Twenty Per Cent for Every Asset
The asset register draws a downward value line, and the line is honest about itself: one flat twenty per cent a year, applied to a building and a laptop alike, reconciled to nothing. Here is why that is the right shape for it to have, and what a figure your accountant can use would need instead.
Every asset on the chart reaches zero in exactly five years. The generator, the delivery van, the office block and the four-year-old laptop: five years each, to the day.
Our take
A written-down value chart on an asset register is useful as a shape and dangerous as a figure, and the difference is entirely in how it is labelled. This one applies a single straight-line rate of twenty per cent a year to every asset in the register, floors the result at zero, drops assets that were bought later than the point on the chart and drops assets retired before it. It is captioned, on screen, as indicative only, with the rate named and the words "not book value and not posted to the ledger" underneath. That caption is the feature. A finance team asked us to make the maths cleverer once, and the honest answer is that a more precise wrong number would be worse than an obviously rough one — because the precise version stops being questioned.
What the chart is doing
For each point in the period you have selected, the register walks every asset that has both a purchase date and a purchase cost. Assets bought after that point are skipped. Assets retired on or before it are skipped. What remains is reduced by twenty per cent of its original cost for every year elapsed since purchase, with the year counted as 365.25 days so leap years land where they should. If the result goes below zero, zero is used. The points are added up, and that sum is one dot on the line.
Three assets, three years in
The proportions are identical because the rate is identical. Whatever your accountant would do with a van, a laptop and a fit-out, it would not be this — and the chart says so in its own subtitle.
What a figure your accountant can use needs
The distance between an indicative shape and a book value is four specific things, and each of them is a decision somebody has to make and record rather than a calculation somebody has to run.
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A rate per class
Motor vehicles, computers, furniture, buildings and plant depreciate at different rates in every jurisdiction and in every set of accounting policies. One rate for all of them is the single largest source of error in the chart, and it is also the easiest thing to fix, because the register already carries a category on every asset.
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A method per class
Straight line takes the same amount off each year. Reducing balance takes a percentage of what is left, so it never quite reaches zero and it front-loads the charge. Which one applies is a policy choice, and the two produce visibly different lines from the same asset.
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A residual value
Most assets are worth something at the end of their useful life, and the depreciable amount is cost minus that residual. Treating residual as zero is why everything on this chart terminates rather than flattening.
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A journal posting
This is the one that turns a chart into an accounting record. A depreciation charge is an expense in the period and an addition to accumulated depreciation on the balance sheet. Until that entry is written, the register and the ledger are describing the same assets in two unconnected numbers.
Why the rough version is the safer one to ship
A chart labelled "indicative, twenty per cent flat, not book value" gets questioned by the first person who reads it, which is the correct outcome. A chart that applied per-class rates but still posted nothing to the ledger would look authoritative, get copied into a board pack, and disagree with the audited accounts by an amount nobody could trace. The gap between the two is not accuracy. It is how loudly the figure announces what it is.
What the register does hold, precisely
Everything a depreciation engine would read is already recorded per asset. That is what makes this a scoping conversation rather than a rebuild.
- Purchase date and purchase cost, which are the two inputs the chart already uses and the two a real engine starts from.
- A category, free text today, which is where a per-class rate would attach.
- An ownership type — owned, leased or borrowed — which matters because a borrowed asset should not be depreciating in your accounts at all.
- A retirement date, a retiring user and a stated reason, so the point at which an asset leaves the calculation is a recorded event rather than an inference.
- A condition and a status, which are operational facts rather than accounting ones, and are the right basis for a replacement decision even when the value figure is indicative.
The chart is not wrong. It is imprecise on purpose, and it says which.
Reading the line for what it is good for
Used as a trend rather than a total, the line answers real questions. A register whose indicative value falls steadily and never steps up is a register nobody is adding to, which usually means capital purchases are being expensed somewhere else or assets are being bought and never registered. A line that drops sharply in one month is a retirement or a disposal, and it should correspond to a decision somebody made. A flat line on a growing business is worth a conversation.
What it will not answer is what the assets are worth. For that, the figure has to come from the ledger, and the ledger has to be receiving a depreciation charge — which is the fourth item on the list above and the one that changes the register from a record of things into a component of your accounts.
From an indicative line to a posted charge
The inputs are already on every asset, so the work is a rate table, a method per class and a monthly posting — a defined piece rather than an open-ended one.
A rate and method per class
A table of asset classes, each with a rate, a method and a residual percentage, and a class on each asset that defaults from its category.
A monthly depreciation journal
A period charge posted to the depreciation expense and accumulated depreciation accounts, so the register and the ledger agree by construction rather than by reconciliation.
A fixed asset note
Cost, additions, disposals, accumulated depreciation and net book value per class, in the shape the note to your accounts expects.
We publish scope, not dates.
Scope a depreciation engineWhat AWRA OpsHub does today
- An asset register holding purchase date, purchase cost, currency, category, ownership type, condition, status, risk level and a full movement history per asset.
- An indicative written-down value trend across the whole register, at day, week, month or year granularity, with assets excluded before their purchase date and after their retirement.
