*Required; found on the Main data tab.*

For finance leases, the method for depreciating the asset. This selection is ignored for ASC 842 operating leases, as the amortization methodology is defined in the standard as tied to the amortization of the liability. The only time amortization on an operating lease is straight line is if the asset is partially impaired - after a partial impairment, the remaining asset is amortized straight line.

The following methods are available:

Straight line (default unless changed in System Options) - An equal amount of amortization is taken for every day or month of the amortization life, depending on whether you have selected daily or monthly amortization calculations in System Options.

Straight Line full month - A full month of amortization is recorded in the first calendar month a lease is active if the begin date is the 1st to 15th of a month; otherwise, amortization starts at the beginning of the following month. If the end date of the lease is the 1st to 14th of a month, amortization ends at the end of the prior month; otherwise, a full month of amortization is taken for the final month.

SL/Half year convention - In the first and last fiscal years, a half year of straight-line amortization. In the middle years of the lease, amortization is taken at a normal rate. The half year of amortization is taken even if the lease is active for less than half the year, so amortization in the first and last years on a per-month basis could be more or less than the middle years. (Thus, a lease that starts at the beginning of the seventh month and ends at the end of the sixth month of a fiscal year will have identical amortization using this method or standard straight line.)

Declining balance - 150% and 200% versions are offered, meaning that the starting amortization is, respectively, 1.5 or 2 times straight-line amortization. For the first fiscal year, a mid-quarter convention is used (for example, if a lease starts at any point in the fiscal second quarter, 7.5 months worth of amortization is spread over the active part of the fiscal year). All declining balance routines convert to straight line at the optimal year, and then run straight line over the remaining life of the lease. This methodology is essentially identical to that used by the IRS for MACRS amortization. The results will match the IRS tables only if the amortization life length exactly matches a length listed by the IRS (see IRS Publication 946, How to Depreciate Property, available at www.irs.gov).

No amortization - The asset will remain unamortized for the life of the lease.

See System Options for selections that affect the calculation of amortization (monthly or daily, fiscal year end).

**Related links:**

Amortization Life | Default amortization method | Accrual calculation method