Example: Declining-Balance Depreciation 

Assume that you purchase an asset on August 1, 2004, for PLN 30,000. The asset is subject to declining-balance depreciation at a rate of 20%.

In the first year of the asset’s useful life, the system automatically applies whichever of the two different methods (described in Special Depreciation in an Asset's First Year) yields the greater depreciation amount. This, as illustrated in the following, is the 30% flat rate method.

30% Flat Rate

Under this method, the system calculates depreciation at 30% of the asset’s acquisition and production costs (PLN 30,000):

Three Times Declining-Balance Depreciation Rate

Under this method, the system calculates deprecation at three times the standard depreciation rate for the asset, which, in this case, gives a rate of 60%.

However, you capitalized the asset on August 1, and depreciation starts in the first month after, so the system only calculates depreciation for September through December. So the depreciation under this method would be: