Straight Line Depreciation Example:

In calculating straight line depreciation, if the life is changed, it will adjust in the future.

All the system looks at is the following equation which can be found in Appendix A of the Fixed Assets Manual:

(Cost – Salvage Value – Acc Depr) divided by Remaining Life.

Remaining life is calculated by Life (in months) – months already depreciated.

In the case of an asset with a cost of \$10,000 as of 1/31/1998 that had a 50 year life, the system will calculate \$16.67 per month.  As of 12/31/08, the accumulated depreciation would be \$2,183.33 (it’s off by pennies from a manual calculation due to rounding).
This was \$16.67/month x 131 months.

The life was changed to 30 years and the next depreciation run as of 1/31/2009.

Using the formula above:

Remaining life = Life (in months) – months already depreciated.
30 yr x 12 mos = 360 mos             -    131 mos already depr          = 229 Remaining life

(Cost – Salvage Value – Acc Depr) divided by Remaining Life.
\$10,000 -   \$2,183.33 or \$7,816.67  divided by 229 = \$34.13 new depreciation amount.

This amount will be constant every month until the end of life of the asset.