- A caption on that chart naming the rate, stating that one flat rate is applied to every asset regardless of class, and saying in the same breath that the figure is not book value and is not posted to the ledger.
- Retirement as a recorded event carrying a date, the user who retired the asset and a stated reason, so an asset leaving the register leaves a trail.
- An ownership type per asset, which is the field that separates what you own from what you hold.
- A general ledger with a chart of accounts, journals and financial statements, into which a depreciation charge would post.
More we can add to your workspace
- A depreciation rate and method per asset class — motor vehicles, computers, buildings and plant each carrying their own rate, their own choice of straight line or reducing balance, and their own useful life.
- Residual values on the depreciable amount, so an asset settles at what it will still be worth rather than running to zero.
- A monthly depreciation journal posted from the register, charging depreciation expense and accumulating it on the balance sheet, so the register figure and the ledger figure are the same figure.
- A fixed asset note setting out cost, additions, disposals, accumulated depreciation and net book value per class in the layout your accounts expect.
- A capital allowance schedule kept alongside the accounting one, since the rates a tax authority allows and the rates your policy uses are rarely the same and both need to exist.
- A revaluation path for classes carried at valuation rather than cost, with the surplus taken to reserves.
Where we point you to a specialist
- We will not choose your depreciation rates for you. A rate is an accounting policy judgement about useful life, it is reviewed by whoever signs your accounts, and a default we published would become the number an organisation defends to an auditor on our authority rather than on theirs. We build the engine and you or your accountant set the rates in it.
- Where a tax authority prescribes capital allowance rates that differ from your accounting policy, both schedules belong in the system and the reconciliation between them belongs to your tax adviser. We will hold the numbers and produce the schedules; the position taken on a return is theirs to sign.
- An impairment is a judgement that an asset is worth less than its carrying amount, and it is one we will keep declining to make automatically from condition or age. The system can flag an asset for review; deciding that it is impaired is a decision with a person behind it.
The rate table and the monthly posting are the contained half of this, because every input already exists per asset and the ledger already accepts journals. The note and the allowance schedule are reporting on top of them.
Five questions to ask about any depreciation figure
Where does this number come from?
A good answer sounds like
A named rate and method, per class.
What ours actually is
A single straight-line rate of twenty per cent a year on original cost, applied to every asset. Named on the chart, in the caption, in those words.
Does it agree with the general ledger?
A good answer sounds like
Yes, and here is the journal.
What ours actually is
It reconciles to nothing today, because no depreciation entry is posted. The chart says so rather than implying otherwise.
What happens to a retired asset?
A good answer sounds like
It leaves the calculation on its retirement date.
What ours actually is
Exactly that — assets retired on or before a point are excluded from that point onward, and the retirement carries a date, a user and a reason.
Is there a residual value?
A good answer sounds like
Yes, per class.
What ours actually is
Residual is treated as zero, which is why every line terminates at five years rather than flattening. It is first on the list of what a real engine adds.
Can I use this in my accounts?
A good answer sounds like
A straight no, with what to use instead.
What ours actually is
A straight no. Use your ledger. This is a shape for spotting a register nobody is maintaining, and the screen says as much.
Decide whether you need a shape or a schedule
Plenty of organisations genuinely need the first and think they need the second. It is a short conversation, and the answer usually turns on whether anybody is being asked to sign the number.
Talk through asset valuationFrequently asked questions
Why twenty per cent rather than a rate per asset class?
Because a single rate is obviously approximate and a table of rates is not. The chart exists to show whether the register is being maintained and whether value is leaving it, and one flat rate answers that. The moment per-class rates appear, the figure starts to look like a book value, and a book value that posts nothing to the ledger is the most misleading kind of number an asset register can display.
Does anything post depreciation to the accounts today?
No. The general ledger has a chart of accounts and accepts journals, and a depreciation account exists in the chart, but nothing writes to it from the asset register. That is why the chart is captioned as indicative and why a monthly posting is the item that turns this from a report into an accounting process.
What happens on the chart when an asset is retired?
It is excluded from every point on or after its retirement date, so the line steps down by that asset's remaining indicative value at the moment it left. That makes disposals visible as steps, which is one of the more useful things the trend does — a step nobody can explain is worth investigating.
Are leased and borrowed assets included?
Every asset with a purchase date and a purchase cost is included, whatever its ownership type. In practice a borrowed asset usually has neither, so it falls out of the calculation by having no cost rather than by being recognised as somebody else's. Reading the ownership type properly is part of a real engine, since an asset you do not own should not be depreciating in your accounts.
Can I change the rate?
Not today — the rate is a literal in the code rather than a setting, deliberately, because a configurable single rate would invite an organisation to tune one number until the line looked right. The configuration that matters is a rate per class with a method and a residual, and that arrives as a table rather than as a field.
What should we use for our year-end figures?
Your ledger and your accountant. The register is the operational record of what you own, where it is and who has it, and it is the right place to start a fixed asset note from — but the figures in the accounts should come from posted entries, not from a chart that describes itself as indicative.
