How Depreciation Amounts are Calculated Using Depreciable Basis 'Period End Average'

Last updated on SEPTEMBER 12, 2017

Applies to:

Goal

Oracle Assets provides the Depreciable Rules feature to enhance the depreciation method setup provided by Cost or NBV calculation basis. The combination of depreciable basis rule and depreciation method determine how depreciable basis and depreciation expense are derived.  One of these depreciable basis rules is "Period End Average."

"Period End Average" basis can be used in situations where the business wants to calculate depreciation on the average of beginning and ending cost for a period. This basis is available both with flat and formula methods and with the calculation basis of both cost and NBV.  The below formula is used to calculate depreciation when this basis rule is used:

Current Period Depreciation Expense for Period Average Balance =
(End of Current Period Balance + End of Previous Period Balance) /2 * Rate / Periods Per Year

In Oracle Assets, the depreciation amount is mainly impacted by the following three transactions using this rule.

1. Addition
2. Adjustment
3. Retirement

This document explains the depreciation calculation for the flat method with both cost and NBV basis.

Solution