800 / 1.5 = 11,520.00

The straight-line amount is used because it is the greater amount.

If you have three depreciation books, B1, B2 and B3, and you want to duplicate entries from B1 to B2 and B3, you can place a check mark in the Part of Duplication List field on the depreciation book cards for B2 and B3. This can be useful if depreciation book B1 is integrated with the general ledger and uses the fixed asset G/L journal, and depreciation books B2 and B3 are not integrated with the general ledger and use the fixed asset journal.

When you enter an entry in B1 in the fixed asset G/L journal and place a check mark in the Use Duplication List field, application will duplicate the entry in book B2 and B3 in the fixed asset journal when the entry is posted.

Note

You cannot duplicate in the same journal and journal batch as you are duplicating from. If you post entries in the fixed asset G/L journal, you can duplicate them in the fixed asset journal or in the fixed asset G/L journal using another batch.

Note

You cannot use the same number series in the fixed asset G/L journal and the fixed asset journal. When you post entries in the fixed asset G/L journal, you must leave the Document No. field empty. If you enter a number in the field, the the number is duplicated in the fixed asset journal. You'll have to manually change the document number before you can post the journal.

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