Unit-of-Production Method of Depreciation

Unit-of-Production Method of Depreciation

Use

Unit-of-production depreciation is useful for certain types of assets. This depreciation method allows you to take fluctuations in activity into account for the depreciation calculation, by linking the amount of the period depreciation directly to the output quantity.

Features

Depreciation Method

The calculation of the period depreciation is dependent on the depreciation method used in the internal calculation key of the depreciation key. Two versions are possible in this case:

Depreciation of acquisition value via the total output (method S)

The base value here is the acquisition value or the replacement value.

Depreciation of net book value over the remaining output (method T)

Make sure that you use base value 27 (net book value with proportional value adjustments) when using this method.

Specifications in the Depreciation Key

For forecasting unit-of-production depreciation you must modify a depreciation key that is dependent on the number of units. You have to modify one depreciation key for each total output quantity (application menu: Periodic processing ® Settings).

For the calculation of the unit-of-production depreciation, enter the probable total output quantity of the fixed asset (for method S) or the remaining output (for method T).

You can change the total output quantity, or the remaining output, to the exact periods. The system then calculates unit-of-production depreciation based on the new total output quantity or the new remaining output, starting with the period in which the change was made.

Specify the probable output quantity for every depreciation period in fiscal years that are still open.

All depreciation keys for unit-of-production depreciation can use the same internal calculation key.

Calculation :

Depreciation = acquisition value (net book value) / total output (remaining output) * period output

APC: 10000

total output: 10000

period output: 100

Depreciation = 10000 / 10000 + 100 / 100 = 200

As with other depreciation methods, the actual posting of the unit-of-production depreciation is carried out by the periodic depreciation posting run.