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About 175 percent reducing balance depreciation

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Important

This content is archived and is not being updated. For the latest documentation, see Microsoft Dynamics 365 product documentation. For the latest release plans, see Dynamics 365 and Microsoft Power Platform release plans.

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 175% 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.

To set up 175% reducing balance depreciation, you also must 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.

Select a 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.) Your selection defines the options that are available in the Period frequency field.

Calendar

You can choose to keep the default value in the Depreciation year field, Calendar.

The Calendar option updates the depreciation base (typically net book value minus 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 175% reducing balance depreciation is calculated on the basis of 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 automatically is adjusted for each period, and the length of the next fiscal year is from the setup of periods in the Fiscal calendars form.

If you select Fiscal 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 calculates the total amount of the depreciation for the fiscal year, which is accrued into the fiscal periods that are defined in the Fiscal calendars form.

Example of 175% reducing balance depreciation

Acquisition cost

11,000

Salvage value

1,000

Depreciation base

10,000

Service life years

5

Yearly depreciation percentage

35%%%

The 175% reducing balance method will divide 175% 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) * 35% = 3,500

11,000 - 3,500 = 7,500

11,000 - 1,000 - 3,500 = 6,500

Year 2

6,500 * 35% = 2,275

7,500 - 2,275 = 5,225

6,500 - 2,275 = 4,225

Year 3

4,225 * 35% = 1,478.75

5,225 - 1,478.75 = 3,746.25

4,225 - 1,478.75 = 2,746.25

Note

When the 175% 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.