Management Depreciation - Balances Reduction
This method allows assets accelerated depreciation, applying a constant rate in remaining balance.
It is necessary to enter a saving value, as in other forms balance, in the first calculation, it would be zeroed.
If necessary to zero asset value, depreciation must be changed to linear method. It can happen at any moment of asset life and not only when balance reduction method is concluded.
The following fields must be filled out: Deprec. Per. (N3_PERDEPR) and Sav. Vl. (N3_VLSALV1), which establish asset useful life and saving value respectively.
Calculation features:
Saving value must be entered
Rate is constant and applied to residual values instead of asset original value
If method is maintained until asset useful life end, residual value is equal to saving value
Formulas to establish the rate:
Depreciation rate = 1- (VS/VO)1/n
Where:
VS = saving value
VO = original value
n = period in months (if it is monthly, in years or annual depreciation)
Example of monthly depreciation calculation:
Acquisition value 30,000.00
Useful life (months) 36
Saving value 3,000.00
Rate = 1-(3,000.00/30,000.00)1/36 = 1-(0,1)1/36 = 1- 0.9380418666 = 0.0619581334
Month |
Rate |
Calculation Basis |
Depreciation |
Accumulated Depreciation |
Residual Value |
1 |
0.0619581334 |
30,000.00 |
1,858.74 |
1,858.74 |
28,141.26 |
2 |
0.0619581334 |
28,141.26 |
1,743.58 |
3,602.32 |
26,397.68 |
3 |
0.0619581334 |
26,397.68 |
1,635.55 |
5,237.87 |
24,762.13 |
4 |
0.0619581334 |
24,762.13 |
1,534.22 |
6,772.09 |
23,227.91 |
5 |
0.0619581334 |
23,227.91 |
1,439.16 |
8,211.25 |
21,788.75 |
6 |
0.0619581334 |
21,788.75 |
1,349.99 |
9,561.24 |
20,438.76 |
7 |
0.0619581334 |
20,438.76 |
1,266.35 |
10,827.59 |
19,172.41 |
8 |
0.0619581334 |
19,172.41 |
1,187.89 |
12,015.47 |
17,984.53 |
9 |
0.0619581334 |
17,984.53 |
1,114.29 |
13,129.76 |
16,870.24 |
10 |
0.0619581334 |
16,870.24 |
1,045.25 |
14,175.01 |
15,824.99 |
11 |
0.0619581334 |
15,824.99 |
980.49 |
15,155.50 |
14,844.50 |
12 |
0.0619581334 |
14,844.50 |
919.74 |
16,075.23 |
13,924.77 |
13 |
0.0619581334 |
13,924.77 |
862.75 |
16,937.99 |
13,062.01 |
14 |
0.0619581334 |
13,062.01 |
809.30 |
17,747.28 |
12,252.72 |
... |
... |
... |
... |
... |
... |
36 |
0.0619581334 |
3,198.15 |
198.15 |
27,000.00 |
3,000.00 |
Example of annual depreciation calculation:
Asset Value 30,000.00
Useful life (years) 5.00
Vacation amount 3,000.00
Rate = 1-(3,000.00/30,000.00)1/5 = 1-(0,1)1/5 = 1- 0.63095734 = 0.36904
Year |
Rate |
Calculation Basis |
Depreciation |
Accumulated Depreciation |
Residual Value |
1 |
0.36904 |
30,000.00 |
11,071.20 |
11,071.20 |
18,928.80 |
2 |
0.36904 |
18,928.80 |
6,985.48 |
18,056.68 |
11,943.32 |
3 |
0.36904 |
11,943.32 |
4,407.56 |
22,464.25 |
7,535.75 |
4 |
0.36904 |
7,535.75 |
2,780.99 |
25,245.24 |
4,754.76 |
5 |
0.36904 |
4,754.76 |
1,754.70 |
26,999.94 |
3,000.06 |