Setting Up Depreciation Processing

This chapter provides an overview of depreciation processing and discusses how to:

• Set up depreciation calendars.

• Set up depreciation conventions.

• Set up depreciation schedules.

• Define depreciation terms.

• Define depreciation bonus information.

• Define depreciation limits.

• (DEU) Set up multi-shift codes for German depreciation processing.

• Enable option to stop negative depreciation.

Understanding Depreciation Processing

PeopleSoft Asset Management supports all common methods for depreciation processing and corresponds to Generally Accepted Accounting Principles (GAAP) and International Accounting Standards (IAS). Commonly-used depreciation functionality is delivered and ready to be personalized for your enterprise needs. How you define your depreciation processing here determines the depreciation calculation conventions, schedules, terms, and limits for your assets, as well as setup for compliance with periodic asset depreciation legislative and reporting requirements.

Some assets may be depreciated on an annul basis, while others accumulate depreciation monthly or quarterly. Defining depreciation calendars enables you to apply periodic depreciation allocations to assets.

Defining depreciation conventions enables you to establish the start date for asset depreciation. This is used in conjunction with an asset's placed-in-service date to calculate the correct depreciation amount for an asset.

A depreciation schedule is a special type of depreciation method. Depreciation schedules are tables specifying the percentage of depreciation expensed for each period and must be defined for assets using this treatment.

Depreciation terms are typically used in global environments where it is necessary to adjust depreciation calculations to meet local requirements.

Depreciation bonus definitions allow setup of federal or local legislation parameters. These definitions are assigned to assets or asset profiles for automated application of depreciation bonuses for qualifying assets. PeopleSoft delivers depreciation bonus definitions for prior legislation but also enables you to add and configure your own bonus definitions to meet new legislation or other needs that are specific to your organization.

Usually, depreciation limits are imposed by local taxing authorities. Defining depreciation limits enables you to apply the limits to assets accordingly.

Multi-shift codes are used in Germany to accelerate asset depreciation by specifying usage across multiple production shifts. Depreciation is increased as useful life is decreased. Enabling multi-shift codes applies this treatment to depreciation calculations.

In compliance with IAS and GAAP, PeopleSoft provides the option to stop the depreciation calculation in the event the salvage value of an asset exceeds that of its Net Book Value.

Setting Up Depreciation Calendars

To set up depreciation calendars, use the Detail Calendar (DETAIL_CALENDAR) component.

This section lists the pages used to define calendars for depreciation allocation.

Page Used to Set Up Depreciation Calendars

Setting Up Depreciation Conventions

To set up depreciation conventions, use the Depr Convention Builder (CONV_BLDR_PNLG), Depr Convention Definition (DEPR_CONVENTION), Depr Convention Multiple Copy (CONV_COPY_ALL_COMP), and Depr Convention Single Copy (CONV_COPY_PNLG) components.

This section provides an overview of depreciation conventions and discusses how to:

• Generate conventions.

• Modify conventions.

See Also

Processing Asset Depreciation

Understanding Depreciation Calculations

Understanding Depreciation Conventions

Depreciation conventions, in combination with an asset's placed-in-service date, determine when depreciation starts. For example, where a following month convention is used and an asset is placed in service on February 1, depreciation begins on March 1. PeopleSoft Asset Management delivers a wide selection of depreciation tables, including depreciation conventions. Before you set up your own Depreciation Conventions table, review the delivered tables to determine if you can use them as delivered or if modifications are required.

PeopleSoft Asset Management provides a series of pages that enable you to:

• Define a depreciation convention and automatically generate start, end, and begin depreciation dates based on a selected calendar.

• Modify the dates associated with a convention without regenerating it.

• Copy conventions associated with a setID or calendar:

  • Copy one convention associated with a setID or calendar to another setID or calendar.

  • Copy all conventions associated with a setID or calendar to another setID or calendar.

Pages Used to Set Up Depreciation Conventions

Generating Conventions

Access the Depreciation Convention page (Set Up Financials/Supply Chain, Product Related, Asset Management, Depreciation, Convention Builder, Convention Builder).

Period Options

Select Mid Period or Days. Use Daysto begin depreciation based on the value specified in the Begin Date field. Use Mid Period for mid-month and mid-quarter conventions.

Generate Options

This table summarizes how the system determines the begin depreciation date for each convention type, and indicates which fields can be overridden:

Begin Depr Date Options

Enter the options for which to begin depreciation for those conventions that you can override:

An example of beginning depreciation date options is as follows:

• Summary Periods = 3 (three months in one period)

• Which Month = 2 (second month within the period)

• Which Day = 15 (15th day of the second month)

Calendar Options

Click the Generate button to build the conventions based upon the options that you selected.

