Standard depreciation method description

RE - Straight-line on Net Depreciable Value

This method is used to depreciate the net depreciable value of the period start over the residual depreciation duration:

• Net depreciable value = Net value – Residual value
• Residual duration = Duration of the interval [Period start date - Depreciation end date]

The residual duration can be expressed in days, months or weeks, depending on the prorata chosen:

Depreciation origin

The start date is not used to determine the charges. A charge will be calculated for each period as long as the net depreciable value will not equal 0, that is to say as long as the Depreciation end date is not reached.

Duration

It must be entered by the user, in years and hundredths of years.

Example: 6 2/3 years = 6.67 or 6.67.

It must correspond to the total duration of the depreciation and not to a residual time of any date: the residual time will be determined automatically by Sage X3 at the beginning of each period.

Rate

It is always equal to 0 and cannot be specified by the user.

Depreciation end date

• If the prorata method is specified upon creation of the asset, the depreciation end date is determined as follows:

Depreciation start date + Duration

• If the prorata method is specified in months upon creation of the asset, the depreciation end date is determined as follows:

1st day of the month in the depreciation start date + Duration:
this should lead to a Depreciation end date corresponding to the end of a month.

• If the prorata method is specified in weeks upon creation of the asset, the depreciation end date is determined as follows:

1st day of the week of the depreciation start date + Duration:
this should lead to a Depreciation end date corresponding to the end of a week.

   The selection of the first day of the week, for instance Monday or Sunday, is specified with the parameter WEESTR - First day of the week(chapter AAS, group CLC).

• If this method comes from a method change, the Depreciation end date is updated if:
   
  - the prorata of the new method is managed differently. Example: going from LP (prorata expressed in days) to RE (prorata expressed in months)
   
  - the calculation algorithm of the depreciation end date is different. Example: going from DF to RE (prorata expressed in months).

Prorata temporis

This depreciation method uses prorata temporis in day, weeks or months (to select).

Depreciation charge

• Case where the asset is not issued, and 
  Case where the asset is issued in a period which is later than or equal to the current period:
  
  The calculation is done in three steps: 
   
  The charge for the residual fiscal year = [Current period – Last period of the fiscal year] is determined as follows:
   
  Net depreciable value at period start * (Number of holding days/months/weeks in the interval [Current period - last period of the fiscal year] / Number of days/months/weeks of the interval [Current period - Depreciation end date] 
   
  - Calculation of the non-closed charge for each period:
   
  Residual fiscal year charge * (Number of holding days/months/weeks in the periods pc to pn / Number of holding days/months/weeks in the interval [pc - last period of the fiscal year] - Depreciation total of the periods [pc - pn-1]
                      ( pc = Current period, pn = Calculated period )
  The distribution of the residual fiscal year charge is done according to the weight of the periods.

   - The complete fiscal year charge will be equal to = 
  
(Depreciation total in closed periods + Charge for the residual fiscal year)

• Case where the asset is issued in a period which is earlier than the current period:
   
  Recalculation of the charge in the period of the Disposal date (1):
    Net depreciable value at disposal period start * (Number of holding days/months/weeks in the Issue period / Number of days/months/weeks of the interval [Disposal date - Depreciation end date]) 
    
  - Calculation of the disposal period charge =
        
             Sum of the charges of the periods [Fiscal year start - Disposal period]
  
  - Calculation of the current period charge = 

  Fiscal year disposal charge - Sum of closed period charges (specified in the current period DEPREC)

(1) This recalculation will determine the recovery of the depreciations posted in error. The DEPREC record of the disposal period will not be changed. The recovery of the depreciations posted in error will correspond to a negative charge recorded in DEPREC record of the current period.

Examples:

1st example 

• Gross value: 10,000
• Residual value: 0
• Current period: [01/04/2006 - 30/06/2006]
• Depreciation start date: 01/01/2005
• Duration: 3 years
• Depreciation rate: 33.33 % --> Depreciation end date: 31/12/07
• Depreciation method: French straight-line
• Specificity: On 01/04/2006, switch to RE after a depreciation of 845.16 recorded on 31/03/2006. 

Fiscal year	Period	Net value	Fiscal	Total
2005	01/01/2005 - 31/12/2005	10,000.00	3,333.00	3,333.00
2006	01/01/06 - 31/03/06	6,667.00.	(1) 821.84	4,154.84
	01/04/2006 - 30/06/2006	(2) 5,000.00	(3) 710.94	4,865.78
	01/07/2006 - 30/09/2006	4,289.06	(4) 718.75	5,584.53
	10/1/2006 - 12/31/2006	3,570.31	(5) 718.75	6,303.28
2007	01/01/2007 - 31/03/2007	2,851.56	(6) 703.12	7,006.40
	01/04/2007 - 30/06/2007	2,148.44	(7) 710.94	7,717.34
	01/07/2007 - 30/09/2007	1,437.50	(8) 718.75	8,436.09
	01/10/2007 - 31/12/2007	718.75.	(9) 718.75	9,154.84

(1) 10,000.00 * 33.33 % * (90 / 365) = 821.84
(2) Net value on 31/03/2006 = 5,845.16 reduced by a depreciation of 845.16
(3) 5,000.00 * (275 / 640) = 2,148.44 * (91 /275) = 710.94
(4) 5,000.00 * (275 / 640) = 2,148.44 * (183 / 275) = 1,429.69 - 710.94 = 718.75
(5) 5,000.00 * (275 / 640) = 2,148.44 * (275 / 275) = 2,148.44 - 1,429.69 = 718.75
(6) 2,851.56 * (365 / 365) = 2,851.56 * (90 / 365) = 703.12
(7) 2,851.56 * (365 / 365) = 2,851.56 * (181 / 365) = 1,414.06 - 703.12 = 710.94
(8) 2,851.56 * (365 / 365) = 2,851.56 * (273 / 365) = 2,132.81 - 1,414.06 = 718.75
(9) 2,851.56 * (365 / 365) = 2,851.56 * (365 / 365) = 2,851.56 - 2,132.81 = 718.75

