Depreciation¶
Enterprise feature
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Depreciation tracks how an asset's value decreases over its useful life. FSM Navigator calculates depreciation automatically using the method you choose, so you always have an up-to-date picture of your asset portfolio's financial value. This information supports budgeting, replacement planning, tax reporting, and insurance valuations.
Key concepts¶
Before setting up depreciation, understand these terms:
| Term | Definition |
|---|---|
| Purchase cost | The original price paid for the asset |
| Salvage value | The estimated value at the end of the asset's useful life |
| Useful life | The number of months the asset is expected to be in service (for example, enter 60 for a 5-year useful life) |
| Depreciable amount | Purchase cost minus salvage value |
| Book value | Current value after accumulated depreciation is subtracted |
Depreciation methods¶
FSM Navigator supports three industry-standard depreciation methods. Choose the one that best matches how the asset loses value.
Straight-line¶
The simplest and most common method. The asset loses the same amount of value each year.
Formula: (Purchase cost − Salvage value) ÷ Useful life = Annual depreciation
Example: A $10,000 generator with a $1,000 salvage value and a 5-year useful life:
| Year | Depreciation | Book value |
|---|---|---|
| 0 | — | $10,000 |
| 1 | $1,800 | $8,200 |
| 2 | $1,800 | $6,400 |
| 3 | $1,800 | $4,600 |
| 4 | $1,800 | $2,800 |
| 5 | $1,800 | $1,000 |
When to use straight-line
Use straight-line depreciation when the asset provides roughly equal value throughout its life — for example, office furniture, hand tools, or standard vehicles.
Declining balance¶
The asset loses a higher percentage of its remaining value in earlier years, then less in later years. This front-loads depreciation.
Formula: Book value × (2 ÷ Useful life) = Annual depreciation
The rate is typically double the straight-line rate (called "double declining balance").
Example: Same $10,000 generator, 5-year life, 40% rate:
| Year | Rate | Depreciation | Book value |
|---|---|---|---|
| 0 | — | — | $10,000 |
| 1 | 40% | $4,000 | $6,000 |
| 2 | 40% | $2,400 | $3,600 |
| 3 | 40% | $1,440 | $2,160 |
| 4 | 40% | $864 | $1,296 |
| 5 | — | $296 | $1,000 |
Automatic switch to straight-line
In later years, declining balance can produce a smaller annual amount than straight-line on the remaining book value. When that happens, the calculation automatically switches to straight-line for the remainder of the useful life so the asset reaches its salvage value on schedule.
When to use declining balance
Use declining balance for assets that lose value quickly early on — for example, technology equipment, specialized tools, or vehicles that depreciate rapidly in the first few years.
Sum-of-years digits¶
An accelerated method that depreciates more in the early years but uses a different calculation than declining balance. The depreciation amount decreases by a fixed increment each year.
Formula: (Remaining useful life ÷ Sum of years digits) × Depreciable amount
For a 5-year useful life, the sum of years digits is 1 + 2 + 3 + 4 + 5 = 15.
Example: Same $10,000 generator, $1,000 salvage, 5-year life:
| Year | Fraction | Depreciation | Book value |
|---|---|---|---|
| 0 | — | — | $10,000 |
| 1 | 5/15 | $3,000 | $7,000 |
| 2 | 4/15 | $2,400 | $4,600 |
| 3 | 3/15 | $1,800 | $2,800 |
| 4 | 2/15 | $1,200 | $1,600 |
| 5 | 1/15 | $600 | $1,000 |
When to use sum-of-years digits
Use this method when you want accelerated depreciation but a smoother decline than declining balance. It works well for assets with high initial productivity that tapers off, such as HVAC compressors or fleet vehicles.
Set up depreciation for an asset¶
- Open the asset's detail view.
- Select the Financial tab.
- Click Configure Depreciation.
- Fill in the required fields:
| Field | Required | Description |
|---|---|---|
| Purchase cost | Original acquisition price | |
| Salvage value | Estimated end-of-life value | |
| Useful life (months) | Expected service duration in months (for example, 60 for a 5-year life) | |
| Depreciation method | Straight-line, declining balance, or sum-of-years digits | |
| Start date | When depreciation begins (usually the purchase or in-service date) |
- Click Save.
FSM Navigator immediately calculates the full depreciation schedule and updates the asset's book value.
Changes affect financial records
Modifying depreciation settings recalculates the entire depreciation schedule from the start date. Review the updated schedule carefully before saving.
View the depreciation schedule¶
After configuring depreciation, the Financial tab shows:
- Current book value — the asset's value today after accumulated depreciation.
- Accumulated depreciation — total depreciation recorded to date.
- Remaining depreciable amount — how much value is left to depreciate.
- Schedule table — year-by-year breakdown of depreciation and book value.
Depreciation in reports¶
Depreciation data is available in several asset reports:
- Depreciation schedule report — full schedule for all assets or filtered by type, location, or status.
- Cost analysis report — includes current book values alongside purchase costs and maintenance spend.
- Asset inventory report — optionally includes financial columns.
Use these reports for tax preparation, insurance renewals, or capital planning.
Choose the right method¶
| Question | If yes, consider |
|---|---|
| Does the asset provide equal value each year? | Straight-line |
| Does the asset lose most value in the first 1-2 years? | Declining balance |
| Does the asset have high early productivity that gradually decreases? | Sum-of-years digits |
| Are you unsure? | Start with straight-line — it is the most common |
Consult your accountant
Depreciation methods affect financial statements and tax filings. If you are unsure which method to use, consult your accountant or financial advisor for guidance specific to your industry and tax jurisdiction.
Can I change the depreciation method after setup?
Yes. You can change the method at any time from the Financial tab. The schedule is recalculated from the start date using the new method. Past records are updated to reflect the change.
What happens when an asset is fully depreciated?
The book value reaches the salvage value and no further depreciation is recorded. The asset remains in your registry and can continue to be used, maintained, and tracked normally.
Does depreciation affect asset status?
No. Depreciation is purely financial. An asset can be fully depreciated and still have an Active status if it is still in service. Lifecycle status and financial value are tracked independently.
Related guides¶
- Managing assets — enter purchase cost and salvage value when creating assets
- Asset lifecycle — understand how lifecycle stages relate to financial tracking
- Reports — generate depreciation and cost analysis reports
- Bulk operations — import assets with financial data