Unit-of-Production Method of Depreciation
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 depreciation in the given period directly to the output quantity.
The calculation of period depreciation is dependent on the depreciation calculation method used in the base method of the depreciation key. Two versions are possible in this case:
- Depreciation of acquisition value over the total output
The base value here is the acquisition value or the replacement value.
- Depreciation of net book value over the remaining output
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 have to 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: Environment® Current Settings).
- For the calculation of the unit-of-production depreciation, enter the probable total output quantity of the fixed asset (for the No. of units/remaining units depreciation method) or the remaining output (for the No. of units/total no. of units depreciation method).
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.
Depreciation = acquisition value (net book value) / total output (remaining output) * period output
Total output: 10000
Period output: 100
Depreciation = 10000 / 10000 * 100 = 100
As with other depreciation methods, the actual posting of the unit-of-production depreciation is carried out by the periodic depreciation posting run.