Note
- The DEPREC recording [01/01/2006 - 31/03/2006] will have a fiscal year charge of: 3,333.00
- The other DEPREC records of the fiscal year 2006 will have a fiscal year charge of: 2,970.28 (821.24 + 2,148.44).
- The DEPREC records of the fiscal year 2007 will have a fiscal year charge of: 2,851.56

2nd example 

• Gross value: 10,000
• Residual value: 0
• Current period: [01/07/2007 - 30/09/2007]
• Depreciation start date: 01/01/2005
• Duration: 3 years
• Depreciation rate: 33.33 % --> Depreciation end date: 31/12/07
• Depreciation method: French straight-line
• Specificities:
  On 01/04/2006, switch to RE after a depreciation of 845.16 recorded on 31/03/2006. 
  - On 01/07/2007, modification of depreciation duration to 4 years --> Depreciation end date = 31/12/2008; date when method change takes effect = current period start. 

 

Fiscal year	Period	Net value	Fiscal	Total
2005	01/01/2005 - 31/12/2005	10,000.00	3,333.00	3,333.00
2006	01/01/06 - 31/03/06	6,667.00.	(1) 821.84	4,154.84
	01/04/2006 - 30/06/2006	(2) 5,000.00	710.94	4,865.78
	01/07/2006 - 30/09/2006	4,289.06.	718.75	5,584.53
	10/1/2006 - 12/31/2006	3,570.31	718.75	6,303.28
2007	01/01/2007 - 31/03/2007	2,851.56	703.12	7,006.40
	01/04/2007 - 30/06/2007	2,148.44	710.94	7,717.34
	01/07/2007 - 30/09/2007	1,437.50	(3) 240.46	7,957.80
	01/10/2007 - 31/12/2007	1,197.04	(4) 240.45	8,198.25
2008	01/01/2008 - 31/03/2008	956.59	(5) 237.84	8,436.09
	01/04/2008 - 30/06/2008	718.75.	(6) 237.84	8,673.93
	01/07/2008 - 30/09/2008	480.91	(7) 240.46	8,914.39
	01/10/2008 - 31/12/2008	240.45	(8) 240.45	9,154.84

(1) 10,000 * 33.33% * (90 / 365) = 821.84
(2) Net value on 31/03/2006 = 5,845.16 reduced by a depreciation of 845.16
(3) 1,437.50 * (184 / 550) = 480.91 * (92 / 184) = 240.46
(4) 1,437.50 * (184 / 550) = 480.91 * (184 / 184) = 480.91 - 240.46 = 240.45
(5) 956.59 * (366 / 366) = 956.59 * (91 / 366) = 237.84
(6) 956.59 * (366 / 366) = 956.59 * (182 / 366) = 475.68 - 237.84 = 237.84
(7) 956.59 * (366 / 366) = 956.59 * (274 / 366) = 716.14 - 475.68 = 240.46
(8) 956.59 * (366 / 366) = 956.59 * (366 / 366) = 956.59 - 716.14 = 240.45

Note
- The DEPREC recording [01/01/2006 - 31/03/2006] will have a fiscal year charge of: 3,333.00
- The other DEPREC records of the fiscal year 2006 will have a fiscal year charge of: 2,970.28 (821.24 + 2,148.44).
- The DEPREC records of the first 2 periods of fiscal year 2007 will have a fiscal year charge of: 2,851.56
- The DEPREC records of the last 2 periods of fiscal year 2007 will have a fiscal year charge of: 1,894.97
- The DEPREC records of the fiscal year 2008 will have a fiscal year charge of: 956.59

UO - Work Units

This depreciation method can be applied only if the asset is attached to a production plan:

Depreciation origin

The depreciation start date must be specified; it will be used for applying a prorata temporis to the number of WOs defined in the Production plan.

Duration

The duration can be either entered, or determined based on the depreciation end date.

Rate

The rate has no use in this depreciation method: no rate can be entered.

Depreciation end date

The depreciation end date can be:

• entered by the user; in this case, it must be earlier than or equal to the production plan end date, if the latter is specified.
• determined in the following fashion. Two possibilities:
  
  - Depreciation start date + Duration specified
   
  - Equal to Production plan end date, if the duration has not been specified and this production plan end date has been specified.

 On each calculation, the Depreciation end date (as well as the Duration) may be updated with the earliest date among the two following dates: Depreciation end date, Production plan end date

If the production plan End date is postponed, the calculation does not update the Depreciation end date of the assets concerned: the user must perform this update of the date via the Change method action.

Prorata temporis

The expected future cash flows deriving from the asset is expressed in WOs.
The WOS specified in the Production plan may be subjected to a prorata temporis, expressed in days, if:

• the depreciation start occurs mid-period,
• the depreciation end occurs mid-period,
• the disposal occurs mid-period.

Asset disposal date

The disposal date has the effect of stopping depreciation plan. The recording of the disposal can be done

• in a retroactive manner: Disposal date < Current period start date
• in the current period: The disposal date belongs to the interval [current period start - current period end]
•  in a prospective manner: Disposal date > Current period end date

In the first 2 cases, the last depreciation charge calculated is that of the current period.
In the last case, the last depreciation charge calculated is that of the period containing the disposal date.

