French straight line depreciation method is not completely a new method to calculate depreciation. Rather it is more of a derivation or extended version of usual straight line method accounting students learn in depreciation topic. And many students learn french straight line method under the name of straight line method. But they are not completely the same. And recognizing that accounting is a global profession, we must know the difference as in many countries french straight line method is not really used and is considered or named as international straight line method of depreciation.
Although the basic concept behind french straight line method is similar to straight line method but has a minor difference that french straight line method considers the date at which asset was put to use for the first time. Such consideration is not made under a normal straight line method and even if the asset is acquired during the year i.e. middle of the year or in last quarter, full depreciation is charged for that period.
Many times while solving questions while studying depreciation and related topic and also in professional life we consider days for which asset is used during an accounting year but take this additional consideration to be a simple straight line method where in actual it is french straight line method.
French straight line method, as it considers the exact days of usage, is expected to give more accurate depreciation expense amount for the period as compared to the simple straight line method. However, such accuracy comes at a price which many would not like to pay.
For example one has to determine exact days of particular year which is more of a cumbersome task as you have to consider leap years and thus total number of days in a year does not remain the same. Just another problem is the confusion whether to include or exclude the day of acquisition from depreciation computation and this might cause erroneous depreciation expense figure in the financial statements in the absence of clear policy guidelines about these minor details.
As straight line method is considered the simplest method to compute depreciation so most often no one likes to complicate things and this is one the reason why the name of french straight line method of depreciation is not known to many accountants.
Go through the following example to understand how straight line and french straight are different
Example:
PakAccountants Inc. bought an office equipment worth 100,000 with an expected useful life of five years which is estimated to be sold for 8,000 at the end of its useful life. The asset was bought on June 15, 2010.
Required
Calculate the depreciation expense for five years using:
- Straight line method
- French straight line method
Solution:
Straight line method
Depreciable amount = Cost – Scrap value => 100,000 – 8,000 => 92,000
Year 2010 depreciation = 92,000 / 5 = 18,400
Year 2011 depreciation = 92,000 / 5 = 18,400
Year 2012 depreciation = 92,000 / 5 = 18,400
Year 2013 depreciation = 92,000 / 5 = 18,400
Year 2014 depreciation = 92,000 / 5 = 18,400
French straight line method
Depreciable amount = Cost – Scrap value => 100,000 – 8,000 => 92,000
Year 2010 depreciation = 92,000 / 5 x 200 / 365 = 10,082.19
Year 2011 depreciation = 92,000 / 5 x 365 / 365 = 18,400
Year 2012 depreciation = 92,000 / 5 x 366 / 366 = 18,400
Year 2013 depreciation = 92,000 / 5 x 365 / 365 = 18,400
Year 2014 depreciation = 92,000 / 5 x 365 / 365 = 18,400
Year 2015 depreciation = 92,000 / 5 x 165 / 365 = 8,317.81
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