Example: Period-Based Calculation 

 

A fiscal year consists of one or more period intervals. The number of intervals in the fiscal year is determined largely by the periods with transactions that influence depreciation calculation (such as, acquisitions, retirements) and changes to depreciation terms during the course of the year.

 

In the following example, the fiscal year has twelve periods (twelve months). The depreciation rate is ten percent. Three transactions are posted in different periods. The resulting period intervals are as follows:

 

Date	Transaction Type	Amount	Calculation Period	Period Interval
01/01	Acquisition	1000	1	1 (= 6 periods)
07/01	Partial retirement	- 400	7	2 (= 3 periods)
10/01	Acquisition	200	10	3 (= 3 periods)

 

 

Period Intervals

 

Based on the period intervals, the depreciation calculation is as follows:

Period Interval	Base Amount for Dep. Calculation	Depreciation Calculation	Depreciation per Interval
1	1000	1000 x 10% x (6/12)	50
2	600  (= 1000 – 400)	600 x 10% x (3/12)	15
3	800  (=  600 + 200)	800 x 10% x (3/12)	20