10. Extraordinary Depreciation
An extraordinary depreciation type is stored in a value type defined in (FAS920). The value type for extraordinary depreciation is displayed in (FAS010). The method to use after the extraordinary depreciation is made is selected between:
It is possible to make an extraordinary depreciation regardless of whether the normal depreciation for that period has been done. In this case, the depreciation plan is adjusted.
- No change of depreciation amount (that is, to reduce the lifetime but keep the same amount)
- Recalculation of the depreciation plan (that is, to reduce the depreciation amount but keep the same lifetime).
10.1 Examples
An asset bought on April 1 of year 1 is depreciated in linear mode for four years (25% rate). An extraordinary depreciation is done in year 2.
10.1.1 Example: No Change of Depreciation Amount
Alternative 1 is selected after the extraordinary depreciation, so the depreciation continues in the same way as before. That is, the fixed asset will be fully depreciated faster than it would have been without the extraordinary depreciation.
| Depreciation | Linear | Residual Value | Extraordinary Depreciation | New Plan After Extraordinary | Residual Value |
|---|---|---|---|---|---|
| Year 1 | 17,809* | 82,191 | 17,809 | 82,191 | |
| Year 2 | 25,000 | 57,191 | 10,000 | 35,000 | 47,191 |
| Year 3 | 25,000 | 32,191 | 25,000 | 22,191 | |
| Year 4 | 25,000 | 7,191 | 22,191 | 0 | |
| Year 5 | 7,191 | 0 | 0 | 0 | |
| Total | 100,000 | 0 | 10,000 | 100,000 | 0 |
10.1.2 Example: Reduced Depreciation Amount
Alternative 2 is selected after the extraordinary depreciation, so the depreciation will continue as long as planned but with a lower amount each year.
| Depreciation | Linear | Residual Value | Extraordinary Depreciation | New Plan After Extraordinary | Residual Value |
|---|---|---|---|---|---|
| Year 1 | 17,809* | 82,191 | 17,809 | 82,191 | |
| Year 2 | 25,000 | 57,191 | 10,000 | 35,000 | 47,191 |
| Year 3 | 25,000 | 32,191 | 20,629 | 26,562 | |
| Year 4 | 25,000 | 7,191 | 20,629 | 5,933 | |
| Year 5 | 7,191 | 0 | 5,933 | 0 | |
| Total | 100,000 | 0 | 10,000 | 100,000 | 0 |
* According to daily depreciation for the linear method: (25,000 x 260)/365=17,809.