My issue is while they are all wrong, it is only really obvious for the instant write off where the book value goes negative. In my opinion the chance of a user entering wrong values is sufficiently high that manager should be enhanced to minimise this risk. A possible solution would be to show a warning if the calculation period includes a leap day. Better yet do not depreciate on leap day, which would mean all depreciation years are 365 days long. So Period depreciated over = Duration in days - number or leap days
If the user is aware of this limitation it can be fudged by starting a day into a leap year
@Patch Your example has crystalised the shortcomings of using this criteria.
PS: At first I was not going to use the worksheet, but I like the ability to create a report for depreciation at any time for any year. I have accepted that the anomaly may not be corrected, however I do not depreciate any of my assets at 100% so it does not worry me all that much.
Which means ATO allows slightly greater depreciation in leap years, which is good to know.
It does break instant write off calculations thought, as book value becomes negative. So perhaps a manual adjustment is required for that.
Partial year worksheet calculation does still appear to be incorrect.
I suggest you check the total depreciation claimed for the year is consistent with what the ATO allows. My understanding is the calculation worksheet can not be used for that.
What you actually need to do is
run the worksheet for a year at the beginning of the year
Edit the generated depreciation entry to divide each by the number of periods in your year (12 for monthly, 4 for quarterly). Then change the date to the end of your period.
for subsequent periods clone the above entry and change the end date.
Yes, I would say when a fiscal year contains 366 days then an asset disposed or purchased during that year should use 366 as the denominator. At least that is how I calculated depreciation prior to accepting the current method used in Manager.
Instant write-off will rarely be 100% per annum (only if the asset is installed on the first day of the fiscal year). It is 100% at the time of installation ( no time period needed). I guess though that it is not necessary to do a separate partial year worksheet for an instant write-off asset - just use 100% on a full year worksheet (except in a leap year).
Yeah, it would be good if Manager could cater for this as well.
Car owned for full year, Starting value $50,000 deduction 30%, so should be able to claim about 30% x $50,000 = $15,000
Truck owned for half the year, starting value $50,000. So should be able to claim about 30% x $50,000 x 1/2 year = $7,500. But Depreciation worksheet calculates $15,000 in error.
That is what instant write off means, 100% of asset value in the first period for which it is calculated. If you buy it half way through the year you still get 100% depreciation in that year.
I agree that sound logical for a per annum depreciation specification however your ATO reference indicates we can claim more that that, for leap years, so that is what we should do. I don’t make the rules, I just live by them.
It does using the method I just described. No manual calculation. Cloning an entry and changing the date is no harder than creating a new depreciation worksheet for a different date range.
Yeah, it works for disposals but not for acquisitions. I do a separate partial year worksheet for each acquisition.
Yes, but it is 100% full stop, not 100% per annum because you have not had use of the asset for the full year (in most cases). And yes, it is a pedantic distinction.
I agree, that is the best policy, but it doesn’t mean that rules cannot be challenged.
I have used accounting systems that the depreciation can be run for a specified period (usually monthly, but quarterly or whatever, because it used the number of days in the period specified) and it will calculate, allow revision and then hit a button to post. Incidently it didn’t use the ATO method, it used the number of days in the year as the denominator (366 in a leap year and 365 for other years).