Depreciation charge

• Case where the asset is not issued, and 
  Case where the asset is issued in a period which is later than or equal to the current period:
  
  The calculation is done in three steps: 
   
  The charge for the residual fiscal year = [Current period – Last period of the fiscal year] is determined as follows:
   
  Net depreciable value at Period start * ( Sum WOs of non-closed periods of the fiscal year / Residual WO at period start) 
   
  - Calculation of the non-closed charge for each period:

Charge for the residual fiscal year * 
           ( Sum of the WOs of periods pc to pn / Sum WOs of non-closed periods of the fiscal year ) 
         - Sum of the depreciations of the previous periods
         ( pc = Current period, pn = Calculated period )
   - The complete fiscal year charge will be equal to =

( Depreciation total in closed periods + Charge for the residual fiscal year )

• Case where the asset is issued in a period which is earlier than the current period:
   
  - Calculation of the period charge that contains the Disposal date =
    Net depreciable value at disposal period start * (WO of Disposal period / Residual WO at disposal period start ) 
    
  - Calculation of the disposal period charge =
        
             Sum of the charges of the periods [Fiscal year start - Disposal period]
  
  - Calculation of the current period charge = 

  Fiscal year disposal charge - Sum Charges of closed periods (specified in the current period DEPREC)

Examples:

Production plan example

	Start period	End period	Residual WOs	WO planned	WO completed	WO fiscal year	WO total
T1	01/01/2006	31/03/06	100,000	3,000	2,500	14,000	2,500
T2	01/04/2006	30/06/06	97,500	5,000	6,000	15,000	8,500
T3	01/07/2006	30/09/2006	91,500	1,500		15,000	10,000
T4	01/10/2006	31/12/06	90,000	5,000		15,000	15,000
T1	01/01/2007	31/03/07	85,000	2,500		15,000	17,500
T2	01/04/2007	30/06/2007	82,500	5,000		15,000	22,500
T3	01/07/2007	30/09/2007	77,500	2,500		15,000	25,000
T4	01/10/2007	31/12/07	75,000	5,000		15,000	30,000
	01/01/2008	31/12/08	70,000	15,000		15,000	45,000
	01/01/2009	31/12/09	55,000	15,000		15,000	60,000
	01/01/2010	31/12/10	40,000	10,000		10,000	70,000
	01/01/2011	31/12/11	30,000	30,000		30,000	100,000

 

Work Units depreciation plan example

• Gross value: 10,000
• Residual value: 0
•  Depreciation start date: 01/05/2006
• Depreciation end date: 30/11/2007
• Production plan displayed above

Fiscal year	Net value	Fiscal year charge	Fiscal year total
01/01/2006 – 31/12/2006	10,000.00	(1) 4,415.15	4,415.15
01/01/2007 – 31/12/2007	5,585.85	5,585.85	10,000.00
01/01/2008 – 31/12/2008
01/01/2009 – 31/12/2009
01/01/2010 – 31/12/2010
01/01/2011 – 31/12/2011

(1) 10,000.00 * (10,522 / 23,837) = 4,415.15
    10,522 represents the sum of the WOs completed in the fiscal year 2006:
    - WO of T2 period: 6,000 * 61 / 91 = 4,022 (calculated with prorata of the number of holding days)
    - WO of T3 period: 1,500
    - WO of T4 period: 5,000
    Thus for the fiscal year 2006: 4,022 + 1,500 + 5,000 = 10,522

    23,837 represents the total sum of the WOs completed with the asset (10,522 for 2006 + 13,315 for 2007):

    Fiscal year 2007:
    - WO of T1 period: 2,500
    - WO of T2 period: 5,000
    - WO of T3 period: 2,500
    - WO of T4 period: 5,000 * 61 / 92 = 3,315 (calculated with prorata of the number of holding days)
    Thus for the fiscal year 2007: 2,500 + 5,000 + 2,500 + 3,315 = 13,315

Distribution of the fiscal year 2006 charge, according to the Work Units specified for each quarter:

Period	Net value	Work units	Fiscal
T1 01/01/2006–31/03/2006	10,000.00		----
T2  01/04/2006–30/06/2006	10,000.00	4,022	(2)     1,687.29
T3  01/07/2006–30/09/2006	8,312.71	1,500	(3)       629.28
T4  01/10/2006–31/12/2006	7,683.43	5,000	(4)     2,097.58
Fiscal year 2006 total:		10,522	4,415.15
T1  01/01/2007–31/03/2007	5,585.85	2,500	(5)     1,048.79
T2  01/04/2007–30/06/2007		5,000	(6)     2,097.58
T3  01/07/2007–30/09/2007		2,500	(7)     1,048.79
T4  01/10/2007–31/12/2007		3,315	(8)     1,390.69
Fiscal year 2007 total:		13,315	5,585.85

(2)  4,414.15 * 4,022 / 10,522 = 1,687.29

(3)  4,414.15 * 5,522 / 10,522 = 2,316.57 - 1,687.29 = 629.28
      Where 10,522 represents the total number of WOs completed since the fiscal year start

(4)  4,414.15 – (1,687.29 + 629.28)  = 2,097.58

(5)  5,585.85 * 2,500 / 13,315 = 1,048.79

(6) 5,585.85 * (7,500 / 13,315) = 3,146.37 – 1,048.79 = 2,097.58

(7)  5,585.85 * 10,000 / 13,315 = 4,195.16 – 3,146.37 =  1,048.79

(8)  5,585.85 -  4,195.16 =  1,390.69

PR - Progressive

This depreciation method, also called Increasing depreciation, is used in various countries.
It is also accepted in French accounting.

Depreciation origin

It is systematically equal to the first day of the month specified in the depreciation start date, except if the Depreciation plan/Context is managed in weeks. In this case, the depreciation origin is systematically the first day of the week (Monday) in which the depreciation start date is to be found.

Duration

As the depreciation rate is determined based on the sum of the data for each fiscal year, the duration must be expressed in whole years.

