Depreciations

1. What is depreciation?

Depreciation is reference data used to model how an asset’s or license’s value decreases over time. In AssetLoom, depreciation helps organizations calculate an asset’s/license’s current value based on its useful life and salvage value, supporting better decisions around replacement, disposal, budgeting, and lifecycle planning.

AssetLoom supports two depreciation methods:

Straight-Line Depreciation

Straight-Line depreciation reduces the asset or license value by the same amount each month throughout its useful life.

This method is best for items that lose value evenly over time, such as software licenses, subscriptions, or assets with predictable value reduction.

For example, if an item has a useful life of 36 months, AssetLoom spreads the depreciable value evenly across those 36 months.

Double-Declining Balance Depreciation

Double-Declining Balance depreciation reduces the asset value faster in the earlier years of its useful life. Instead of applying the same depreciation amount every month, AssetLoom applies a higher depreciation rate to the item’s remaining value at the start of each year.

This method is best for assets that lose more value early in their lifecycle, such as laptops, devices, servers, or other hardware.

For Double-Declining Balance depreciation, the useful life must be at least 12 months.

In both methods, AssetLoom stops depreciation once the asset or license reaches its salvage value. The residual value will not go below the salvage value defined in the depreciation policy.

2. How To Set Up Depreciation

Step 1: Navigate To The Depreciation Screen

Select the Reference Data in the Configure section on the left-hand side menu sidebar.

On the left menu sidebar, you can view Depreciation under the Reference Data.

Step 2: Fill In The Depreciation Form

Click the “New Item” button to open the Depreciation Form

Now you can fill in the Depreciation Form. Below are some key fields:

• Name: Enter the name of the depreciation rule, such as 1-Year Asset Depreciation, 3-Year Laptop Depreciation, or 5-Year Server Depreciation.
• Depreciation Method: Select the method used to calculate depreciation over time. Two methods AssetLoom supports are:
  • Straight Line: Calculates depreciation by reducing the asset value by the same fixed amount every month until it reaches the salvage value.
  • Double-Declining Balance: Calculates depreciation faster in the earlier years by applying a higher depreciation rate to the asset’s remaining value.
  • Below are the comparisons of the 2 methods:

• Useful Life: Enter the expected period (in months) that the item will remain useful, such as 12 months, 36 months, or 60 months. For Double-Declining Balance, useful life needs to be at least 12 months.
• Salvage Value: Enter the estimated remaining value of the asset at the end of its useful life. The asset value will not depreciate below this amount.

Step 3: Save The Depreciations

Once all required fields are filled, click the Create button at the bottom of the form to save the depreciation to the system.

Step 4: Review Your Depreciations

After creating the depreciations, you will be redirected to the Depreciations List, where you can view and manage all your depreciations. If any information needs to be updated, simply click on the depreciations and modify the details as needed.

3. Actions With Depreciation List

After creating the depreciations, you can perform some actions with the list:

• Edit: Update the Depreciation’s details
• Delete: Remove a Depreciation that is no longer needed.

4. How to Assign a Depreciation Policy to Assets or Licenses

After creating a depreciation policy, you can assign it to assets or licenses so AssetLoom can calculate their depreciated amount, residual value, and residual date.

Assign a Depreciation Policy to Assets

Assets inherit depreciation through their assigned Asset Model. This means you do not assign a depreciation policy directly to each asset. Instead, you assign the policy to an Asset Model, and all assets using that model will follow the same depreciation rule.

To assign a depreciation policy to assets:

1. Go to the Asset Models page.
2. Create a new Asset Model or open an existing one.
3. Select the depreciation policy you want to apply.
4. Save the Asset Model.

Once the depreciation policy is assigned to the Asset Model, all assets linked to that model will inherit the policy. AssetLoom will then calculate each asset’s depreciation based on the method, useful life, and salvage value defined in the selected policy.

For example, if a “3-Year Laptop Depreciation” policy is assigned to a Laptop Asset Model, all laptop assets using that model will be depreciated according to that policy.

Assign a Depreciation Policy to Licenses

Licenses can have a depreciation policy assigned directly. You can select a depreciation policy when creating a new license or update the policy later by editing an existing license.

To assign a depreciation policy to a license:

1. Go to the Licenses page.
2. Create a new license or open an existing license.
3. Locate the Depreciation section.
4. Select the depreciation policy you want to apply.
5. Save the license.

Once the policy is saved, AssetLoom will calculate the license’s depreciated amount, residual value, and residual date based on the method, useful life, and salvage value defined in the selected policy.

 5. How Depreciations Are Calculated

After setting up your depreciation and filling in the purchase information, you can see the depreciation information of an asset or license in the Asset/License Detail Screen

Summary Table of Depreciation-Related Fields

Once you select a Depreciation Policy Name from your existing list, the Depreciation Method, Useful Life, and Salvage Value corresponding to this depreciation will be automatically filled in.

Here is how the other fields are calculated:

Depreciated Amount

Depreciated Amount indicates the total depreciation expense that has been applied to the asset or license so far.

Residual Value

Residual Value shows the asset or license’s remaining value after depreciation has been applied.

Example

Purchase Cost = $10,000, Salvage Value = $500, Useful Life = 36 months

A. Depreciated Amount After:

• 2 Months for Straight Line approach
• 2 Years for Double-Declining approach

B. Residual Value After:

• 2 Months for Straight Line approach
• 2 Years for Double-Declining approach

Straight-Line (SL)

A. Depreciated Amount

Step 1: Calculate the Depreciation Rate”

• Depreciation = 1/36 (months) = 2.78%

Step 2: Calculate Monthly Expense

• Monthly Expense = (10,000 - 500) x 2.78% = $264 per month

Step 3: Calculate The Depreciated Amount after 2 months:

• Depreciated Amount = $264 x 2 = $528

B. Residual Value

Step 1: Calculate the Current Expense:

Step 2: Calculate the Resident Value after Month 2:

• Residual Value after Month 2 = $10,000 − $528 = $9,472

Double-Declining Balance (DDB)

A. Depreciated Amount

Step 1: Calculate the Depreciation Rate:

• Depreciation = 2/3 (years)= 66.67%

Step 2: Calculate Annual Expense Year 1:

• Annual Year 1 Expense = $10,000 x 66.67% = $6,667

Step 3: Calculate Residual Value Year 1:

• Residual Value after Year 1 = Residual Value start of Year 2 = $10,000 − $6,667 = $3,333

Step 4:Calculate Annual Expense Year 2:

• Annual Year 1 Expense= $3,333 x 66.67% = $2,222

Step 5: Depreciated Amount after 2 years:

• Depreciated Amount = $6,667 + $2,222 = $ =8,889

B. Residual Value

Step 1: Calculate the Depreciated Amount after Year 2:

Step 2: Calculate the Resident Value after Year 2:

• Residual Value after Year 2 = $10,000 − $8,889 = $1,111

Residual Date

Residual Date displays the date when the asset or license reaches its salvage value.

Formula: Residual Date = Purchase Date + Useful Life (months)

Example: Purchase Date Jan 01, 2026, Useful Life = 36 months

-> Residual Date = Jan 01, 2029