About 150 percent reducing balance depreciation
Important
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Applies To: Microsoft Dynamics AX 2012 R3, Microsoft Dynamics AX 2012 R2, Microsoft Dynamics AX 2012 Feature Pack, Microsoft Dynamics AX 2012
When you set up a fixed asset depreciation profile and select 150% reducing balance in the Method field in the Depreciation profiles form, the depreciation of fixed assets that are assigned this depreciation profile is by the same percentage in each depreciation period. The percentage will be calculated based on the service life of the asset. For example, if an asset has a service life of five years, the percentage will be calculated as 30% (150% / 5).
To set up 150% reducing balance depreciation, you must also select options in the Depreciation year field and the Period frequency field in the Depreciation profiles form. Depending on the selection in the Depreciation year field, the options will change in the Period frequency field.
Selection of depreciation year
You can select either Calendar or Fiscal in the Depreciation year field in the Depreciation profiles form. (Click Fixed assets > Setup > Depreciation > Depreciation profiles.) This selection defines the options that are available in the Period frequency field.
Calendar
You can keep the default value in the Depreciation year field, Calendar.
The Calendar option updates the depreciation base (typically the net book value minus the scrap value) on January 1 of each year. In the examples later in this topic, the depreciation base is the numerator in the first expression in the calculations in the calculations column.
If you select Calendar, you have the following options in the Period frequency field, which defines the depreciation accrual posting dates and amounts throughout the calendar year:
Yearly posts an amount on December 31
Monthly posts a monthly amount at the end of each calendar month
Quarterly posts a quarterly amount at the end of each calendar quarter (March 31, June 30, September 30, and December 31)
Half-Yearly posts a half-yearly amount at the calendar half year (June 30 and December 31)
Daily posts the depreciation amount for the daily depreciation method using one transaction for each day
Note
(THA) This control is available only to legal entities whose primary address is in Thailand.
Fiscal
If you select Fiscal in the Depreciation year field, the 150% reducing balance depreciation is calculated based on the fiscal year for the fiscal calendar that is specified for the value model or depreciation book, or by the fiscal calendar that is selected in the Ledger form. Fiscal calendars are set up in the Fiscal calendars form. For more information, see About fiscal calendars, fiscal years, and periods.
For example, for the fiscal year of July 1 through June 30, the depreciation calculation starts on July 1. The fiscal year can be longer or shorter than 12 months. The depreciation is adjusted for each period. The length of the next fiscal year is from the setup of periods in the Fiscal calendars form.
When Fiscal is selected as the depreciation year, the following options are available in the Period frequency field:
Yearly posts the total amount of the depreciation calculated for the fiscal year on the last date of the fiscal year.
Fiscal period posts the total amount of the depreciation calculated for the fiscal year, which is accrued into the fiscal periods that are defined in the Fiscal calendars form.
Example of 150% reducing balance depreciation
Acquisition cost |
11,000 |
Salvage value |
1,000 |
Depreciation base |
10,000 |
Service life years |
5 |
Yearly depreciation percentage |
30% |
The 150% reducing balance method will divide 150% by the service life years. That percentage will be multiplied by the net book value of the asset to determine the depreciation amount for the year.
Period |
Calculation of yearly depreciation amount |
Book value |
Net book value at the end of the year |
|---|---|---|---|
Year 1 |
(11,000 - 1,000) * 30% = 3,000 |
11,000 - 3,000 = 8,000 |
11,000 - 1,000 - 3,000 = 7,000 |
Year 2 |
7,000 * 30% = 2,100 |
8,000 – 2,100 = 5,900 |
7,000 – 2,100 = 4,900 |
Year 3 |
4,900 * 30% = 1,470 |
5,900 - 1,470 = 4,430 |
4,900 - 1,470 = 3,430 |
Note
When the 150% reducing balance depreciation amount becomes less than what would have occurred using the straight line method, there is generally a conversion to straight line for the remaining life.