Mid-quarter convention in US

[Former Member]

Under the US tax depreciation areas, Once we have changed the depreciation key to Mid-quarter convention from half-year convention in the present year, why do we need to change it back to Mid-year convention from Mid-quarter in the next year.

Thanks

Ron

[Former Member]

Ron,

Mid-Quarter convention in US is applicable ONLY IF more than 40% of your annual assets purchases are in the 4th quarter of the fiscal year.

Thus, for e.g. in 2009 I find that I am qualifying for Mid-Quarter convention, then I will have to change the depreciation keys. However, whether mid-quarter is applicable in the forth coming year may not be easy to estimate. Thus, usually the depreciation keys are changed back.

Of course all these changes are done ONLY to the new acquisitions in the said fiscal year.

I hope I could clarify your doubt.

Regards,

Vishal.

[Former Member]

Lets say Midquarter conventions for new acquisitions has been applied in 2009 because more than 40% of the acquisiton has been done in 4th quarter. This means depreciation was calculated and posted as per mid-quarter convention in 2009 based on the mass substitution of the depreciation keys.

Now my question is do we need to reset back the depreciation keys to Mid-year (from Mid-quarter) on 1st Jan 2010. Because I am struggling to understand really why we need to do this change back on 1st Jan 2010, because the overall depreciation for these assets (acquired in 2009) will going to be same at the end of 2010, whether we use Mid-quarter or Mid-year convention. Because the whole idea of changing to Mid-quarter convendtion is to change the start date of the depreciation. Once we have done that we should be done.

Since the mass change to mid-quarter keys happened to only the new acquisition of 2009. Hence, the new acquisition of 2010 are not impacted, and they should have mid-year keys anyway.

Thanks

Ron

Edited by: Ron on Jun 18, 2010 1:48 AM

[madhusoodanan_ramachandra]

Hi,

I don't think it is required. If you change back to mid quarter, it will recalculate depreciation for the remaining open periods. It will give wrong calculation.

Best Regards,

Madhu