# Depreciation methods in the asset register

### What depreciation methods does the asset register use?

Depreciation method

Description of the depreciation calculation

Prime cost

The depreciation calculation is a percentage of the original cost. It reduces the asset value to zero. If a depreciation limit applies to an asset, the calculation will use that limit. If an asset's original cost was offset by balancing charges, the adjusted original cost is used in taxation depreciation.

This depreciation method is not applicable to New Zealand for taxation purposes.

Straight line

(Australia) Straight line depreciation is similar to prime cost depreciation. But the value of the asset depreciates using prime cost calculations to the salvage value rather than zero. If a depreciation limit is applicable to the asset, the limit is applied in taxation depreciation calculations. If an asset's original cost was offset by balancing charges, the adjusted original cost is used in taxation depreciation.

(New Zealand) Straight line depreciation depreciates an asset by the same amount every year as a percentage of its original cost price. This method is sometimes called the cost price basis. In other words, this method calculates depreciation on the purchase price of an asset and the same amount is claimed each year.

Diminishing value

The depreciation calculation uses an asset’s opening written down value. If a depreciation limit is applicable, the asset’s opening written down value (for the purpose of calculating taxation depreciation) will equal the depreciation limit value less the accumulated depreciation.

Immediate write-off

The depreciation calculation

is equal to the original cost of the asset. In essence, the asset is written-off at the end of the current period or the financial year the depreciation starts.

### How does an asset register calculate depreciation?

• It calculates the depreciation for each asset using the appropriate depreciation method for taxation or accounting.

• It records depreciation journals for each asset.

### We'll calculate depreciation when you:

• edit an asset

• (Australia) allocate or de-allocate an asset to a small business or low-value pool

• sell an asset

• reverse the sale of an asset

• transfer an asset