About Diminishing Value (Australia)

The Declining Balance (US & Canada) and Diminishing Value (Australia) methods of depreciation allow you to depreciate larger amounts in the first year of an asset's life, and then gradually decrease depreciation amounts in subsequent years until the total amount to depreciate has been reached.

The diminishing value method assumes that the value of a depreciating asset decreases more in the early years of its effective life. With this method, the value of the equipment will be depreciated by a defined percentage of the base value on a monthly basis.

Base value × (days held/365) × (200%/asset’s effective life)

The base value reduces each year by the decline in the value of the asset. So if the purchase price is $50,000, the days held is 365, and the effective life is 5 years, the base value for the first year is $50,000. Based on the formula above, the total amount to take for the first year is $20,000:

50,000 x (365/365) x (200%/5) = 20,000

The system then subtracts the $20,000 from the $50,000 to get the base value for the next year ($50,000 - $20,000 = $30,000). This process continues until the value reaches zero.

However, when no residual value is assigned and the monthly depreciation falls below $1.00 per month, the system stops calculating depreciation. This limits the total number of months calculated.

Example of the Diminishing Value Depreciation Schedule

Fiscal Year End: 06/15

Purchase Price:

50,000.00

 

Depreciation Start Date:

07/14

Residual Value:

0.00

 

# of Months Held:

60

Total Amt to Depreciate:

50,000.00

 

Depreciation Factor:

2.0

You can see the depreciation schedule for a particular asset in the Schedule tab of EM Asset Setup. The form header displays the total depreciation amount taken and the remaining amount to take.