Depreciation Calculations

Depreciation Method: Depreciate to Residual Value (RV)

The Depreciate to RV method applies straight-line depreciation to a vehicle's value over its expected service life, reducing the asset value down to a predefined residual value (RV) by the end of that life.

This method is evaluated during a costing transfer run, where depreciation is calculated based on the vehicle's age relative to its total depreciable life.

The following calculations are executed during the costing transfer:

The INI code VEH:SUPPLYDATES controls which date field is used when calculating VehicleLifeInDays and VehicleAgeInDays.

For clarity in the formulas shown below, VEHICLES_FW.IN_SERVICE_DATE_FW is used as the reference date.

1. VehicleLifeInDays = The number of days between VEHICLES_FW.IN_SERVICE_DATE_FW and VEHICLES_FW.DEPRECIATE_TO_DATE_FW
2. VehicleAgeInDays  = The number of days between VEHICLES_FW.IN_SERVICE_DATE_FW and POSTING_DATES_FW.END_OF_PERIOD_DATE_FW
3. DepreciationAmount = ROUND( (VEHICLES_FW.SUPPLY_PRICE_FW - VEHICLES_FW.SALE_PRICE_BOOKRV_FW) * (VehicleAgeInDays / VehicleLifeInDays), 2) - VEHICLES_FW.DEPRECIATION_TOTAL_FW 

Example: 

• VEHICLES_FW.IN_SERVICE_DATE_FW  = January 1, 2020

• VEHICLES_FW.DEPRECIATE_TO_DATE_FW = January 1, 2025

• VEHICLES_FW.SUPPLY_PRICE_FW  = 30,000

• VEHICLES_FW.SALE_PRICE_BOOKRV_FW = 10,000

• VEHICLES_FW.DEPRECIATION_TOTAL_FW = 6,000

• POSTING_DATES_FW.END_OF_PERIOD_DATE_FW = January 1, 2022
   

1. VehicleLifeInDays = The number of days between January 1, 2020 and January 1, 2025 = 1,827 days
2. VehicleAgeInDays  = The number of days between January 1, 2020 and January 1, 2022 = 731 days
3. DepreciationAmount = ROUND( (VEHICLES_FW.SUPPLY_PRICE_FW - VEHICLES_FW.SALE_PRICE_BOOKRV_FW) * (VehicleAgeInDays / VehicleLifeInDays), 2) - VEHICLES_FW.DEPRECIATION_TOTAL_FW  =  ((30,000 - 10,000) * (731 /1,827) ) - 6,000 =( 20,000 * 0.4 ) - 6,000 = 2,000