| # Calculations and Averaging Conventions Averaging conventions are used to determine the beginning and end of an asset's recovery period. The recovery period determines how much an asset depreciates in the first and last year of service. Rather than using the asset's service dates, LN uses these dates to calculate the depreciation amounts for the first and last year. The averaging conventions are used as information-only and are stored in the Fixed Assets Management module for use with the federal and other tax books. LN distinguishes the following averaging conventions: U.S. Averaging conventions. European averaging conventions. U.S. Averaging conventions: None Mid-month Mid-quarter Half year Modified half-year None The start date of depreciation is equal to the service date. Mid-month The start date of depreciation is calculated as the midpoint of the month in which the asset is placed in service. Mid-quarter The start date of depreciation is calculated as the midpoint of the quarter in which the asset is placed in service. Half year The start date of depreciation is calculated as the midpoint of the fiscal year in which the asset is placed in service. Modified half-year The start date of depreciation is calculated as the first day of the actual (following) fiscal year in which the asset is placed in service if the service date is in the first (second) half of a fiscal year. Period in service The start date of depreciation is calculated as the first day of the fiscal period in which the asset is placed in service. Example If you are using monthly periods and the service date is December 12, 2002, then the start date is December 1, 2002. First day service year The start date of depreciation is calculated as the first day of the fiscal year in which the asset is placed in service. Example Example: If you are using monthly periods and the service date is December 12, 2002, then the start date is January 1, 2002. Day after service year The start date of depreciation is calculated as the first day following the end of the fiscal year in which the asset is placed in service. Example If the fiscal year ends June 30, 1998 and the service date is July 1, 1998, then the start date is July 1, 2002. Period after service date The start date of depreciation is calculated as the first day following the end of the fiscal period in which the asset is placed in service. Example An asset with a three-year life is placed in service on March 11, 2001. LN uses April, 2002 as the beginning of the recovery period. First/second half of year The start date of depreciation is calculated as the first day of the fiscal year (second half of the fiscal year) in which the asset is placed in service if the service date is in the first (second) half of a fiscal year. Second half of year in service The start date of depreciation is calculated as the first day of the second half of the fiscal year in which the asset is placed in service. European averaging conventions: None Mid-month Mid-quarter Half year Modified half-year Period in service None The start date of depreciation is equal to the service date. Mid-month The start date of depreciation is calculated as the midpoint of the month in which the asset is placed in service. Mid-quarter The start date of depreciation is calculated as the midpoint of the quarter in which the asset is placed in service. Half year The start date of depreciation is calculated as the midpoint of the fiscal year in which the asset is placed in service. Modified half-year The start date of depreciation is calculated as the first day of the actual (following) fiscal year in which the asset is placed in service if the service date is in the first (second) half of a fiscal year. Period in service The start date of depreciation is calculated as the first day of the fiscal period in which the asset is placed in service. Example If you are using monthly periods and the service date is December 12, 2002, then the start date is December 1, 2002. First day service year The start date of depreciation is calculated as the first day of the fiscal year in which the asset is placed in service. Example If you are using monthly periods and the service date is December 12, 2002, then the start date is January 1, 2002. Day after service year The start date of depreciation is calculated as the first day following the end of the fiscal year in which the asset is placed in service. Example If the fiscal year ends June 30, 1998 and the service date is July 1, 2001, then the start date is July 1, 2002. Period after service date The start date of depreciation is calculated as the first day following the end of the fiscal period in which the asset is placed in service. Example An asset with a three-year life is placed in service on March 11, 2001. LN uses April, 2002 as the beginning of the recovery period. First/second half of year The start date of depreciation is calculated as the first day of the fiscal year (second half of the fiscal year) in which the asset is placed in service if the service date is in the first (second) half of a fiscal year. Second half of year in service The start date of depreciation is calculated as the first day of the second half of the fiscal year in which the asset is placed in service. The end date of depreciation is calculated as the start date of depreciation plus the life of the asset minus one day. Related topics To calculate depreciation 21 Days Rule |