<?xml version="1.0" encoding="utf-8"?>
<ManualTopic ID="/baanerp/tf/onlinemanual/000182" xml:lang="en">
	<Header>
		<Title xmlns:ssa="http://www.ssaglobal.com" xmlns:HTML="http://www.w3.org/TR/REC-html40">To calculate MACRS depreciation</Title>
		<Keyword><Level1>Methods</Level1>
			<Level2>MACRS Depreciation</Level2>
		</Keyword>
		<Keyword><Level1>MACRS</Level1>
			<Level2>Depreciation Methods</Level2>
		</Keyword>
	</Header>
	<GeneralSection><Paragraph>MACRS formula depreciation uses either a declining balance formula or a straight-line formula.</Paragraph>
		<List><ListItem><Link href="#A" role="internal">MACRS Straight-Line Formula Depreciation</Link>
			</ListItem>
			<ListItem><Link href="#B" role="internal">MACRS Declining Balance Depreciation</Link>
			</ListItem>
		</List>
		<GeneralSection ID="A"><SectionTitle>MACRS Straight-Line Formula Depreciation</SectionTitle>
			<Paragraph>In the MACRS straight-line method, SSA ERP calculates a new applicable percentage of depreciation in each year of the asset's life. The MACRS SL formula uses the asset's remaining life rather than its original depreciation life in the calculation.</Paragraph>
			<Paragraph>In MACRS straight line, SSA ERP calculates the percentage for a year by dividing one depreciation period by the remaining life of the asset, and then applying this amount with the averaging convention to determine the depreciation amount for that year.</Paragraph>
			<Paragraph>In the first year, SSA ERP divides the resulting annual depreciation amount evenly across each period from the beginning of the recovery period to the end of the year. In subsequent years, SSA ERP divides the depreciation amount evenly across each period in the year.</Paragraph>
			<Note><SectionTitle>Note</SectionTitle>
				<Paragraph>If the asset for which you are calculating depreciation contains an averaging convention, SSA ERP adjusts the depreciation expense for the first halfyearly, quarterly, or monthly calculation. For more information, refer to <Link href="/baanerp/tf/onlinemanual/000176" role="manual">Calculations and Averaging Conventions</Link>.</Paragraph>
				<Paragraph>MACRS straight line formula:</Paragraph>
				<Formula><Paragraph UserLevel="Novice" UserType="Taskuser">
depreciation =  (cost - accumulated depreciation) * (1 / remaining life)
</Paragraph>
				</Formula>
			</Note>
			<ExampleSection><SectionTitle>Example</SectionTitle>
				<Paragraph>Your company has an asset with a cost of $10,000, an estimated life of seven years, and a half year averaging convention. Because of the averaging convention, SSA ERP must calculate the full annual depreciation for the first year but record only half of the resulting depreciation. The annual depreciation for the first year of the asset's life is calculated as:</Paragraph>
				<Formula><Paragraph UserLevel="Novice" UserType="Taskuser">[ $10,000 * (1 / 7) ]
___________________ = $714.29
       2 
</Paragraph>
				</Formula>
				<Paragraph>SSA ERP divides this amount evenly from the service date to the end of the first fiscal year.</Paragraph>
				<Paragraph>In the second year of the asset's life, the remaining life is now 6.5 years. SSA ERP calculates the annual depreciation as follows:</Paragraph>
				<Formula><Paragraph UserLevel="Novice" UserType="Taskuser">[ ($10,000 - $714.29) * (1 / 6.5) ] = $1428.57</Paragraph>
				</Formula>
				<Paragraph>SSA ERP divides this amount evenly across the twelve periods in the calendar year which results in a depreciation amount of $119.05 in each period of the second year.</Paragraph>
				<Paragraph>In the third year of the asset's life, the remaining life is now 5.5 years. SSA ERP calculates the annual depreciation as follows:</Paragraph>
				<Formula><Paragraph UserLevel="Novice" UserType="Taskuser">[ ($10,000 - $2142.86) * (1 / 5.5) ] = $1428.57</Paragraph>
				</Formula>
				<Paragraph>SSA ERP divides this amount evenly across the twelve periods in the calendar year which results in a depreciation amount of $119.05 in each period of the third year.</Paragraph>
			</ExampleSection>
			<Note><SectionTitle>Note</SectionTitle>
				<Paragraph>If the asset for which you are calculating depreciation contains an averaging convention, SSA ERP adjusts the depreciation expense for the first halfyearly, quarterly, or monthly calculation. For more information, refer to <Link href="/baanerp/tf/onlinemanual/000176" role="manual">Calculations and Averaging Conventions</Link>.</Paragraph>
			</Note>
		</GeneralSection>
		<GeneralSection ID="B"><SectionTitle>MACRS Declining Balance Depreciation</SectionTitle>
			<Paragraph>The formula used by MACRS declining balance is the same as the formula used in the regular declining balance formula with a switch to straight line. SSA ERP uses declining balance for the first portion of the asset's life, then switches to straight line with remaining life.</Paragraph>
			<Note><SectionTitle>Note</SectionTitle>
				<Paragraph>If the asset for which you are calculating depreciation contains an averaging convention, SSA ERP adjusts the depreciation expense for the first halfyearly, quarterly, or monthly calculation. For more information, refer to <Link href="/baanerp/tf/onlinemanual/000176" role="manual">Calculations and Averaging Conventions</Link>.</Paragraph>
			</Note>
		</GeneralSection>
	</GeneralSection>
	<RelatedTopics><SectionTitle>Related topics</SectionTitle>
		<RelTopic><Link href="/baanerp/tf/onlinemanual/000183" role="manual">To calculate MACRS table depreciation</Link>
		</RelTopic>
	</RelatedTopics>
</ManualTopic>
