Zoomed Image
USA
800 691 9120
UK
01225 704844

Depreciation Types

Fixed Asset Management Guide
Section 3 – Financial Setup

Depreciation Types

Depreciation types define the formulae used to calculate depreciation. Each depreciation type is a named formula (for example, straight line or declining balance) that is assigned to categories, as a default for a book, or to an individual asset as an override. xAssets ships 22 standard depreciation types, and you can add your own by writing a formula from the supported tokens - there is no limit to the calculation methods you can define.

Prerequisites

  • You must be in the Fixed Asset Management profile (see Fixed Asset Management Profile). Click the profile name at the top left of the screen and choose Fixed Asset Management.
  • You should understand your organisation's depreciation policies before creating or modifying types.

Accessing Depreciation Types

Navigate to Financial Setup > Depreciation > Types:

Financial Setup menu showing the Depreciation Types page-level menu, opened over the Depreciation Types list

The Depreciation Types screen lists all defined formulae:

Depreciation Types list screen showing the 22 seeded depreciation formulae with ID, Code, Name, Formula, Use For New Asset and Periodicity columns

Each row shows the type's ID, Code, Name, Depreciation Formula, whether it is flagged Use For New Asset, its Periodicity (how often it calculates, typically Monthly), and how many Assets currently use it.

Common Depreciation Methods

The 22 seeded depreciation types cover the calculation conventions used across most jurisdictions. The most commonly used are:

Straight-Line Depreciation

Spreads the depreciable amount evenly over the asset's recovery period. The seeded REC type ("Straight Line over Recovery Period") uses:

(OriginalValue - SalvageValue) * InServiceFlag / RecoveryPeriod

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

Variants in the seeded list handle different in-service timing conventions - SLHALFYEAR, SLMIDMONTH, SLMIDQUARTER, SLWHOLEMONTH, WHOLEYEAR, STDAILY and others - so the first period's charge is prorated the way your accounting policy expects.

Declining Balance (Reducing Balance)

Applies a fixed percentage to the remaining net book value each period, giving higher charges early and lower charges later. The seeded STD type ("Standard 20% Declining Balance") and DB2 type ("Double Declining Balance - USA", 2 * (NetBookValue - SalvageValue) / RecoveryPeriod) are examples.

Example: An asset with a 10,000 net book value and 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

The MACRS200HALFYEARCALC / MIDMONTHCALC / MIDQTRCALC types combine a 200% declining balance formula with a straight-line formula in a single depreciation type, separated by |; the engine automatically switches to whichever produces the larger charge in a given period.

GDS Tables (MACRS)

The MACRS type looks up the depreciation rate from IRS Publication 946 tables instead of calculating it, using a Lookup() formula against rate tables loaded into the system.

No Depreciation

Some assets (e.g. land) should not be depreciated. Assign the seeded NONE type ("No Depreciation") to prevent the system from calculating charges.

Formula Flexibility

xAssets depreciation types are not limited to the seeded methods above. Any depreciation type's formula can use mathematical operators, the built-in value/time/convention tokens, and rate-table lookups, giving you full control over how asset values are reduced over time. This supports:

  • Tax depreciation schedules with specific rates per asset class or jurisdiction
  • Rate-table methods (like MACRS) based on published tables
  • Custom conventions - half-year, mid-month, mid-quarter proration
  • SL/DB switching formulas that pick whichever calculation gives the larger charge each period

Creating a New Depreciation Type

To create a new depreciation type:

  1. Navigate to Financial Setup > Depreciation > Types.
  2. Select Depreciation Types > New Depreciation Type from the page-level menu.
  1. Enter a Code (short identifier, e.g. "SL5") and a Name (display name shown when assigning to categories or assets).
  2. Choose the Periodicity (e.g. Monthly).
  3. Optionally tick Use For New Assets to make this the default type offered for newly added assets.
  4. Enter the Depreciation Formula using the supported value, time and convention tokens.
  5. Click OK to save, or Deploy To Assets to save and immediately open the deployment dialog for assigning the type to assets.

Tip: Use descriptive codes and names that include the method and rate - for example, "SL5" / "Straight Line 5yr", or "DB25" / "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, book or asset. Reassign or remove all references first, then delete the type. The system prevents deletion and displays an error if references exist.

Deploying a Depreciation Type to Assets

Once a type is defined, use the page-level menu to roll it out without editing categories or assets one at a time:

  • Deploy Depreciation Type to Assets by Category - applies the selected type to all assets in one or more categories.
  • Deploy Depreciation Type to Specific Assets - applies the selected type to an explicitly chosen set of assets.

Key Fields on a Depreciation Type

Field Description
ID System-assigned identifier, read-only
Code Short identifier used internally and in the DepreciationType catalogue
Name The display name shown when assigning to categories or assets
Periodicity How often the type calculates a charge (e.g. Monthly)
Use For New Assets When ticked, this type is offered as the default for newly added assets
Depreciation Formula The expression used to calculate the depreciation charge each period

The Assets column on the list screen shows a live count of how many assets currently use each type - useful for checking whether a type is safe to delete.

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.