Half-Year Convention For Depreciation

DEFINITION of 'Half-Year Convention For Depreciation'

A depreciation schedule that treats all property acquired during the year as being acquired exactly in the middle of the year. This means that only half of the full-year depreciation is allowed in the first year, with the remaining balance being deducted in the final year of the depreciation schedule, or the year that the property is sold.

BREAKING DOWN 'Half-Year Convention For Depreciation'

The half-year convention for depreciation applies to both modified accelerated cost recovery systems and straight-line depreciation schedules. There is also a mid-quarter convention that is used instead of the half-year convention if the aggregate depreciable base of new property was greater than 40% and was used in service sometime during the last three months of the year.

RELATED TERMS
  1. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax ...
  2. Modified Accelerated Cost Recovery ...

    The new accelerated cost recovery system, created after the release ...
  3. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
  4. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  5. Straight Line Basis

    A method of computing amortization (depreciation) by dividing ...
  6. Short-Term Debt

    An account shown in the current liabilities portion of a company's ...
Related Articles
  1. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  2. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  3. Fundamental Analysis

    Understanding Pro-Forma Earnings

    These figures can either shed light on a company's performance or skew it. Find out why.
  4. Markets

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  5. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  6. Economics

    Understanding Cost-Volume Profit Analysis

    Business managers use cost-volume profit analysis to gauge the profitability of their company’s products or services.
  7. Fundamental Analysis

    5 Basic Financial Ratios And What They Reveal

    Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know.
  8. Investing Basics

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  9. Stock Analysis

    Understanding Chipotle's Financials (CMG)

    Learn about Chipotle Mexican Grill and its financial statements, including metrics such as comparable sales, operating margin and returns.
  10. Investing Basics

    How To Decode A Company’s Earnings Reports

    Earnings reports tell investors how a publicly-traded company is performing, but aren’t always easy to decipher.
RELATED FAQS
  1. How does proration affect asset depreciation?

    Accountants calculate an asset's pro-rata depreciation during the first and final year of its service. The IRS established ... Read Full Answer >>
  2. What are pro forma earnings?

    Great question, but it is not easily answered, because pro forma earnings figures are inherently different for different ... Read Full Answer >>
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ... Read Full Answer >>
  4. What items are considered liquid assets?

    A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted ... Read Full Answer >>
  5. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  6. What are working capital costs?

    Working capital costs (WCC) refer to the costs of maintaining daily operations at an organization. These costs take into ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center