vRealize Business for Cloud calculates the yearly depreciation values of server hardware cost and then divides the value by 12 to arrive at the monthly depreciation.

vRealize Business for Cloud uses the salvage value of zero dollars.

`depreciable cost == original cost`

`Depreciation rate = 2 / number of depreciation years`

For example, `2/5 = 0.4`

This is the yearly depreciation of double declining balance method and yearly depreciation of straight line method.

Table 1. Depreciation Methods

Method

Calculation

Double declining balance

`yearly double declining depreciation = (original cost - accumulated depreciation) * depreciation rate`
Note:

`Double declining depreciation for the last year = original cost - accumulated depreciation`

Straight line

`Yearly straight line depreciation = (original cost - accumulated depreciation) / number of remaining depreciation years`

You can set the depreciation period to two or seven years.

vRealize Business for Cloud uses the maximum value between yearly depreciation of declining balance with multiplied depreciation rate and yearly depreciation of straight line over five years.

`Yearly depreciation = Max(yearly depreciation of double declining balance method, yearly depreciation of straight line method)`

Below is an example of depreciation cost for an original cost of \$2000 with a depreciation period of five years.

• Depreciation cost for the first year: `Max[((2000-0) * 0.4), ((2000-0)/5))] = Max(800, 400) => 800 (per_month= 66.67)`

• Depreciation cost for the second year: `Max[((2000-800) * 0.4), ((2000-800)/4))] = Max(480, 300) => 480 (per_month= 40)`

• Depreciation cost for the third year: `Max[(( 2000-1280) * 0.4), ((2000-1280)/3))] = Max(288, 240) => 288 (per_month= 24)`

• Depreciation cost for the fourth year: `Max[(((2000-1568) * 0.4), ((2000-1568)/2))] = Max(172.8, 216) => 216 (per_month= 18)`

• Depreciation cost for the fifth year: `Max[((2000-1784) * 0.4), ((2000-1784)/1))] = Max(86.4, 216) => 216 (per_month= 18)`