Rate

This progressive rate cannot be entered by the user: it is determined as follows:

Number of the year concerned / Sum of the yearly data for the depreciation duration

For example :
 For a 5-year depreciation, the rate applied to the second year is 2/15th. Indeed:

- the number linked to the 2nd year is equal to 2

- the total of years figures for a 5 year duration is: 5 + 4 + 3 + 2 + 1 = 15

If the depreciation starts during a fiscal year or if the fiscal year duration differs from 12 months, two different depreciation rates can be applied in the same fiscal year.

Depreciation end date

It depends on the prorata temporis type.

• If the prorata temporis is expressed in months:
  
  Depreciation end date = 1st day of the month of the depreciation start date + depreciation duration in months.
  This leads to a depreciation end set at the end of the month.
  

• If the prorata temporis is expressed in weeks:
  
  Depreciation end date = 1st day of the week (Monday) in which the depreciation start date is to be found + (depreciation duration * 52 weeks).
  This leads to a depreciation end located on the last day of the week (Sunday)
   
  Depreciation end date calculation examples:
   

  Start date	Duration & Prorata	End date
  01/08/2005	3 years, prorata in months	31/07/2008
  07/02/2005	3 years, prorata in months	31/01/2008
  01/08/2005	3 years, prorata in weeks	27/07/2008
  07/02/2005	3 years, prorata in weeks	03/02/2008

Prorata temporis

In most cases, the time is expressed in months.
An exception is made when the Depreciation plan/Context is managed in weeks: time is then expressed in weeks, too.

A prorata temporis is applied in the following cases:

• During the acquisition fiscal year, if the depreciation origin is not the 1st day of the fiscal year.
• When the fiscal year duration has a one-year or 52-week difference if the Depreciation plan/Context is managed in weeks.
• During the disinvestment fiscal year: the charge is calculated until the disposal day if the day of the disposal date is the last of the month; otherwise, the charge is calculated until the end of the month that precedes the disposal.
  This rule can be modified by Disposal rules: Disposal at the end of the previous FY and Disposal at the end of the current FY..
   
  If the Depreciation plan/Context is managed in weeks, the depreciation charge is calculated until the end of the week (Sunday) in which the issue date is to be found. As described above, this rule can be modified by Disposal rules: Disposal at the end of the previous FY and Disposal at the end of the current FY.
   
  

Depreciation charge

A fiscal year charge is calculated as follows:
Charge =  (Depreciable value * Rate 1) * prorata temporis 1 
                 + (Depreciable value * Rate 2) * prorata temporis 2

• Depreciable value = (Gross value – Residual value)
• Rate 1 = Depreciable rate applied in 1st part of fiscal year
• Rate 2 = Possible depreciation rate applied in 2nd part of fiscal year
• (1) Prorata temporis 1 =
  Number of months (or weeks) in the period [max (Fiscal year start date, Depreciation start date)
  – min (End date of Rate 1 application, Fiscal year end date, Depreciation end date, Disposal date)]
  / 12 (or 52 if Depreciation plan/Context management in weeks)
• Prorata temporis 2 =
  Number of months (or weeks) in the period [Start date of Rate 2 application
  – min (Fiscal year end date, Depreciation end date, Disposal date)]
  / 12 (or 52 if Depreciation plan/Context management in weeks)

Notes:

- For the disinvestment fiscal year, only one depreciation rate applies, unless the fiscal year is longer than 12 months (or 52 weeks) and the asset was held for longer than 12 months (or 52 weeks) during it.
- For each following fiscal year, two depreciation rates apply, each for a number of months (or weeks) defined in Prorata temporis 1 and Prorata temporis 2.
- In order to have only one depreciation rate apply, two conditions must be met: each fiscal year must be equal to 12 months (or 52 weeks), and the depreciation origin must be the 1st day of the fiscal year.

Example: asset acquired on 7/1/2005 and depreciated over 5 years. The applied rates for the next fiscal years are:

Fiscal year	Rate 1	Rate 2
01/01/2005 - 31/12/2005	1/15th for 6 months
01/01/2006 - 31/12/2006	1/15th for 6 months	2/15th  for 6 months
01/01/2007 - 31/12/2007	2/15th  for 6 months	3/15th  for 6 months
01/01/2008 - 31/12/2008	3/15th  for 6 months	4/15th  for 6 months
01/01/2009 - 31/12/2009	4/15th  for 6 months	5/15th  for 6 months
01/01/2010 - 31/12/2010	5/15th  for 6 months

Distribution of the fiscal year charge on the periods

If the fiscal year is divided into several periods, the fiscal year charge is distributed over these periods. This distribution is applied according to the following rule:

Period Charge =       

(Depreciable value * Rate 1 * Prorata 1) + (Depreciable value * Rate 2 * Prorata 2)
- Depreciation total of previous periods

• Prorata temporis 1 =
  Number of months (or weeks) in the period [max (Fiscal year start date, Depreciation start date)
  – min (End date of Rate 1 application, Current period end date, Depreciation end date, Disposal date)]
  / 12 (or 52 if Depreciation plan/Context management in weeks)
• Prorata temporis 2 =
  Number of months (or weeks) in the period [Start date of Rate 2 application
  – min (Current period end date, Depreciation end date, Disposal date)]
  / 12 (or 52 if Depreciation plan/Context management in weeks)

Notes:
- In some cases, depending on the division of the fiscal year into periods, a period may be subjected to only one depreciation rate.
- For this depreciation method, period weight is not taken into account: it is the effective duration of each period that is taken into account.