Modifying Conventions

Access the Depreciation Convention page (Set Up Financials/Supply Chain, Product Related, Asset Management, Depreciation, Convention Definition).

Select System Maintained to use standard depreciation conventions that are delivered with and maintained by the PeopleSoft system.

Note. You cannot enter the from date, to date, or the begin depreciation date for system-maintained depreciation conventions.

Setting Up Depreciation Schedules

To set up depreciation schedules, use the Depreciation Schedule Definition (DEPR_SCHEDULE_DEFN) component.

This section provides an overview of depreciation schedules and discusses how to define depreciation schedules.

Understanding Depreciation Schedules

There are several different methods for calculating depreciation. Each depreciation method is an equation by which depreciation is calculated. In most methods, the same equation is used to calculate depreciation for each period. A depreciation schedule is a special type of depreciation method. Depreciation schedules are tables specifying the percentage of depreciation expensed for each period. Currently, the PeopleSoft system delivers schedules (DEPR_SCHED_TBL system table) for the following standard IRS depreciation methods:

• Declining balance with straight-line switch:

  • 200 percent

  • 175 percent

  • 150 percent

  • 125 percent

• Sum-of-the-years' digits.

• ACRS (Accelerated Cost Recovery System), GDS (General Depreciation System), ADS (Alternative Depreciation System).

• MACRS (Modified Accelerated Cost Recovery System), GDS, ADS.

Note. Standard depreciation schedules cannot be used for short tax year processing. For short tax year processing, you need to set up special schedules that have the short tax year worked into them.

PeopleSoft Asset Management depreciation schedules are based on the percentage depreciation tables found in IRS Publication 534. You can modify existing depreciation schedules or add new schedules, by using the Depreciation Schedule page. On the Depreciation Schedules page, the method is DB150 with a switch to straight line. The in-service period for each year of the asset's life is the key to determining the percentage of depreciation allowed for any one year. For example, suppose that your organization runs on a monthly calendar and places an asset in service in January 1997. View Year of Life 1, In-Service Period 1 to find the percentage allowed in the first year; view Year of Life 2, In-Service Period 1 to find the percentage allowed for the second year, and so on.

Page Used to Set Up Depreciation Schedules

Defining Depreciation Schedules

Access the Depreciation Schedules page.

Specific Convention	Select to apply a particular convention. The page refreshes and displays the Convention list box from which to choose the depreciation convention.
Convention	This field appears when selecting the Specific Convention check box. Select the convention that you want to use.

Note. The schedule periods that you set up should reflect the periods set up in your calendar.

See Also

Understanding Depreciation Calculations

Processing Asset Depreciation

Defining Depreciation Terms and Rates

To set up depreciation terms, use the Terms Definition (DEPR_TERMS_DEFN) component, the Rate-User Defined (UD_DEPR_RATE) component, and the Period Allocation (RUN_AMCALLOC) component.

This section lists the pages used to set up depreciation terms and rates and discusses how to define depreciation terms.

Pages Used to Define Depreciation Terms

Defining Depreciation Terms

Access the Depreciation Terms page (Set Up Financials/Supply Chain, Product Related, Asset Management, Depreciation, Terms Definition, Terms Definition).

Depreciation terms are used to adjust depreciation calculations so that they comply with specific country requirements. Using additional terms affects how depreciation is calculated:

See Also

Processing Asset Depreciation

Understanding Depreciation Calculations

Defining Depreciation Bonus Information

To set up depreciation bonus information, use the Depreciation Bonus (AM_DEPR_BONUS) component.

Use the Depreciation Bonus component to define Depreciation Bonus values. Depreciation Bonus values are then selected at the Asset level or Asset Profile level for qualifying assets based on depreciation bonus legislation.

This section discusses how to define depreciation bonus information.

Page Used to Define Depreciation Bonus

Defining Depreciation Bonus Information

Access the Depreciation Bonus Info page (Set Up Financials/Supply Chain, Product Related, Asset Management, Depreciation, Depreciation Bonus, Depreciation Bonus Info).

Use the Depreciation Bonus Info page to add new depreciation bonus values or to modify existing values to accommodate new legislation. You are then able to assign the Depreciation Bonus definitions to assets or asset profiles.

See Adding Tax Information for the Book.

See Specifying Tax Attributes in a Profile.

Although PeopleSoft Asset Management delivers several depreciation bonus values based on prior legislation, the Depreciation Bonus component gives you the flexibility to create your own Depreciation Bonus definitions in order to accommodate individual organization needs as well as new legislative changes.

Acquisition & In-Service Dates

Defining Depreciation Limits

To set up depreciation terms, use the Limits (DEPR_LIMIT_DEFN) component.

