Depreciation conventions

Depreciation conventions are used to determine the first and last years' amounts of depreciation to be taken. The Asset Management application provides nine depreciation conventions. One depreciation convention is assigned to a book as the default convention for all assets that use the book. You can change the convention from the default convention for individual assets.

The depreciation conventions are:

• FM = Full Month

  The asset receives a full month of depreciation during the month it is placed in service. The asset does not receive any depreciation for the month in which it is disposed of.

• HM = Modified Half Month

  If the asset is placed in service during the first half of the month, it receives one full month's depreciation; it receives no depreciation for the month in which it is disposed of. If the asset is placed in service during the second half of the month, depreciation calculations begin the following month. In this case, the asset receives a full month's depreciation during the month in which it is disposed of.

• MM = Mid Month

  The asset receives one-half of one month's depreciation for the month in which it is placed in service, and one-half of one month's depreciation for the month in which it is disposed of.

• NM = Next Month

  The asset begins depreciating the month after it is placed in service, and receives one full month of depreciation for the month in which it is disposed of.

• HY = Half Year

  The asset receives one half of a year's depreciation for the first and last year it is in service.

• MY = Modified Half Year

  If the asset is in service before the midpoint of the year, it receives a full year's depreciation during its first year, and no depreciation during its last year of service. If the asset is placed in service after the midpoint of the year, depreciation calculations begin the following year, and the asset receives a full year's depreciation for the year in which it is disposed of.

• FY = Full Year

  Whenever the asset is placed in service, it receives a full year of depreciation. It receives no depreciation for the year in which it is disposed of.

  Note: Monthly conventions consider a wall calendar to determine depreciation calculation for a first year asset. Therefore, to ensure accurate depreciation calculation for a depreciation posting schedule that doesn't use month-end posting dates (such as a 4-4-5 calendar), use the Actual Days (AD) convention code.

• AD = Actual Days

  The asset receives depreciation for each day it is in service during the fiscal year, beginning with the in-service date. This convention should be used for assets that use calendars with period ending dates that are not month-end dates.

• MQ = Mid Quarter

  The asset receives one-half of one quarter's depreciation for the quarter in which it is placed in service, and one-half of one quarter's depreciation for the quarter in which it is disposed of.