Examples:

1st example 

•  Gross value: 10,000
• Residual value: 0
•  Depreciation start date: 01/01/2005
•  Depreciation duration: 5 years
• Prorata type: months
  

Fiscal year	Net depreciable value	Fiscal year charge	Fiscal year total
01/01/2005 – 31/12/2005	10,000.00	(1) 666.67	666.67
01/01/2006 – 31/12/2006	9,333.33	(2) 1,333.33	2,000.00
01/01/2007 – 31/12/2007	8,000.00	(3) 2,000.00	4,000.00
01/01/2008 – 31/12/2008	6,000.00	(4) 2,666.67	6,666.67
01/01/2009 – 31/12/2009	3,333.33	(5) 3,333.33	10,000.00

(1) 10,000.00 * 1/15th = 666.67

(2) 10,000.00 * 2/15th = 1,333.33

(3) 10,000.00 * 3/15th = 2,000.00

(4) 10,000.00 * 4/15th = 2,666.67

(5) 10,000.00 – 6,666.67 = 3,333.33 (equal to 5/15th but used to close the depreciation)

2nd example 

•  Gross value: 10,000
• Residual value: 0
•  Depreciation start date: 07/02/2005
•  Depreciation duration: 5 years
• Prorata type: months
  

Fiscal year	Net depreciable value	Fiscal year charge	Fiscal year total
01/01/2005 – 31/12/2005	10,000.00	(1) 611.11	611.11
01/01/2006 – 31/12/2006	9,388.89	(2) 1,277.78	1,888.89
01/01/2007 – 31/12/2007	8,111.11	(3) 1,944.44	3,833.33
01/01/2008 – 31/12/2008	6,166.67	(4) 2,611.11	6,444.44
01/01/2009 – 31/12/2009	3,555.56	(5) 3,277.78	9,722.22
01/01/2010 – 31/12/2010	277.78	(6) 277.78	10,000.00

(1) 10,000.00 * 1/15th * 11/12th = 611.11

(2) ( 10,000.00 * 1/15th * 1/12th ) + ( 10,000.00 * 2/15th * 11/12th ) = 55.56 + 1,222.22

(3) ( 10,000.00 * 2/15th * 1/12th ) + ( 10,000.00 * 3/15th * 11/12th ) = 111.11 + 1,833.33

(4) ( 10,000.00 * 3/15th * 1/12th ) + ( 10,000.00 * 4/15th * 11/12th ) = 166.67 + 2,444.44

(5) ( 10,000.00 * 4/15th * 1/12th ) + ( 10,000.00 * 5/15th * 11/12th ) = 222.22 + 3,055.56

(6) 10,000.00 – 9,722.22 = 277.78 (equal to 5/15th * 1/12th but used to close the depreciation)
 

3rd example 

•  Gross value: 10,000
• Residual value: 0
•  Depreciation start date: 02/07/2005 (corresponds to the 1st day of the week)
•  Depreciation duration: 3 years --> Depreciation end date: 03/02/2008
• Prorata type: weeks

Fiscal year	Net depreciable value	Fiscal year charge	Fiscal year total
03/01/2005 – 01/01/2006	10,000.00	(1) 1,506.41	1,506.41
1/2/2006 – 12/31/2006	8,493.59	(2) 3,173.08	4,679.49
01/01/2007 – 31/12/2005	5,320.51	(3) 4,839.74	9,519.23
31/12/2007 – 28/12/2008	480.77	(4) 480.77	10,000.00

(1) 10,000.00 * 1/6th * 47/52th = 1,506.41

(2) ( 10,000.00 * 1/6th * 5/52th ) + ( 10,000.00 * 2/6th * 47/52th ) = 160.26 + 3,012.82

(3) ( 10,000.00 * 2/6th * 5/52th ) + ( 10,000.00 * 3/6th * 47/52th ) = 320.51 + 4,519.23

(4) 10,000.00 – 9,519.23 = 480.77 (equal to 10,000.00 * 3/6th * 5/52th but used to close the depreciation)

Distribution of the fiscal year 2005 charge on quarterly periods (1 quarter = 13 weeks)

Period	Number of weeks	Number of holding weeks	Fiscal
03/01/2005 – 03/04/2005	13	08	(5) 256.41
04/04/2005 – 03/07/2005	13	13	(6) 416.67
04/07/2005 – 02/10/2005	13	13	(7) 416.66
03/10/2005 – 01/01/2006	13	13	(8) 416.67
Fiscal year 2005 total			1,506.41

(5)  (1,506.41 / 47 * 8) – 0 = 256.41
(6)  (1,506.41 / 47 * 21) – 256.41 = 416.67
(7)  (1,506.41 / 47 * 34) – 673.08 = 416.66
(8)  (1,506.41 / 47 * 47) – 1,089.74 = 416.67

Distribution of the fiscal year 2006 charge on quarterly periods (1 quarter = 13 weeks)

Period	Number of weeks	Number of holding weeks	Fiscal
02/01/2006 – 02/04/2006	13	13	(1) 673.08
03/04/2006 – 02/07/2006	13	13	(2) 833.33
03/07/2006 – 01/10/2006	13	13	(3) 833.34
02/10/2006 – 31/12/2006	13	13	(4) 833.33
Fiscal year 2006 total			3,173.08

(1) ( 10,000.00 * 1/6th * 5/52th ) + ( 10,000.00 * 2/6th * 8/52th ) = 160.26 + 512.82

(2) ( 10,000.00 * 1/6th * 5/52th ) + ( 10,000.00 * 2/6th * 21/52th ) = (160.26 + 1,346.15) – 673.08

(3) ( 10,000.00 * 1/6th * 5/52th ) + ( 10,000.00 * 2/6th * 34/52th ) = (160.26 + 2,179.49) – 1,506.41

(4) ( 10,000.00 * 1/6th * 5/52th ) + ( 10,000.00 * 2/6th * 47/52th ) = (160.26 + 3,012.82) – 2,339.75
 

4th example 

•  Gross value: 10,000
• Residual value: 0
•  Depreciation start date: 07/02/2005
•  Depreciation duration: 3 years --> Depreciation end date: 31/01/2008
• Prorata type: months
   