Depreciation limits are used to specify the maximum amount of depreciation that you can expense on your assets for each year of life.

This section discusses how to define depreciation limits.

Page Used to Define Depreciation Limits

Defining Depreciation Limits

Access the Depreciation Limits page (Set Up Financials/Supply Chain, Product Related, Asset Management, Depreciation, Limits).

If you choose, you can use the delivered Depreciation Limit table to reduce the number of table setup tasks. PeopleSoft Asset Management delivers limits based on U.S. tax law. Currently, this defines depreciation limits for luxury automobiles.

See Also

Understanding Depreciation Calculations

Processing Asset Depreciation

(DEU) Setting Up Multi-shift Codes

To set up multi-shift codes, use the Multi-Shift Codes (MULTI_SHIFT_DEFN) component.

This section provides an overview of multi-shift codes and lists the page used to define multi-shift codes.

Understanding Multi-shift Codes

German businesses can accelerate their depreciation by specifying usage across multiple production shifts. This increases the depreciable amount and reduces the useful life. This functionality was developed to satisfy German asset accounting rules. You can do so by establishing codes for each additional shift that indicate the rate by which annual depreciation should increase. Once you have defined these codes, you can select them for assets as they are added to the system. When you run depreciation, the Depreciation (AM_DEPR_CALC) application engine applies the rates to the depreciation calculations. As annual depreciation increases, the useful life of an asset decreases.

The following tables show the effect of multi-shift codes on depreciation amounts and useful life. In the tables, the example assumes that the asset has a cost of 1,000 EUR, a useful life of 10 years, and an in-service date of January 1, 2001. The end depreciation date is December 31, 2010. It is being depreciated by using the Straight Line method.

Example Without Multi-shift Rates

The following table shows depreciation with no multi-shift rates applied.

Example with Multi-shift Rates

In the following multi-shift operation, the Two Shifts Factor has been established as 50 percent and the Three Shifts Factor has been established as 100 percent. Annual depreciation therefore increases, and the asset's useful life decreases from ten years to seven years:

Example with Multi-shift Rates by Accounting Period

The next multi-shift operation demonstrates multi-shift rates by accounting period:

Note. Zero or no accounting period denotes that the whole fiscal year uses the same number of shifts. Accounting period 1 to 13 indicates multi-shift operation applies only to that specific period. If you don't set up the fiscal year or accounting period, one shift operation appears by default.

Page Used to Set Up Multi-shift Codes

Enabling Options to Stop Negative Depreciation

This section provides an overview of the setup necessary to stop negative depreciation and lists the pages used to enable this option.

Understanding the Option to Stop Negative Depreciation

In compliance with International Accounting Standards (IAS) and Generally Accepted Accounting Principles (GAAP), PeopleSoft provides the option to stop the depreciation calculation in the event the salvage value of an asset exceeds that of its NBV. Based on the rules you establish at the Installation Option and Business Unit/Book levels, the depreciation calculation program stops depreciating assets when the NBV is less than the salvage value. Hence, the system does not create negative depreciation amounts in order to reach to the salvage value at the end of the asset's useful life.

It is important to understand that the depreciation program works at the ChartField level such that you can define a particular salvage value for one ChartField value but not for the other. For example, assume that an asset belongs to two different departments (X and Y, 40% and 60%, respectively) and the total cost of the asset is 62,000 USD. However, the salvage value could be zero for department X and 2,000 USD for department Y. The depreciation calculation generates depreciation for each department separately as two independent rows.

Enable the option to stop negative depreciation for the following:

• Installation Options - Asset Management

• Asset Management Business Unit Definition - Business Unit/Book Feature page

• Asset Net Book Value Report (AMDP2100)

The Asset Net Book Value report shows multi-ChartField assets that have had their depreciation stopped for at least one ChartField. You can select to show assets with negative NBV only and you can select to show assets whose NBV is less than the salvage value.

The alternate approach to handling an asset when the NBV of an asset becomes less than its salvage value is to allow the system to generate negative depreciation until the NBV equals the salvage value at the end of the asset's useful life. To use this approach, simply do not select the Stop Depr when NBV < Salvage options.

PeopleSoft also delivers a Negative Depreciation query (AM_NEG_DEPR_NBV_LT_SALVAGE) that reports those assets that have a NBV that is less than their salvage value for any given fiscal year and period. This query is based upon the depreciation reporting table (DEPR_RPT).

See Calculating Depreciation When Salvage Value Exceeds Net Book Value (NBV).

Pages Used to Set Up the Stop Depreciation Option

See Also

Defining Asset Management Installation Options

Defining Business Unit/Book Feature Options

Depreciation Reports