When an asset is purchased at some point other than the first day of the
year, depreciation must be depreciation a fractional proportion of the first
year, et cetera. Then the remaining years must be calculated. In addition,
for DDB, the last year or two may need to be adjusted to make sure at the end
of the useful life, the asset has been depreciation down to the specific
salvage value. I'm having trouble understanding how this is done in EXCEL for
DDB and SYD especially. Can you help me?

Hi Prof D
Re DDB.

This cannot be used for partial years. This is because modifications
required in the first year would not be reflected in subsequent years and the
function would deliver incorrect values for them.

If you wish to use DDB then the only alternative would be to utilise the
formula, but to express the life as months rather than years. However this
would increase the size of the worksheet considerably if one column of data
were to be utilised for each month.

Alternatively one could abandon DDB and go back to the underlying principles.

Provision for Depn = (Cost €“ Depn in Prior Years)* Factor / Life.

In the first year the Depn charge would be (Cost * Factor / Life)*Year
Fraction.

The year fraction should be determined by reference to the relevant taxation
/ financial reporting authorities: n/12 is suggested by Microsoft but this
undermines the principle of DDB when earlier periods bear a higher level of
depreciation.

In subsequent years something like
=MIN(Initial Cost €“ Salvage - Depn in Prior Years,(Initial_Cost- Depn in
Prior Years)*Factor/Life)
could be utilised.

As an aside Microsofts notes on DDB are wrong. The stated underlying
formula is not used to calculate this function, which is good as this does
not calculated DDB €“ in this case two wrongs make a rather confusing right!
:-)

Similar considerations would apply for SYD.

I hope this helps.

Regards

Phil Smith.

"Prof D" wrote:

When an asset is purchased at some point other than the first day of the
year, depreciation must be depreciation a fractional proportion of the first
year, et cetera. Then the remaining years must be calculated. In addition,
for DDB, the last year or two may need to be adjusted to make sure at the end
of the useful life, the asset has been depreciation down to the specific
salvage value. I'm having trouble understanding how this is done in EXCEL for
DDB and SYD especially. Can you help me?