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Function documentationStraight Line Method Locate this document in the navigation structure

 

Straight line depreciation is the simplest and most commonly used depreciation method, which assumes an asset loses an equal amount of value each year over its estimated useful life. This means that the acquisition and production costs are distributed evenly across the entire useful life of the asset.

Generally, straight line depreciation is calculated by subtracting the salvage value of the asset from the acquisition and production costs, and then dividing this amount by the useful life of the asset. SAP Business One provides two additional calculation methods. For more information, see the Calculation Method field in the section that follows.

Note Note

Subsequent acquisitions lead to an increment in the value of an asset; therefore, the depreciation is usually increased by the amount that would have been necessary to fully depreciate the increment over the useful life of the asset.

End of the note.
Straight Line Method
Calculation Method

Select one of the following depreciation calculation methods:

  • Acquisition Value/Useful Life

  • Percentage of Acquisition Value

    If you select this method, you must specify a percentage in the Annual Percentage field.

  • Net Book Value/Remaining Life

Annual Percentage

Enter the annual percentage rate for the depreciation calculation.

Note Note

The field is available only if you have selected Percentage of Acquisition Value in the Calculation Method field.

End of the note.

Example Example

Asset X

Acquisition and Production Costs: 60,000 USD

Useful Life: 60 Months

Depreciation Method: Straight Line

Calculation Base: Yearly

Capitalization Date: January 1st, 2010

The asset depreciation is calculated in different ways, depending on the different calculation methods.

  • Acquisition Value/Total Useful Life

    The system calculates the monthly depreciation as follows:

    60000 USD / 60 * 12 / 12 = 1000 USD

    Jan.

    Feb.

    Mar.

    Apr.

    May

    Jun.

    Jul.

    Aug.

    Sep.

    Oct.

    Nov.

    Dec.

    2010

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2011

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2012

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2013

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2014

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

  • Percentage of Acquisition Value

    Annual Percentage = 20%

    The system calculates the monthly depreciation as follows:

    60000 USD * 20% / 12 = 1000 USD

    Jan.

    Feb.

    Mar.

    Apr.

    May

    Jun.

    Jul.

    Aug.

    Sep.

    Oct.

    Nov.

    Dec.

    2010

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2011

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2012

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2013

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2014

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

  • Net Book Value/Remaining Life

    The system calculates the monthly depreciation for each year as follows:

    • 2010

      60000 USD / 60 * 12 / 12 = 1000 USD

    • 2011

      (60000 USD – 1000 USD * 12) / (60 – 12) = 1000 USD

    • 2012

      (60000 USD – 1000 USD * 12 * 2) / (60 – 12 * 2) = 1000 USD

    • ...

    Jan.

    Feb.

    Mar.

    Apr.

    May

    Jun.

    Jul.

    Aug.

    Sep.

    Oct.

    Nov.

    Dec.

    2010

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2011

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2012

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2013

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    2014

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

    1000

If there is a subsequent acquisition of the asset, the system recalculates the depreciation so that the asset can still be fully depreciated over its useful life.

To determine when the asset depreciation is recalculated, select a convention in the Subsequent Acquisition field on the Depreciation Types - Setup Window: General Tab.

Assume a subsequent acquisition, with a worth of 15,000 USD, takes place on October 1st, 2010, and the depreciation is recalculated from the same day using the Acquisition Value/Total Useful Life method; the system updates the depreciation amounts as follows:

  • 2010: October – December

    The system calculates the monthly depreciation as follows:

    (60000 USD + 15000 USD) / 60 = 1250 USD

  • 2011, 2012, 2013

    The system calculates the monthly depreciation as follows:

    (60000 USD + 15000 USD) / 60 = 1250 USD

  • 2014

    In order to fully depreciate the asset, the system calculates the monthly depreciation in the last year of its useful life as follows:

    [60000 USD + 15000 USD – 1250 USD * (12 * 3 + 3) – 1000 USD * (12 – 3)] / (60 – 12 * 4) = 1437.50 USD

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

2010

1000

1000

1000

1000

1000

1000

1000

1000

1000

1250

1250

1250

2011

1250

1250

1250

1250

1250

1250

1250

1250

1250

1250

1250

1250

2012

1250

1250

1250

1250

1250

1250

1250

1250

1250

1250

1250

1250

2013

1250

1250

1250

1250

1250

1250

1250

1250

1250

1250

1250

1250

2014

1437.50

1437.50

1437.50

1437.50

1437.50

1437.50

1437.50

1437.50

1437.50

1437.50

1437.50

1437.50

End of the example.