Half-Year Convention Method

The Half-Year Convention method supports both the year and month time period bases. You can use this method to calculate depreciation schedules according to the following proportional breakdown by year, based on the useful life in years and the time period basis:

  1. The asset's Net Book Value is divided by its Service Life in Years.
  2. Half of the first year's depreciation is depreciated equally from the month specified in the asset's Date in Service field through to the end of the company's fiscal year.
  3. An additional six months are added to the useful life of the fixed asset. In these six months, the remaining half-year balance of depreciation corresponding to the first year is depreciated equally for six periods or months.
  4. The remaining full years are depreciated as in the standard Straight-Line depreciation method.
Notes:
  • The effective depreciation dates always begin in the month that the asset is placed in service, as specified in the Date in Service field.
  • If the company has fiscal years configured as calendar years, from January to December, the first year of depreciation for the asset will end on December 31 of the first year regardless of when the asset was placed in service. The final newly created year's depreciation will always be for six months ending on June 30.
  • An equal amount of depreciation is calculated for each month of each year, starting the month the asset is in service.

The following example shows the Half-Year Convention method applied to calculate an asset's depreciation schedules when:

  • Time period basis: Month
  • Date in Service: 06/10/2022
  • Useful life: 5 years
  • Cost: €5,000
  • Fiscal Year: January - December
  • Salvage Value: 0

Using this method results in the following proportional breakdown by year:

Asset Depreciation Calculation - Half-Year Convention
(Time period basis: Month, Date in Service: June)

Year

Percent

Value

Per Month

Year 1

10%

€500

 €71.43 x 7 (Jun - Dec)

Year 2

20%

€1,000

 €83.33 x12 (Jan - Dec)

Year 3

20%

€1,000

 €83.33 x12 (Jan - Dec)

Year 4

20%

€1,000

 €83.33 x12 (Jan - Dec)

Year 5

20%

€1,000

 €83.33 x12 (Jan - Dec)

Year 6

10%

€500

€83.33 x5 (Jan - May)

€83.50 x1 (Jun)

Total: 100%

€5,000

 €5,000

The following example shows the Half-Year Convention method applied to calculate an asset's depreciation schedules when:

  • Time period basis: Month
  • Date in Service: 25/11/2022
  • Useful life: 5 years
  • Cost: €5,000
  • Fiscal Year: January - December
  • Salvage Value: 0

Using this method results in the following proportional breakdown by year:

Asset Depreciation Calculation - Half-Year Convention
(Time period basis: Month, Date in Service: November)

Year

Percent

Value

Per Month

Year 1

10%

€500

€250 (Nov)

€250 (Dec)

Year 2

20%

€1,000

€83.33 x 12 (Jan - Dec)

Year 3

20%

€1,000

 €83.33 x 12 (Jan - Dec)

Year 4

20%

€1,000

 €83.33 x 12 (Jan - Dec)

Year 5

20%

€1,000

 €83.33 x 12 (Jan - Dec)

Year 6

10%

€500

€83.33 x 12 (Jan - May)

€83.50 (Jun)
Total: 100%

€5,000

 €5,000

The total amount of depreciation is proportionally broken down on a monthly basis and, because the date in service is in November, the total amount corresponding to the first year is divided into two months.

The following example shows the Half-Year Convention method applied to calculate an asset's depreciation schedules when:

  • Time period basis: Year
  • Date in Service: 20/6/2022
  • Useful Life: 5 years
  • Cost: €5,000
  • Fiscal Year: January - December
  • Salvage Value: 0

Using this method results in the following proportional breakdown by year:

Asset Depreciation Calculation - Half-Year Convention
(Time period basis: Year)

Year

Percent

Value

Year 1

10%

€500

Year 2

20%

€1,000

Year 3

20%

€1,000

Year 4

20%

€1,000

Year 5

20%

€1,000

Year 6

10%

€500
Total: €5,000

€5,000