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
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.
Select one of the following depreciation calculation methods:
|
Enter the annual percentage rate for the depreciation calculation. Note The field is available only if you have selected Percentage of Acquisition Value in the Calculation Method field. End of the note. |
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 |