Fiscal year	Net depreciable value	Fiscal year charge	Fiscal year total
01/01/2005 – 31/12/2005	10,000.00	(1) 1,527.78	1,527.78
1/1/2006 – 31/12/2006	8,472.22	(2) 3,194.45	4,722.23
01/01/2007 – 31/12/2007	5,277.77	(3) 4,861.11	9,583.34
01/01/2008 – 31/12/2008	416.66	(4) 416.66	10,000.00

(1) 10,000.00 * 1/6th * 11/12th = 1,527.78

(2) ( 10,000.00 * 1/6th * 1/12th ) + ( 10,000.00 * 2/6th * 11/12th ) = 138.89 + 3,055.56

(3) ( 10,000.00 * 2/6th * 1/12th ) + ( 10,000.00 * 3/6th * 11/12th ) = 277.78 + 4,583.33

(4) 10,000.00 – 9,583.34 = 416.66 (equal to 10,000.00 * 3/6th * 1/12th but used to close the depreciation)
 

Distribution of the fiscal year 2005 charge on quarterly periods

Period	Number of months	Number of holding months	Fiscal
01/01/2005 – 31/03/2005	03	02	(5) 277.78
01/04/2005 – 30/06/2005	03	03	(6) 416.67
01/07/2005 – 30/09/2005	03	03	(7) 416.66
10/1/2005 – 12/30/2005	03	03	(8) 416.67
Fiscal year 2005 total			1,527.78

(5)  (1,527.78 / 11 * 2) – 0 = 277.78
(6)  (1,527.78 / 11 * 5) – 277.78 = 416.67
(7)  (1,527.78 / 11 * 8) – 694.45 = 416.66
(8)  (1,527.78 / 11 * 11) – 1,111.11 = 416.67

Distribution of the fiscal year 2006 charge on quarterly periods

Period	Number of months	Number of holding months	Fiscal
01/01/2006 – 31/03/2006	03	02	(1) 694.45
01/04/2006 – 30/06/2006	03	03	(2) 833.33
01/07/2006 – 30/09/2006	03	03	(3) 833.33
01/10/2006 – 31/12/2006	03	03	(4) 833.34
Fiscal year 2006 total			3,194.45

(1) ( 10,000.00 * 1/6th * 1/12th ) + ( 10,000.00 * 2/6th * 2/12th ) = 138.89 + 555.56 = 694.45

(2)  ( 10,000.00 * 1/6th * 1/12th ) + ( 10,000.00 * 2/6th * 5/12th ) – 694.45 = 833.33

(3)  ( 10,000.00 * 1/6th * 1/12th ) + ( 10,000.00 * 2/6th * 8/12th ) – 1,527.78 = 833.33

(4) 3,194.45 – 2,361.11 = 833.34

SO - Softy (Sum-of-Years Digits)

This declining depreciation method is used in various countries (United Kingdom, United States, Spain).
It is also accepted in French accounting.

Depreciation origin

It is systematically equal to the first day of the month specified in the depreciation start date, except if the Depreciation plan/Context is managed in weeks. In this case, the depreciation origin is systematically the first day of the week (Monday) in which the depreciation start date is to be found.

Duration

As the depreciation rate is determined based on the sum of the data for each fiscal year, the duration must be expressed in whole years.

Rate

This declining rate cannot be entered by the user, it is determined as follows:

Value of the year concerned / Sum of the yearly data for the depreciation duration

For example :
 For a 5-year depreciation, the rate applied to the second year is 4/15th. Indeed:

- the total of years figures for a 5 year duration is: 5 + 4 + 3 + 2 + 1 = 15

- the value linked to the 2nd year is equal to 4

If the depreciation starts during a fiscal year or if the fiscal year duration differs from 12 months, two different depreciation rates can be applied in the same fiscal year.

Depreciation end date

It depends on the prorata temporis type.

• If the prorata temporis is expressed in months:
  
  Depreciation end date = 1st day of the month of the depreciation start date + depreciation duration in months.
  This leads to a depreciation end set at the end of the month.

• If the prorata temporis is expressed in weeks:
  
  Depreciation end date = 1st day of the week (Monday) in which the depreciation start date is to be found + (depreciation duration * 52 weeks).
  This leads to a depreciation end located on the last day of the week (Sunday)

Depreciation end date calculation examples:
 

Start date	Duration & Prorata	End date
01/08/2005	3 years, prorata in months	31/07/2008
07/02/2005	3 years, prorata in months	31/01/2008
01/08/2005	3 years, prorata in weeks	27/07/2008
07/02/2005	3 years, prorata in weeks	03/02/2008

Prorata temporis

In most cases, the time is expressed in months.
An exception is made when the Depreciation plan/Context is managed in weeks: time is then expressed in weeks, too.

A prorata temporis is applied in the following cases:

• During the acquisition fiscal year, if the depreciation origin is not the 1st day of the fiscal year.
• When the fiscal year duration has a one-year or 52-week difference if the Depreciation plan/Context is managed in weeks.
• During the disinvestment fiscal year: the charge is calculated until the disposal day if the day of the disposal date is the last of the month; otherwise, the charge is calculated until the end of the month that precedes the disposal.
  This rule can be modified by Disposal rules: Disposal at the end of the previous FY and Disposal at the end of the current FY..
   
  If the Depreciation plan/Context is managed in weeks, the depreciation charge is calculated until the end of the week (Sunday) in which the issue date is to be found. As described above, this rule can be modified by Disposal rules: Disposal at the end of the previous FY and Disposal at the end of the current FY.

