You use a depreciation method that allows you to depreciate assets in an accelerated manner for income tax purposes.
You would use the following depreciation rates for a fixed asset with a three-year lifetime for tax purposes:
year 1: 25%
year 2: 38%
year 3: 37%
The acquisition cost is LCY 100,000, and the depreciable lifetime is five years. Depreciation is calculated annually.
| Date | FA Posting Type | Days | Amount | Book Value |
|---|---|---|---|---|
01/01/00 | Acquisition Cost | * | 100,000.00 | 100,000.00 |
12/31/00 | Depreciation | 360 | -25,000.00 | 75,000.00 |
12/31/01 | Depreciation | 360 | -38,000.00 | 37,000.00 |
12/31/02 | Depreciation | 360 | -37,000.00 | 0 |
12/31/03 | Depreciation | None | None | 0 |
12/31/04 | Depreciation | None | None | 0 |
*Depreciation start date
If you use a user-defined method, the First User-Defined Depr. Date and Depreciation Starting Date fields must be filled in in the FA Depreciation Books window. The First User-Defined Depr. Date field and the contents in the Period Length field in the Depreciation Tables window are used to determine the time intervals to be used for depreciation calculations. This ensures that the program will start using the specified percentage on the same day for all assets. The Depreciation Starting Date field is used to calculate the number of depreciation days.
In the previous example, both the First User-Defined Depr. Date and Depreciation Starting Date fields contain 01/01/00. If, however, the First User-Defined Depr. Date field contained 01/01/00 and the Depreciation Starting Date field contained 04/01/00, the result would be:
| Date | FA Posting Type | Days | Amount | Book Value |
|---|---|---|---|---|
01/01/00 | Acquisition Cost | * | 100,000.00 | 100,000.00 |
12/31/00 | Depreciation | 270 | -18,750.00 | 81,250.00 |
12/31/01 | Depreciation | 360 | -38,000.00 | 42,250.00 |
12/31/02 | Depreciation | 360 | -37,000.00 | 6,250.00 |
12/31/03 | Depreciation | 90 | -6,250.00 | 0 |
12/31/04 | Depreciation | None | None | 0 |
*Depreciation start date