Ans)Depreciation keys = depreciation method + depreciation rate.
depreciation method could be slm(straight line method),
wdv(written down value method)etc
depreciation rate is nothing but the percentate like 5%, 6%,etc
hence dep key = slm + 5 %
A Depreciation key can be considered as a
box which houses all the depreciation methods
You are aware that every fixed asset keeps losing value as
time progresses and the loss of value is called as depreciation.
Depreciation Keys are pre-defined mathematical functions
which perform number crunching so as to reduce the value of
asset (usually) with the passage of time.
A Depreciation Key is a bundle of various methods of
standardized depreciation. A depreciation key contains
a. Base method (such as straight line depreciation etc.)
b. Declining Balance Method ( more affectionately known as
WDV method, Written Down Value Method)
this menthod includes both the declineing balance method sum of the years digits method. the normar declining balance method of dep mutiplies the straight line % by a given factor usually the factor would be 2/2.5/3 which means that your depreciation would be 2/2.5/3 times more under this method as compared to SLM this is just to accelerate the intial depreciation so that you have earmarked a sizable portion of your intial profits.
c. Maximum Amount Method ( an arbitrary pre-defined amount
up to which depreciation of an asset can be carried out)
d. Multi-level method ( which is a mixed bag of one or more
of the aforesaid methods ) . Usually it has been
mathematically proved that the Declining Balance Method
cannot be effective in writing off the value of an asset in
full ( viz. reduce to zero balance) in a finite period of
time. In order to avoid this complication, you can use
multi-level method which effects a change-over from
declining balance method to straight line method under
certain conditions pre-defined in the depreciation methods/
keys)
each level represents a validity period for a given percentage rate.
e. Period Control Method ( this tells you the date on which
capitalization / de-activation, start of depreciation could
commence with regard to asset acquisition, additions to it,
retirement and transfer ).
All these depreciation methods are bundled into a
depreciation key which is assigned to the asset master record.
in the class field of dep key we select the actual method
There are many depreciation keys available and you can
create them too. Usually they are country-specific.
Assignment of a suitable depreciation key to the asset
master helps in the fair valuation of assets and profits /
losses ( through fair estimation of depreciation of assets).
Hope it is clear. Please feel free to share with any other
information that I might have missed out
depreciation method could be slm(straight line method),
wdv(written down value method)etc
depreciation rate is nothing but the percentate like 5%, 6%,etc
hence dep key = slm + 5 %
A Depreciation key can be considered as a
box which houses all the depreciation methods
You are aware that every fixed asset keeps losing value as
time progresses and the loss of value is called as depreciation.
Depreciation Keys are pre-defined mathematical functions
which perform number crunching so as to reduce the value of
asset (usually) with the passage of time.
A Depreciation Key is a bundle of various methods of
standardized depreciation. A depreciation key contains
a. Base method (such as straight line depreciation etc.)
b. Declining Balance Method ( more affectionately known as
WDV method, Written Down Value Method)
this menthod includes both the declineing balance method sum of the years digits method. the normar declining balance method of dep mutiplies the straight line % by a given factor usually the factor would be 2/2.5/3 which means that your depreciation would be 2/2.5/3 times more under this method as compared to SLM this is just to accelerate the intial depreciation so that you have earmarked a sizable portion of your intial profits.
c. Maximum Amount Method ( an arbitrary pre-defined amount
up to which depreciation of an asset can be carried out)
d. Multi-level method ( which is a mixed bag of one or more
of the aforesaid methods ) . Usually it has been
mathematically proved that the Declining Balance Method
cannot be effective in writing off the value of an asset in
full ( viz. reduce to zero balance) in a finite period of
time. In order to avoid this complication, you can use
multi-level method which effects a change-over from
declining balance method to straight line method under
certain conditions pre-defined in the depreciation methods/
keys)
each level represents a validity period for a given percentage rate.
e. Period Control Method ( this tells you the date on which
capitalization / de-activation, start of depreciation could
commence with regard to asset acquisition, additions to it,
retirement and transfer ).
All these depreciation methods are bundled into a
depreciation key which is assigned to the asset master record.
in the class field of dep key we select the actual method
There are many depreciation keys available and you can
create them too. Usually they are country-specific.
Assignment of a suitable depreciation key to the asset
master helps in the fair valuation of assets and profits /
losses ( through fair estimation of depreciation of assets).
Hope it is clear. Please feel free to share with any other
information that I might have missed out
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