Remaining Value Over Remaining Life (Method RV)
Remaining value over remaining life is similar to straight-line depreciation. What makes it unique is that while the straight-line calculation is static, the remaining value over remaining life calculation is dynamic. If there is a change in a critical value (for example, the asset's estimated life), the straight-line method cannot adjust its future calculations so that the asset is fully depreciated at the end of its life. The remaining value over remaining life method, on the other hand, takes the asset's remaining depreciable basis and depreciates that amount evenly over the asset's remaining estimated life.
Converting to remaining value over remaining life is generally the best way to take an adjustment evenly over the rest of an asset's life. It is the suggested approach to handling a change in an accounting estimate under the Accounting Principles Board (APB) Opinion Number 20.
You can convert from any other depreciation method to the remaining value over remaining life method. To do this, follow these steps:
- Calculate depreciation through the date that the conversion to remaining value over remaining life is to be effective.
- Change the Depreciation Method field selection to RV. The system displays a confirmation message.
- Click the Yes button to confirm that you want the system to reset depreciation. The system displays a message asking if you want to update the beginning depreciation fields with the current depreciation amounts, or clear both the beginning and current depreciation.
If you click the Yes button, the system saves the current depreciation information as beginning depreciation. If you click the No button, the system resets depreciation to zero.
If you choose the remaining value over remaining life method for an asset in the year you placed the asset in service, and if you placed the asset in service on or before the