This article is part of the Fixed Assets Module training.  Click here for more information on the Fixed Assets Module.  Specifically, Conventions are set on the Asset Class, as well as on the Asset record.  

The Averaging Convention is selected on each Asset Book and is used to determine the following:

  • What is the Depreciation Start Date for this Book?
  • How much Depreciation should be included in the First and Last Months of Depreciation?


Below are the descriptions for each Averaging Convention and how each Convention determines the answer for the above questions.  Below each Convention description is an example Start and End date for the Convention type.  All examples assume the following: 

  1. Fiscal Year Type: Calendar Year
  2. Asset Effective Life: 2 Years, 0 Months
  3. Placed in Service Date: 1/10/2017 (except second example in 'Modified Half Year')

 

Conventions:

  • Full Period = Depreciation start is 1st day of Period that the Asset is 'Placed in Service'
    • Depreciation Start = 1/1/2017
    • Depreciation End = 12/31/2018
  • Next Period = Depreciation start is 1st day of Period following the Period that the Asset is 'Placed in Service'
    • Depreciation Start = 2/1/2017
    • Depreciation  End = 1/31/2019
  • Mid Period = Depreciation Start is the Date in the middle of the 'Placed in Service' Period.  Additionally, 1/2 depreciation is posted in the 1st Period and the remaining 1/2 is posted in the final Period
    • Depreciation Start = 1/15/2017
    • Depreciation End = 1/15/2019 (1/2 of a full month's Depreciation applied to Jan 2017 and Jan 2019)
  • Mid Quarter = Depreciation Start is the Date in the middle of Quarter of the 'Placed in Service' Quarter.  Additionally, 1/2 depreciation is posted in the 1st Period and the remaining 1/2 is posted in the final Period
    • Depreciation Start = 2/15/2017
    • Depreciation End = 2/15/2019 (1/2 of full month's Depreciation applied to Feb 2017 and Feb 2019)
  • Half Year = Depreciation Start on 1st day of 7th Period in the Fiscal Year asset that the Asset was 'Placed in Service'
    • Depreciation Start = 7/1/2017
    • Depreciation End = 6/1/2019
  • Modified Half Year 
    • If 'Placed in Service' date is on/in 1st half of the year, then Depreciation Start is 1st day of current year 
      • Depreciation Start 1st Half = 1/1/2017
      • Depreciation End 1st Half = 12/1/2018
    • If 'Placed in Service' date is in 2nd half of the year, then Depreciation Start is 1st day of next year
      • Depreciation Start 2nd Half = 1/1/2018
      • Depreciation End 2nd Half = 12/1/2019