The invoice date, payment date, delivery date, installation date, acceptance date, and in-service date can differ. Start partial-period depreciation when the asset is in the location and condition necessary for its intended use. Apply the scoped policy rather than choosing a convenient date.
If full-year straight-line depreciation is $24,000 and a supplied calendar- month convention assigns nine months to the first year, first-year expense is $18,000. A daily convention or an activity method could produce a different amount. The working paper should state the convention and fraction, not leave “9/12” unexplained.
Book conventions must not be silently replaced with MACRS or another tax convention. A disposal-period schedule must also prevent depreciation after the applicable derecognition or held-for-sale date and reconcile accumulated depreciation immediately before the next accounting event.
Historical cost includes the work needed to put an asset in its intended condition and location. See ASC 360-10-30-1. Paragraph 35-3 bases depreciation expense on useful life, and paragraph 35-4 requires systematic and rational allocation. These paragraphs do not prescribe a half-year, midmonth, monthly, or daily convention. The exercise must state the book policy and the supported readiness date.
The Linden Peak worked example shows a nine-month allocation. The independent Harbor Works practice tests a different readiness date and six-month fraction.
Put the concept to work
Understand this concept
- Explain why depreciation begins from supported readiness for intended use and why a stated convention must not be confused with tax treatment or cash timing.
Apply this concept
- Apply a supplied monthly, daily, or policy convention consistently to acquisition and disposition dates and reconcile cumulative depreciation to carrying amount.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Depreciation method — Apply
To apply this concept: Required. The full-period allocation must be correct before it is time-weighted.
- Depreciation — Understand
To understand this concept: Required. The learner applies the allocation model to a fractional reporting period.