You assign depreciation methods to an asset when you create a master record. The system performs depreciation calculations based on the established depreciation rules for each user defined depreciation method.
This chapter includes the following topics:
Although the JD Edwards World Fixed Assets system provides a wide range of standard depreciation methods, you might need a specific depreciation algorithm other than those provided with the standard depreciation methods.
An organization that operates in a multi-site, multi-national, and/or multi-currency environment is likely to require a broad sample of the variations of the elements of depreciation. With user defined depreciation, you have access to all the elements of the depreciation equation. You can use these elements to define depreciation methods to meet your unique depreciation needs.
For example, you can set a user-defined period number to ensure that depreciation methods used complies with depreciation rules defined by Russian legislation. Setting a user-defined period number will allow for the tracking of the actual, remaining total number periods. For example, if the asset is a 36-month asset, the actual total number of periods will start at 36 and work down to one.
The following graphic shows the elements of depreciation and their relationship:
Figure 22-1 Elements of Depreciation and Their Relationship
User defined depreciation uses the following elements, combined into depreciation rules, to control depreciation:
The Fixed Assets system uses account rules and depreciation rules. Account rules define the association between cost accounts and the related accumulated depreciation and depreciation expense accounts. Depreciation rules define the algorithm that the system applies to the cost of an asset over the course of the asset's life every time you compute depreciation.
Depreciation rules are the key to user defined depreciation.
The user-defined depreciation rules are defined in three components as shown in the following illustration.
Figure 22-2 The Components of Depreciation Rules
The header information is key to identifying the depreciation rule and includes information, such as:
Method code
Initial term apportionment
Compute direction (also called the method of computation)
Asset life
Relevant dates
Rule description
The rule conventions define certain parameters within which the rules operate, such as:
First and last year spreads
Disposal apportionment
Secondary depreciation amount treatment
Life year reference
Over-depreciation indicators
Negative depreciation indicators
The annual rules define the specifics of how the depreciation is actually calculated. For a given depreciation rule, one or more annual rules might exist. For a given year there might be primary and secondary rules. Annual rule specifics include such things as:
Beginning and ending years for each annual rule
Placed in service months
Annual multipliers
Spread patterns
Formula codes for both depreciation and depreciable basis
The system calculates depreciation for an asset cost based on the depreciation rules that you define. The rules relate to the category of the asset cost. The system determines which depreciation rule to use. The system associates accounting and depreciation categories in the asset master record and the cost account in the Cost Item Balance record with the corresponding information in the depreciation rule.
Figure 22-3 User Defined Depreciation Calculation - Process Flow