Multiple, concurrent, depreciation methods

Because of local reporting requirements, international financial reporting standards (IFRS), and local taxation reporting requirements, various algorithms can be used to calculate depreciation:
  • Straight Line
  • Reducing Balance
  • Straight Line
  • Usage
  • Sum of Digits, rule of 78
  • MACRS
  • ACRS
  • Reducing Balance switching to Straight Line
  • Double Declining Balance switching to Straight Line

Straight Line and Reducing Balance are the most common depreciation methods in use. The co-existence of corporate and taxation depreciation calculations is required.

These are the base values that are used for depreciation: Acquisition value, 50% of acquisition value, replacement value, and 50% of replacement value.

Australia specifics

This list shows the depreciation methods that are required:

  • Prime cost, the straight line method
  • Diminishing value
  • Immediate write off
  • Pooling

Enterprises can use one of these alternative methods to calculate depreciation:

  • Prime cost

    The value of a depreciating asset decreases uniformly over its effective life.

  • Diminishing value

    The value of a depreciating asset decreases more in the early years of its effective life.

When the value of the asset falls to $1,000 or less, the remaining value can be transferred to a low-value pool. The enterprise can claim depreciation for the asset with any other low-value assets. Simplified depreciation rules apply to small enterprises with aggregated annual turnover of less than $2 million.

For certain assets, the Australian Taxation Office requires that their estimate of an asset's effective life is used. The estimates are updated annually and indicated in the taxation ruling for income tax, effective life of depreciating assets. Effective life is categorize into two parts, industry and asset categories.

When an asset is retired, a balancing adjustment is required to identify the difference between the adjusted value and that termination value. The balancing adjustments are added as assessable income or is claimed as a deduction.

How Infor meets this requirement

For predefined depreciation calculation methods, see Asset Accounting setup in Financials Setup and Administration Guide.

To create a depreciation method setup, see Asset Accounting setup in Financials Setup and Administration Guide.