Depreciation charge

A fiscal year charge is calculated as follows:
Charge =  (Depreciable value * Rate 1) * prorata temporis 1 
                 + (Depreciable value * Rate 2) * prorata temporis 2

• Depreciable value = (Gross value – Residual value)
• Rate 1 = Depreciable rate applied in 1st part of fiscal year
• Rate 2 = Possible depreciation rate applied in 2nd part of fiscal year
• (1) Prorata temporis 1 =
  Number of months (or weeks) in the period [max (Fiscal year start date, Depreciation start date)
  – min (End date of Rate 1 application, Fiscal year end date, Depreciation end date, Disposal date)]
  / 12 (or 52 if Depreciation plan/Context management in weeks)
• Prorata temporis 2 =
  Number of months (or weeks) of the period [Start date of Rate 2 application - min (Fiscal year end date, Depreciation end date, Disposal date)]
  / 12 (or 52 if Depreciation plan/Context management in weeks)

Notes:

- For the disinvestment fiscal year, only one depreciation rate applies, unless the fiscal year is longer than 12 months (or 52 weeks) and the asset was held for longer than 12 months (or 52 weeks) during it.
- For each following fiscal year, two depreciation rates apply, each for a number of months (or weeks) defined in Prorata temporis 1 and Prorata temporis 2.
- In order to have only one depreciation rate apply, two conditions must be met: each fiscal year must be equal to 12 months (or 52 weeks), and the depreciation origin must be the 1st day of the fiscal year.

Example: asset acquired on 7/1/2005 and depreciated over 5 years. The applied rates for the next fiscal years are:

Fiscal year	Rate 1	Rate 2
01/01/2005 - 31/12/2005	5/15th for 6 months
01/01/2006 - 31/12/2006	5/15th for 6 months	4/15th  for 6 months
01/01/2007 - 31/12/2007	4/15th  for 6 months	3/15th  for 6 months
01/01/2008 - 31/12/2008	3/15th  for 6 months	2/15th  for 6 months
01/01/2009 - 31/12/2009	2/15th  for 6 months	1/15th  for 6 months
1/1/2010 - 31/12/2010	1/15th  for 6 months

Distribution of the fiscal year charge on the periods

If the fiscal year is divided into several periods, the fiscal year charge is distributed over these periods. This distribution is applied according to the following rule:

Period Charge =       

(Depreciable value * Rate 1 * Prorata 1) + (Depreciable value * Rate 2 * Prorata 2)
- Depreciation total of previous periods

• Prorata temporis 1 =
  Number of months (or weeks) in the period [max (Fiscal year start date, Depreciation start date)
  – min (End date of Rate 1 application, Current period end date, Depreciation end date, Disposal date)]
  / 12 (or 52 if Depreciation plan/Context management in weeks)
• Prorata temporis 2 =
  Number of months (or weeks) of the period [Start date of Rate 2 application - min (Current period end date, Depreciation end date, Disposal date)]
  / 12 (or 52 if Depreciation plan/Context management in weeks)

Notes:
- In some cases, depending on the division of the fiscal year into periods, a period may be subjected to only one depreciation rate.
- For this depreciation method, period weight is not taken into account: it is the effective duration of each period that is taken into account.

Examples:

1st example 

•  Gross value: 120,000
• Residual value: 0
•  Depreciation start date: 01/08/2010 adjusted to 01/08/2010
•  Depreciation duration: 1.5 years
• Prorata type: months
  

Fiscal year	Net depreciable value	Fiscal year charge	Fiscal year total
01/01/2010 – 31/12/2010	120,000.00	(1)   33,333.33	33,333.33
01/01/2011 – 31/12/2011	86,666.67	(2)   80,000.00	113,333.33
01/01/2012 – 31/12/2012	6,666.67	(3) 6,666.67	120,000.00

(1) 120,000.00 * 1/15th * 5/12th = 3,333.33

(2)  Net value on 31/07/2011: 40,000
(120,000.00 * 1/1.5 * 7/12th) + (40,000 = 2,666.67

(3) 10,000.00 * 3/15th = 2,000.00

(4) 10,000.00 * 2/15th = 1,333.33

(5) 10,000.00 – 9,333.33 = 666.67 (equal to 1/15th but used to close the depreciation)

2nd example 

•  Gross value: 10,000
• Residual value: 0
•  Depreciation start date: 07/02/2005
•  Depreciation duration: 5 years
• Prorata type: months
  

Fiscal year	Net depreciable value	Fiscal year charge	Fiscal year total
01/01/2005 – 31/12/2005	10,000.00	(1) 3,055.56	3,055.56
1/1/2006 – 31/12/2006	6,944.44	(2) 2,722.22	5,777.78
01/01/2007 – 31/12/2007	4,222.22	(3) 2,055.55	7,833.33
01/01/2008 – 31/12/2008	2,166.67	(4) 1,388.89	9,222.22
01/01/2009 – 31/12/2009	777.78	(5) 722.22	9,944.44
01/01/2010 – 31/12/2010	55.56	(6) 55.56	10,000.00

(1) 10,000.00 * 5/15th * 11/12th = 3,055.56

(2) ( 10,000.00 * 5/15th * 1/12th ) + ( 10,000.00 * 4/15th * 11/12th ) = 277.78 + 2,444.44

(3) ( 10,000.00 * 4/15th * 1/12th ) + ( 10,000.00 * 3/15th * 11/12th ) = 222.22 + 1,833.33

(4) ( 10,000.00 * 3/15th * 1/12th ) + ( 10,000.00 * 2/15th * 11/12th ) = 166.67 + 1,222.22

(5) ( 10,000.00 * 2/15th * 1/12th ) + ( 10,000.00 * 1/15th * 11/12th ) = 111.11 + 611.11

(6) 10,000.00 – 9,944.44 = 55.56 (equal to 1/15th * 1/12th but used to close the depreciation)

3rd example 

•  Gross value: 10,000
• Residual value: 0
•  Depreciation start date: 02/07/2005 (corresponds to the 1st day of the week)
•  Depreciation duration: 3 years --> Depreciation end date: 03/02/2008
• Prorata type: week
  

