QAD 2017 Enterprise Edition > User Guides > Fixed Assets > Setting Up Fixed Assets > Depreciation Methods and Conventions > Using Conventions
  
Using Conventions
Fixed assets are not always acquired on the first day of the year, nor are they always retired on the last day of year. Fixed‑asset conventions are used for averaging depreciation in the first and last years of an asset life.
Example: A company purchases a $3,600 computer that has a three-year service life and does not have a salvage value. The computer is depreciated using the straight‑line method.
Using the straight‑line method, the first year depreciation calculation and depreciation per period are:
Annual Depreciation = $3,600 / 3 Years = $1,200
Depreciation Per Period = $1,200 / 12 = $100
This example is used to illustrate how each convention works.
Full Period
The computer is placed into service on March 14, 2012, and it is retired on October 13, 2013.
Full‑Period Depreciation illustrates the depreciation taken for each period.

Full‑Period Depreciation
 
Period
2012
2013
January
0
$100
February
0
$100
March
$100
$100
April
$100
$100
May
$100
$100
June
$100
$100
July
$100
$100
August
$100
$100
September
$100
$100
October
$100
0
November
$100
0
December
$100
0
Half Period
The computer is placed into service on March 14, 2012, and it is retired on October 13, 2013.
Half‑Period Depreciation illustrates the depreciation taken for each period.

Half‑Period Depreciation
 
Period
2012
2013
January
0
$100
February
0
$100
March
$50
$100
April
$100
$100
May
$100
$100
June
$100
$100
July
$100
$100
August
$100
$100
September
$100
$100
October
$100
$50
November
$100
0
December
$100
0
Next Period
The computer is placed into service on March 14, 2012, and it is retired on October 13, 2013.
Next‑Period Depreciation illustrates the depreciation taken for each period.

Next‑Period Depreciation
 
Period
2012
2013
January
0
$100
February
0
$100
March
0
$100
April
$100
$100
May
$100
$100
June
$100
$100
July
$100
$100
August
$100
$100
September
$100
$100
October
$100
$100
November
$100
0
December
$100
0
Full Quarter
The computer is placed into service in the third quarter on September 14, 2012, and it is retired in the fourth quarter on November 13, 2013.
The following factors are used for calculating depreciation using the full‑quarter convention:

Full‑Quarter Factors
 
Quarter in Service
Acquisition Factor
Retirement Factor
1
100%
0%
2
75%
25%
3
50%
50%
4
25%
75%
The first year depreciation and depreciation per period calculations are:
Annual Depreciation = $1,200 * 50% = $600
Depreciation Per Period = $600 / 4 = $150
The retirement depreciation calculation is:
Depreciation = $1,200 * 75% = $900
When the computer is retired, $1,100 has already been taken in depreciation. There is a difference of $200 ($1,100 – $900) in the depreciation calculation due to the early retirement. Therefore, a depreciation expense credit of $100 is applied in the retirement period.
Full‑Quarter Depreciation illustrates the depreciation taken for each period.

Full‑Quarter Depreciation
 
Period
2012
2013
January
0
$100
February
0
$100
March
0
$100
April
0
$100
May
0
$100
June
0
$100
July
0
$100
August
0
$100
September
$150
$100
October
$150
$100
November
$150
–$100
December
$150
0
Half Quarter
The computer is placed into service in the third quarter on September 14, 2012, and it is retired in the fourth quarter on November 13, 2013.
The factors listed in Half‑Quarter Factors are used for calculating depreciation using the half‑quarter convention.

Half‑Quarter Factors
 
Quarter in Service
Acquisition Factor
Retirement Factor
1
87.5%
12.5%
2
62.5%
37.5%
3
37.5%
62.5%
4
12.5%
87.5%
The first year depreciation and depreciation per period calculations are:
Annual Depreciation = $1,200 * 37.5% = $450
Depreciation Per Period = $450 / 4 = $112.50
The retirement depreciation calculation is:
Depreciation = $1,200 * 87.5% = $1050
When the computer is retired, $1,100 has already been taken in depreciation. There is a difference of $50 ($1,100 – $1,050) in the depreciation calculation due to the early retirement. Therefore, a depreciation expense credit of $50 is applied in the retirement period.
Half‑Quarter Depreciation illustrates the depreciation taken for each period.

