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The half-year convention is a method of calculating depreciation for tax purposes stipulated by the Internal Revenue Service (IRS) in the United States. 

It assumes that property placed in service or disposed of during a tax year was in service or disposed of at the midpoint of the year. 

This allows for one-half year’s depreciation to be allowed in the year the property was placed in service or disposed of, regardless of when it was actually placed in service or disposed of during that year.  

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Odoo handles half-year convention deprecation as straight line with a start date of July 1st.

Example: You purchase a machine for $25,000 on March 1, 2024. The useful life is five years. With the application of a half-year convention, the depreciation schedule is as follows:

  • Straight-line Depreciation = Cost of Asset / Useful Life = ($25,000 / 5) = $5,000 each year.
  • Application of Half-year Convention = ($5,000 / 2) = $2,500 for the first and last year.
  • Depreciation Schedule:
  • Year

    Depreciation

    2024

    $2,500

    2025

    $5,000

    2026

    $5,000

    2027

    $5,000

    2028

    $5,000

    2029

    $2,500

Total Depreciation: $25,000


Setup your Fixed Asset like this:


After clicking COMPUTE DEPRECIATION you will see the suggested schedule of automated Journal Entries:


See also https://www.odoo.com/documentation/17.0/applications/finance/accounting/vendor_bills/assets.html


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