Depreciation Conventions

Controller 5 min read Updated July 2026

An asset activated on July 19th poses a small, ancient question: how much depreciation does July get? The convention is the standing answer — a policy for the first period so nobody hand-calculates partial months, ever. It's set per asset (defaulted from the Asset Type) and affects only the first period's charge.

Getting there. Open the App Launcher (the grid icon at the top-left of any page) → REDA Financials AI → the Capital Assets tab and open an asset to see or set its Convention; the class default lives on the Asset Type in the REDA Financials Admin app.
Access you'll need. Any REDA Financials permission set can view the convention on an asset; changing it (or the type's default) requires the Accounting Admin v2 or Accounting Controller v2 permission set.

The conventions

Convention	First period gets…	Spirit
Full Month	The full monthly charge	Simple and common: any part of a month counts as the month
Mid Month	Half a charge	Assume mid-month service start on average
Mid Quarter / Half Year	Half a charge	The same averaging idea at quarter/year granularity, familiar from tax practice
Pro-rata (Daily)	Charge × days in service ÷ days in month	The precise answer: activated the 19th of July → 13/31 of a month
Full Year	The full charge (no first-period adjustment)	Annual-convention books

Half is half, whatever the calendar granularity. Mid Month, Mid Quarter and Half Year all produce the same first-month arithmetic here — half the monthly charge — because the schedule is monthly. The three names exist so your books can declare the averaging policy your jurisdiction or tax practice expects, and the label on the asset matches the policy in your files.

The same asset under every convention

Meridian's office equipment charges $83.33 a month. Suppose it had gone into service on 19 July instead of the 1st — here is July's charge under each convention, derived from that one monthly figure:

Convention	First-month arithmetic	July's charge
Full Month	The full charge, regardless of the day	$83.33
Full Year	The full charge — no first-period adjustment	$83.33
Mid Month	$83.33 × 0.5	$41.67
Half Year	$83.33 × 0.5	$41.67
Mid Quarter	$83.33 × 0.5	$41.67
Pro-rata (Daily)	$83.33 × 13 days in service ÷ 31 days in July	$34.95

From August onward, every column reads the same $83.33 — the convention touches only the first period. And the total never changes: whatever July didn't take moves to the tail (next section), so all six schedules still close at exactly $5,000.

Out of the box, the answer is Pro-rata (Daily). A new Asset Type's Default Convention is Pro-rata (Daily) — the most precise choice. Change it per type where your policy prefers simplicity (Meridian's equipment uses Full Month), and remember an individual asset can override its type before activation.

Where the missing half-month goes

Prorating the first period leaves a remainder — and the engine doesn't lose it: the schedule gains one extra period at the end carrying the deferred amount, so the asset still depreciates its full base over its full life. A 60-month asset with a Mid Month start shows 61 lines: half at the front, the other half at the tail.

In numbers, for the Mid Month case: July takes $41.67, months two through sixty take their normal charges, and a 61st line carries the deferred $41.66 — the front half's mirror, settling the cumulative total on the base to the penny (the final line always plugs any rounding, as with every schedule).

Common mistakes to avoid

Mistake	Why it hurts	Do this instead
Expecting the convention to prorate every month	It never does — months two onward always take the full charge; assuming otherwise makes forecasts drift	Read the convention as a first-period policy only
Hand-calculating a partial first month and entering it as a manual line	Duplicates what the generated schedule already did — the month ends up double-charged	Set the convention and let generation do the split
Mixing conventions within one asset class	Identical assets activated the same week charge different amounts — awkward questions at review, no accounting benefit	Encode one convention per Asset Type and let every asset inherit it
Reporting the extra tail line as a schedule bug	Time spent chasing designed behavior	Count the lines: a prorated start means life-in-months + 1, with the deferred remainder at the end

Pick per class, apply forever. Meridian uses Full Month for equipment (simple, immaterial differences) and Mid Month for buildings (larger sums, standard practice). Whatever you choose, the convention's value is consistency — set it on the Asset Type and stop thinking about it.

Where to go next

Depreciation Schedule Generation — see the convention shape the lines.
Depreciation Rules & Methods — the other half of the settings.
Asset Types & Categories — where the default lives.

Frequently asked questions

Never — only its timing. Every convention depreciates the same base; they differ solely in how the first (and consequently last) period splits.

Barely: a full first month is a full first month under Full Month or Pro-rata alike (Meridian's July 1 activation produced an even $83.33 either way). Conventions earn their keep on mid-month dates.

All are accepted practice; jurisdictions and policies differ. Pro-rata Daily is the most precise, Full Month the most convenient — your accounting policy (and sometimes local tax rules) decides. Consistency across comparable assets is the real requirement.

No — the rebuilt remainder resumes the month after the last posted charge with a full first month (Full Month behavior), whatever the asset's own convention says. The convention's job was the original first period; a mid-life rebuild has no partial month to prorate.

Technically yes — the convention is an asset-level field, defaulted from the type at activation and overridable before it. Practically, don't: comparability within a class is the whole point. Save overrides for genuine policy exceptions, documented on the asset.

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