Depreciation_ Alternate Estimated Life

Hi @Lakna K 

• Purpose of Alternative Estimated Life:

When calculating depreciation for fixed assets, the standard approach is to use the estimated life of the asset. However, there are scenarios where an alternative estimate might be more appropriate.

The alternative estimated life allows you to consider a different useful life for an asset, which may be based on factors other than the standard estimate. For example, if an asset’s actual wear and tear suggest a shorter or longer lifespan than the estimated life, you can adjust it using the alternative estimate.

• Calculation Methods:

The correct method for calculating depreciation based on alternative estimated life is typically either:

• Remaining Value/Remaining Months: Divide the current net value by the remaining months until the end of the asset’s life.
• Remaining Value/Remaining Periods: Similar to the above, but based on periods (e.g., quarters) instead of months.

Ensure that the method parameter “Change base value” is set to “Depreciation period” to recalculate the net value each month1.

• Change Net Value Option:

IFS provides the Change Net Value Option to modify the net book value when an asset’s useful life or salvage value changes after initial acquisition.

This feature allows adjustments to be made based on updated information about the asset’s condition or expected lifespan.

Best Regards,

Tharindu

Tharindu Nadeeshan | LinkedIn