Half‑Quarter Depreciation
 
Period
2012
2013
January
0
$100
February
0
$100
March
0
$100
April
0
$100
May
0
$100
June
0
$100
July
0
$100
August
0
$100
September
$112.50
$100
October
$112.50
$100
November
$112.50
–$50
December
$112.50
0
Full Year
The computer is placed into service on July 14, 2012, and it is retired on October 13, 2013.
The first year of depreciation is allocated to the six remaining periods.
Depreciation Per Period = $1,200 / 6 = $200
When the computer is retired, $1,000 has already been taken in depreciation. Depreciation must be reversed in the retirement period. Therefore, a depreciation expense credit of $1000 is applied in the retirement period.
Full‑Year Depreciation illustrates the depreciation taken for each period.

Full‑Year Depreciation
 
Period
2012
2013
January
0
$100
February
0
$100
March
0
$100
April
0
$100
May
0
$100
June
0
$100
July
$200
$100
August
$200
$100
September
$200
$100
October
$200
–$1000
November
$200
0
December
$200
0
Half Year
The computer is placed into service on March 14, 2012, and it is retired on October 13, 2013.
The first year depreciation and depreciation for the 10 periods of ownership calculations are:
Annual Depreciation = $1,200 / 2 = $600
Depreciation Per Period = $600 / 10 = $60
The retirement depreciation calculation is:
Depreciation = $1,200 / 2 = $600
When the computer is retired, $900 of depreciation has already been taken and only $600 is allowed in the retirement year. Depreciation must be reversed in the retirement period. Therefore, a depreciation expense credit of $300 ($900 – $600) is applied in the retirement period.
Half‑Year Depreciation illustrates the depreciation taken for each period.

Half‑Year Depreciation
 
Period
2012
2013
January
0
$100
February
0
$100
March
$60
$100
April
$60
$100
May
$60
$100
June
$60
$100
July
$60
$100
August
$60
$100
September
$60
$100
October
$60
–$300
November
$60
0
December
$60
0
Modified Half Year Version 1
The computer is placed into service on March 14, 2012, and it is retired on October 13, 2013.
The depreciation for the 10 periods of ownership calculations are:
Depreciation Per Period = $1,200 / 10 = $120
Since the computer is retired in the second half of the year, a full-year depreciation is taken. The remaining depreciation for the year is added to the retirement period.
Modified Half‑Year (Version 1) Depreciation illustrates the depreciation taken for each period.

Modified Half‑Year (Version 1) Depreciation
 
Period
2012
2013
January
0
$100
February
0
$100
March
$120
$100
April
$120
$100
May
$120
$100
June
$120
$100
July
$120
$100
August
$120
$100
September
$120
$100
October
$120
$300
November
$120
0
December
$120
0
Modified Half Year Version 2
The computer is placed into service on March 14, 2012, and it is retired on October 13, 2013.
The depreciation for the 10 periods of ownership calculations are:
Depreciation Per Period = $1,200 / 10 = $120
The retirement depreciation calculation is:
Depreciation = $1,200 / 2 = $600
When the computer is retired, $900 of depreciation has already been taken and only $600 is allowed in the retirement year. Depreciation must be reversed in the retirement period. Therefore, a depreciation expense credit of $300 ($900 – $600) is applied in the retirement period.
Modified Half‑Year (Version 2) Depreciation illustrates the depreciation taken for each period.

Modified Half‑Year (Version 2) Depreciation
 
Period
2012
2013
January
0
$100
February
0
$100
March
$120
$100
April
$120
$100
May
$120
$100
June
$120
$100
July
$120
$100
August
$120
$100
September
$120
$100
October
$120
–$300
November
$120
0
December
$120
0