See also: Defining a custom method for calculating depreciation
You can define and use up to 99 custom methods for calculating depreciation for assets when standard IRS formulas are not appropriate. Some businesses, for example, must calculate depreciation based on industry-specific formulas. Any custom methods you define are available for all clients and, if applicable, for all users on a network. Custom methods can be selected from the Method field in the Depreciation tab in the Asset Detail dialog.
To open this dialog, choose Setup > Custom Methods.
All custom methods you define are available to all clients. If you make changes to a custom method, it affects all clients using that method. Therefore, if you make changes to a custom method, you must recalculate depreciation for all assets for each affected client.
Current-period depreciation calculations
When using a custom method, current-period depreciation is calculated in the following manner.
- (Basis as adjusted for section 179/AFD, ITC, and salvage value)
- x (applicable year's percentage from the Annual Rates table)
- x (applicable holding period)
- = current-period depreciation
Note that a short year uses the full percentage listed.
Fields & buttons
Lists the custom methods that have already been defined.
Displays the name of the selected custom method.
Notes
- To edit the name of an existing custom method, highlight a method, click the Edit button, edit the name in this field, and click the Enter button.
- When you enter a name for a method that is not time based and for which assets using the method will be marked as section 168(f)(1) assets, the name should describe the method because it will print on the statement for property subject to 168(f)(1) election on Form 4562.
Click this button to open the Annual Rates dialog, where you can enter depreciation percentages for up to 40 years for the currently highlighted custom method.
Note: This button is available only after you highlight the desired method and click the Edit button. After entering the rates in the Annual Rates dialog and clicking OK, click the Enter button in the Custom Methods dialog to save your changes.
Displays the period convention that is selected for the currently highlighted custom method. (To select a period convention, click the Add or Edit button depending on whether you want to create or modify a custom method.)
Monthly: Based on number of months held during year of transaction; full month or no month for month of transaction.
Half Year: Give one-half year's depreciation in year of transaction.
Full year / No year: Full year or no year, depending on when during the year the transaction occurs.
Full year at acquisition / global disposal treatment: Full year at acquisition, or monthly if using a global disposal treatment.