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Short Years Tab

Short Years Example

Clearing Short Years

Date Placed in Service

Short Years

A short year occurs when there is an accounting period of less than 12 calendar months. A short year can be:

  • the first reporting period,
  • the final reporting period, or
  • the result of a change in an annual accounting period.

A short period requires special calculations for depreciation. In general, a short accounting period requires that you allocate depreciation calculations based on the number of months in the short year. The way you accomplish this differs depending on the depreciation method selected.

Depreciation methods that use a half-year convention (methods SH, DH, and YH) need to use the half-rate rule, which requires that one-half of the depreciation calculated for the full short-year period be used. Depreciation methods that use the modified half-year convention (methods SD, DD, and YD) apply special rules to the short-year calculation. When you place an asset in service in the first half of a short year, then the full amount of the short-year depreciation is allowed. In such cases, the regular full-year recovery is multiplied by the short-year fraction.

The short-year fraction is:

Months in a short year
           12

For example, if an organization changes its fiscal year-end month from September to December, the short-year fraction is 3/12.