Fiscal year	Net depreciable value	Fiscal year charge	Fiscal year total
03/01/2005 – 01/01/2006	10,000.00	(1) 4,519.23	4,519.23
1/2/2006 – 12/31/2006	5,480.77	(2) 3,493.59	8,012.82
01/01/2007 – 31/12/2005	1,987.18	(3) 1,826.92	9,839.74
31/12/2007 – 28/12/2008	160.26	(4) 160.26	10,000.00

(1) 10,000.00 * 3/6th * 47/52th = 4,519.23

(2) ( 10,000.00 * 3/6th * 5/52th ) + ( 10,000.00 * 2/6th * 47/52th ) = 480.77 + 3,012.82

(3) ( 10,000.00 * 2/6th * 5/52th ) + ( 10,000.00 * 1/6th * 47/52th ) = 320.51 + 1,506.41

(4) 10,000.00 – 9,839.74 = 160.26 (equal to 10,000.00 * 1/6th * 5/52th but used to close the depreciation)
 

Distribution of the fiscal year 2005 charge on quarterly periods (1 quarter = 13 weeks)

Period	Number of weeks	Number of holding weeks	Fiscal
03/01/2005 – 03/04/2005	13	08	(5) 769.23
04/04/2005 – 03/07/2005	13	13	(6) 1,250.00
04/07/2005 – 02/10/2005	13	13	(7) 1,250.00
03/10/2005 – 01/01/2006	13	13	(8) 1,250.00
Fiscal year 2005 total			4,519.23

(5)  (4,519.23 / 47 * 8) – 0 = 769.23
(6)  (4,519.23 / 47 * 21) – 769.23 = 1,250.00
(7)  (4,519.23 / 47 * 34) – 2,019.23 = 1,250.00
(8)  (4,519.23 / 47 * 47) – 3,269.23 = 1,250.00

Distribution of the fiscal year 2006 charge on quarterly periods (1 quarter = 13 weeks)

Period	Number of weeks	Number of holding weeks	Fiscal
02/01/2006 – 02/04/2006	13	13	(1) 993.59
03/04/2006 – 02/07/2006	13	13	(2) 833.33
03/07/2006 – 01/10/2006	13	13	(3) 833.34
02/10/2006 – 31/12/2006	13	13	(4) 833.33
Fiscal year 2006 total			3,493.59

(1) ( 10,000.00 * 3/6th * 5/52th ) + ( 10,000.00 * 2/6th * 8/52th ) = 480.77 + 512.82

(2) ( 10,000.00 * 3/6th * 5/52th ) + ( 10,000.00 * 2/6th * 21/52th ) = (480.77 + 1,346.15) – 993.59

(3) ( 10,000.00 * 3/6th * 5/52th ) + ( 10,000.00 * 2/6th * 34/52th ) = (480.77 + 2,179.49) – 1,826.92

(4) ( 10,000.00 * 3/6th * 5/52th ) + ( 10,000.00 * 2/6th * 47/52th ) = (480.77 + 3,012.82) – 2,660.26

4th example 

•  Gross value: 10,000
• Residual value: 0
•  Depreciation start date: 07/02/2005
•  Depreciation duration: 3 years --> Depreciation end date: 31/01/2008
• Prorata type: months
  

Fiscal year	Net depreciable value	Fiscal year charge	Fiscal year total
01/01/2005 – 31/12/2005	10,000.00	(1) 4,583.33	4,583.33
1/1/2006 – 31/12/2006	5,416.67	(2) 3,472.23	8,055.56
01/01/2007 – 31/12/2007	1,944.44	(3) 1,805.56	9861.12
01/01/2008 – 31/12/2008	138.88	(4) 138.88	10,000.00

(1) 10,000.00 * 3/6th * 11/12th = 4,583.33

(2) ( 10,000.00 * 3/6th * 1/12th ) + ( 10,000.00 * 2/6th * 11/12th ) = 416.67 + 3,055.56

(3) ( 10,000.00 * 2/6th * 1/12th ) + ( 10,000.00 * 1/6th * 11/12th ) = 277.78 + 1,527.78

(4) 10,000.00 – 9,861.12 = (equal to 10,000.00 * 1/6th * 1/12th but used to close the depreciation)
 

Distribution of the fiscal year 2005 charge on quarterly periods

Period	Number of months	Number of holding months	Fiscal
01/01/2005 – 31/03/2005	03	02	(5) 833.33
01/04/2005 – 30/06/2005	03	03	(6) 1,250.00
01/07/2005 – 30/09/2005	03	03	(7) 1,250.00
10/1/2005 – 12/30/2005	03	03	(8) 1,250.00
Fiscal year 2005 total			4,583.33

 (5)  (4,583.33  / 11 * 2) – 0 = 833.33
(6)  (4,583.33  / 11 * 5) – 833.33 = 1,250.00
(7)  (4,583.33  / 11 * 8) – 2,083.33 = 1,250.00
(8)  (4,583.33  / 11 * 11) – 3,333.33 = 1,250.00

Distribution of the fiscal year 2006 charge on quarterly periods

Period	Number of months	Number of holding months	Fiscal
01/01/2006 – 31/03/2006	03	02	(1) 972.23
01/04/2006 – 30/06/2006	03	03	(2) 833.33
01/07/2006 – 30/09/2006	03	03	(3) 833.33
01/10/2006 – 31/12/2006	03	03	(4) 833.34
Fiscal year 2006 total			3,472.23

(1)  ( 10,000.00 * 3/6th * 1/12th ) + ( 10,000.00 * 2/6th * 2/12th ) = 416.67 + 555.56 = 972.23

(2)  ( 10,000.00 * 3/6th * 1/12th ) + ( 10,000.00 * 2/6th * 5/12th ) – 972.23 = 833.33

(3)  ( 10,000.00 * 3/6th * 1/12th ) + ( 10,000.00 * 2/6th * 8/12th ) – 1,805.56 = 833.33

(4) 3,472.23 – 2,638.89 = 833.34