Function DepreciationNonLinearFactor(PurchaseDate, NextPeriodDate, Cost, Salvage, Life, Period, Factor, Basis, Mode)

DepreciationNonLinearFactor

The function DepreciationNonLinearFactor returns the depreciation of an asset for the specified period, using double-declining balance depreciation or some other method you specify. The accounting periods have a length of one year, but they don’t necessary need to start January 1. The depreciation amounts decline by the factor times a fixed rate for every succeeding period. The higher the used factor, the sooner the asset is totally depreciated.

DepreciationNonLinearFactor(
    PurchaseDate,             ! (input) scalar string expression
    NextPeriodDate,           ! (input) scalar string expression
    Cost,                     ! (input) numerical expression
    Salvage,                  ! (input) numerical expression
    Life,                     ! (input) numerical expression
    Period,                   ! (input) numerical expression
    Factor                    ! (input) numerical expression
    [Basis,]                  ! (optional) numerical expression
    [Mode]                    ! (optional) numerical expression
    )

Arguments

PurchaseDate

The date of purchase of the asset. PurchaseDate must be given in a date format. This is the first day that there will be depreciated.

NextPeriodDate

The next date after the balance is drawn up. NextPeriodDate must also be in date format. NextPeriodDate is the first day of a new period and must be further in time than PurchaseDate, but not more than one year after PurchaseDate. When NextPeriodDate is an empty string, it will get the default value of January 1st of the next year after purchase.

Cost

The purchase or initial cost of the asset. Cost must be a positive number.

Salvage

The value of the asset at the end of its useful life. Salvage must be a scalar numerical expression in the range \([0, Cost)\).

Life

The number of periods until the asset will be fully depreciated, also called the useful life of the asset. Life must be a positive integer.

Period

The period for which you want to compute the depreciation. Period an integer in the range \(\{1, Life + 1\}\). Period 1 is the (partial) period from PurchaseDate until NextPeriodDate.

Factor

The rate by which the depreciation declines is \(\frac{Factor}{Life}\). Factor must be a numerical expression in the range \([1, \infty )\). In case \(Factor = 2\) we define this method as double declining depreciation.

Basis

The day-count basis method to be used. The default is 1.

Mode

Specifies how partial periods will be handled. Mode must be binary. \(Mode = 0\): we just take a relatively equal part of the depreciation for a full year. This is mathematically incorrect, but is rather common in the financial world. \(Mode = 1\): the depreciation for the partial periods is calculated so that the asset exactly equals its Salvage after its useful life. The default is 0.

Return Value

The function DepreciationNonLinearFactor returns the depreciation of an asset for the specified period.

Equation

The method-dependent depreciation \(\tilde{d_i}\) is expressed by the equations

\[\begin{split}\begin{aligned} \tilde{d_1} &= \begin{cases} f_{PN}rc & \mbox{for $\textit{Mode} = 0$}\\ \left(1-(1-r)^{f_{PN}}\right)c & \mbox{for $\textit{Mode} = 1$} \end{cases} \\ \tilde{d_i} &= (c-d_1)r(1-r)^{i-2} \qquad\qquad (i\neq 1) \end{aligned}\end{split}\]

where the depreciation rate \(r\) equals

\[r = \frac{f}{L}\]

with \(f\) the Factor argument.

Note

  • The useful life of the asset is determined by the Factor and Life arguments, and the requirement that the value of the asset can never drop below its salvage value.

  • The function DepreciationLinearNonFactor is similar to the Excel function DDB.

See also

Day count basis methods. General equations for computing depreciations.