Depreciate an asset by straight line or diminishing value, with a year by
year schedule.
Use for: 'how is depreciation calculated', 'straight line vs diminishing
value', 'depreciation schedule', 'book value after 3 years', 'work out
depreciation on equipment'.
THE TWO METHODS DIVERGE SHARPLY ON THE SAME ASSET. Straight line spreads the
deduction evenly across the useful life. Diminishing value applies the rate
to the REDUCING book value, so it front-loads the deduction heavily and never
reaches zero on its own. Which is better depends entirely on when the owner
wants the deduction, so the year by year schedule is the useful part of this
answer rather than the first year figure. Show the schedule.
additional_costs are capitalised into the cost base, which is where delivery
and installation belong. salvage_value acts as a floor under both methods,
and the last year of a straight line life takes only what is left, so
rounding cannot push the book value below it.
ONE IMPORTANT LIMIT, AND IT MATTERS. This is the ARITHMETIC of the two
methods on a rate you supply. It is NOT a lookup of Inland Revenue's
prescribed rates, which vary by asset class and are published in the IRD
depreciation rate finder. If someone needs to know the right RATE for a
particular asset, send them to that finder. DO NOT INVENT A RATE to feed this
tool and present the output as their tax position.
Args:
initial_cost: Purchase price of the asset.
method: straight_line or diminishing_value.
additional_costs: Costs capitalised in, such as delivery or installation.
salvage_value: Expected residual value. A floor under both methods.
useful_life_years: Years of life. Required for straight line.
annual_rate_pct: Rate per year. Required for diminishing value.
years_to_schedule: Years to show. Defaults to the life, or ten.
Returns:
The cost base, the depreciable amount, the first year charge, the total
charged, the closing book value and the full year by year schedule.