Depreciation Types

Depreciation types define the formulae used to calculate depreciation. Each depreciation type is a named formula that can be assigned to categories (as a default) or to individual assets. Understanding how depreciation types work is essential for setting up accurate financial calculations.

Prerequisites

• You must be in the Fixed Asset Management profile (see Fixed Asset Management Profile).
• You should understand your organisation's depreciation policies before creating or modifying types.

Accessing Depreciation Types

Navigate to Financial > Depreciation Setup > Depreciation Types:

The Depreciation Types screen lists all available formulae:

Common Depreciation Methods

xAssets includes several standard depreciation formulae. The most commonly used methods are:

Straight-Line Depreciation

Spreads the depreciable amount evenly over the asset's useful life (recovery period).

Monthly charge = (Original Value - Salvage Value) / Recovery Period

Example: An asset costing 12,000 with a salvage value of 0 and a recovery period of 60 months:

• Monthly depreciation = 12,000 / 60 = 200 per month
• After 12 months: Accumulated depreciation = 2,400, Net book value = 9,600
• After 60 months: Fully depreciated, Net book value = 0

Declining Balance (Reducing Balance)

Applies a fixed percentage to the remaining net book value each period. This produces higher charges in early years and lower charges later.

Monthly charge = Net Book Value x (Annual Rate / 12)

Example: An asset costing 10,000 with a 25% annual declining balance rate:

• Month 1: 10,000 x (25% / 12) = 208.33
• Month 2: 9,791.67 x (25% / 12) = 203.99
• The charge decreases each month as the NBV reduces

No Depreciation

Some assets (e.g. land) should not be depreciated. Assign a "No Depreciation" type to prevent the system from calculating charges.

Formula Flexibility

xAssets depreciation types are not limited to the standard methods above. You can use any mathematical formula or lookup table, giving you full control over how asset values are reduced over time. This supports:

• Tax depreciation schedules with specific rates per asset class
• Units of production methods based on usage data
• Custom curves defined by lookup tables
• Indexed depreciation where the depreciable base is adjusted for inflation

Creating a New Depreciation Type

To create a new depreciation type:

1. Navigate to Financial > Depreciation Setup > Depreciation Types.
2. Select Depreciation Types > New Depreciation Type from the page-level menu.

TODO Screenshot (manual): Requires navigating to Depreciation Types list, then using the page-level menu t

3. Enter a name and description for the formula.
4. Define the calculation formula.
5. Click Save.

Tip: Use descriptive names that include the method and rate — for example, "SL 5yr" for straight-line over 5 years, or "DB 25%" for 25% declining balance. This makes it easier to identify the correct type when assigning to categories or assets.

Deleting a Depreciation Type

To delete a depreciation type:

1. Select the type in the list.
2. Choose Depreciation Types > Delete Selected Depreciation Type from the page-level menu.

Warning: A depreciation type cannot be deleted while it is assigned to any category or asset. You must reassign or remove all references first, then delete the type. The system will prevent deletion and display an error if references exist.

Key Fields on a Depreciation Type

The Basis field determines which assets are eligible for depreciation:

• In Service — Only assets with an "In Service" status are depreciated. This is the most common setting.
• In Existence — All assets that exist in the register are depreciated, regardless of status. Use this for assets that should depreciate even before they are formally put into service.

How Depreciation Types Are Used

Once defined, depreciation types are assigned at two levels:

1. Category-book level — As default rules for new assets. See Assigning Depreciation Types to Categories.
2. Individual asset level — As overrides when an asset needs different treatment. See Assigning Depreciation Types to Assets.

The depreciation type is then used by the period-end processing engine to calculate the monthly charge for each asset. See The Monthly Accounting Process.

Related Articles

• Assigning Depreciation Types to Categories — Setting default rules per category
• Assigning Depreciation Types to Assets — Overriding rules per asset
• Reviewing Depreciation Setup — Verifying rules before calculating
• Books — How books interact with depreciation types