Factor depreciation

This article gives an overview of the factor depreciation method.

Factors are the percentages that are used to depreciate assets. When you set up a fixed asset depreciation profile and select Factor in the Method field on the Depreciation profiles page, you can set up progressive, digressive, or straight line depreciation:

  • In progressive depreciation, the amount of depreciation increases each depreciation period.
  • In digressive depreciation, the amount of depreciation per period decreases over time.
  • In straight line depreciation, the depreciation is the same in each period.

The rules and examples that follow indicate how you can set up factors for each type of depreciation.

Note

When you select Factor in the Method field, the Factor field and the Interval field are displayed.

Progressive depreciation

The value in the Factor field is more than 50.

Example

The acquisition price is 100,000, the factor is 70, the service life is 10 years, and depreciation starts on January 1. The depreciation amounts and net book value amounts are shown only for the first six years of service life.

Year Period Depreciation amount Net book value amount
1 December 31 307.69 99,692.31
2 December 31 1,447.21 98,245.10
3 December 31 3,104.50 95,140.60
4 December 31 5,150.21 89,990.39
5 December 31 7,522.95 82,467.44
6 December 31 10,184.06 72,283.38

Digressive depreciation

The value in the Factor field is less than 50.

Example

The acquisition price is 100,000, the factor is 20, the service life is 10 years, and depreciation starts on January 1. The depreciation amounts and net book value amounts are shown only for the first six years of service life.

Year Period Depreciation amount Net book value amount
1 December 31 56,080.43 43,919.57
2 December 31 10,665.70 33,253.87
3 December 31 7,156.22 26,097.65
4 December 31 5,538.06 20,559.59
5 December 31 4,579.89 15,979.70
6 December 31 3,937.36 12,042.34

Straight line depreciation

The value in the Factor field is equal to 50. In this case, the depreciation is the same in each period, and you should consider the implications of the values that you have specified in other fields, as described in Straight line service life depreciation.