Doubt related to fixed asset depreciation using WDV method:

ERPNext Asset Management
1

Hi, I’m Anand, maintainer of the Assets module. In ERPNext, we calculate the WDV rate of depreciation only once at the beginning based on the asset’s purchase amount. We then use that rate to calculate the depreciation schedule for all the years of the asset’s life.

Recently an Indian customer got in touch with us and said that our way is incorrect. Their CA calculates a different rate of depreciation for each year of the depreciation based on the asset’s opening value of that year. Here’s the sheet their CA shared: Computation.xlsx - Google Sheets.

I think they’re correct, but didn’t find any supporting resources online. If anyone has any idea, please share.

Thanks!

2

As per IAS - 16 - IFRS, below is the example calculation:

Cost of Asset = $12000 and Residual Value = $2000

an example calculation of written down value (WDV) of depreciation for all five years:

Year 1: Depreciation = ($12,000 – $2,000) * 20% Depreciation = $2,000

Value at End of Year = ($12,000 – $2,000) – $2,000 Value at the End of Year = $8,000

Year 2: Depreciation = ($8,000 – $2,000) * 20% Depreciation = $1,200

Value at End of Year = ($8,000 – $1,200) – $2,000 Value at the End of Year = $4,800

Year 3: Depreciation = ($4,800 – $2,000) * 20% Depreciation = $960

Value at End of Year = ($4,800 – $960) – $2,000 Value at the End of Year = $2,840

Year 4: Depreciation = ($2,840 – $2,000) * 20% Depreciation = $168

Value at End of Year = ($2,840 – $168) – $2,000 Value at the End of Year = $1,672

Year 5: Depreciation = ($1,672 – $2,000) * 20% Depreciation = -$65.6 (rounded to nearest cent)

Value at End of Year = ($1,672 - (-$65.6)) - $2,000 Value at the End of Year = $3.73 (rounded to nearest cent)

Reference: https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-16-property-plant-and-equipment.pdf?bypass=on