You can set up user defined depreciation methods to define as many specific depreciation methods as your company needs without custom programming. Set up user defined depreciation when you need specific depreciation algorithms other than the standard depreciation rules that are included in the Fixed Assets system. For example, you can copy an existing straight-line rule and insert the appropriate life period information to create a depreciation method for your specific needs.
This chapter includes the following topics:
From Fixed Assets (G12), enter 27
From Advanced Operations (G1231), choose Set Up Depreciation
From Set Up User Defined Depreciation (G1232), choose Depreciation Rule Revisions
The system computes depreciation using depreciation rules. When you set up user defined depreciation methods, you must define the depreciation rules, formulas, and date spreads that you want the system to use to calculate depreciation for your fixed assets.
The system stores both standard and user defined depreciation methods in the User Defined Code table 12/DM. When you run the program to compute user defined depreciation, the system distinguishes user defined methods from standard methods by a special handling code. User Defined Depreciation Methods must have a '1' in the first position of the Special Handling Code in the UDC/12/DM table.
Depreciation rules control how the system computes depreciation for an asset. You must specify the rules that you want the system to incorporate when making calculations for user defined depreciation methods. When you set up rules for a depreciation method, you define a hierarchy of conventions that you want the system to apply to the cost of an asset.
The Fixed Assets system includes the base rules for computing standard depreciation methods in user defined depreciation. You cannot change the standard rules that are included in the Fixed Assets system, but you can copy and modify these rules to define depreciation methods specific to your company. For example, if you want to set up a depreciation rule for straight-line depreciation with a life period combination that is not included in the Fixed Assets system, you can use Depreciation Rule Revisions to copy an existing straight-line rule and change the life periods.
User defined depreciation rules must have alphabetic identifiers to distinguish them from standard depreciation rules. When you set up depreciation rules, the system stores the information in the Depreciation Rule Header table (F12851) and the Annual Depreciation Rule table (F12852).
At the highest level, you can set up depreciation rules to apply to the entire period of time over which you want cost of an asset to be apportioned. Or, you can define rules for the period in which the asset was placed in service.
A depreciation rule consists of four parts:
When you set up user defined depreciation rules, you must address each part of the rule.
Setting up user defined depreciation rules includes:
Referencing the rule (by revising header information on Depreciation Rules Revision)
Specifying conventions for the rule
Setting up the life year rules
From Fixed Assets (G12), choose Hidden Selection 27
From Fixed Assets (G1231), choose Setup User Defined Depreciation
From Setup User Defined Depreciation (G1232), choose Depreciation Rule Revisions
On Depreciation Rule Revisions
Figure 24-1 Depreciation Rule Revisions screen
Complete the following fields:
Life (Periods)
Initial Term Apportionment
Compute Direction
In Service From/Thru (Date From/Date Thru)
Effective From/Thru
Pattern Reference
Enter the appropriate code in the following field:
Depreciation Method
From General systems (G00), choose General User Defined Codes
On General User Defined Codes
Figure 24-2 General User Defined Codes screen
Enter an alphabetic, two-character code in the following field:
User Defined Codes
Choose More (F24).
Figure 24-3 General User Defined Codes (Detail) screen
To identify the depreciation method as a user defined method, complete the following field:
Special Handling Code
To return to Depreciation Rule Revisions, choose Exit Program.
On Depreciation Rule Revisions, complete the following field with the code for the depreciation method to which you want to add the rule:
Depreciation Method
To specify conventions for the rule
From Fixed Assets (G12), choose Hidden Selection 27
From Fixed Assets (G1231), choose Setup User Defined Depreciation
From Setup User Defined Depreciation (G1232), choose Depreciation Rule Revisions
On Depreciation Rule Revisions
To define the conventions of the depreciation rule, complete any of the following fields:
Depreciation Expense Business Unit
First Year Spread
Last Year Spread
Disposal Year
Secondary Account/%
Life Year Reference
Allow Over Depreciation
Allow Negative Depreciation
On Depreciation Rule Revisions
Complete the following fields:
Life Year-From (Asset Life Year-Start)
Life Year-Thru (Asset Life Year-Through)
In Service Month (IS Mo)
Annual Multiplier
Enter 1 (Period Pattern) in the following field:
OP (Option)
Figure 24-4 Depreciation Spread Patterns screen
On Depreciation Spread Patterns, to add a new spread pattern, complete the following fields:
Budget Pattern Code (Per Pat)
Desc
Period 01-14
Choose Exit Program.
On Depreciation Rule Revisions, to attach the spread pattern to the rule, enter 1 (Period Pattern) in the following field:
OP (Option)
On Depreciation Spread Patterns, complete the following field:
Budget Pattern Code (Per Pat)
To define formulas for the rule
On Depreciation Rule Revisions
Choose Formula.
Figure 24-5 Depreciation Rule Revisions (Define Formulas) screen
On Depreciation Formula Revisions, to define a new formula, complete the following fields:
Formula ID
Description
Formula
Multiplier/Constant
To select formulas for depreciation elements
On Depreciation Rule Revisions
Complete the following fields with the codes for the formulas that you want the system to use for each element of the depreciation equation:
Depreciation Formula-Multiplier
Depreciation Formula-Basis
Secondary Percentage Continuation
Choose Details.
Figure 24-6 Depreciation Rule Revisions (Select Formulas) screen
For additional formula specifications, complete any of the following optional fields:
Depreciation Formula-Base
Depreciation Formula-Limit
Depreciation Formula-Salvage Value
Field | Explanation |
---|---|
Life(Periods) | The life of an asset in months or periods. The system uses months or periods only to express the life of an asset. For example, if your company uses a 12-month calendar, then a five-year ACRS asset has a 60-month life. If your company uses a 13-month calendar, then a five-year ACRS asset has a 65-month life, and so on. You must specify a life month value for all user defined depreciation methods, and for all standard depreciation methods, except the standard methods 00, 06, 09, 11, and 15. |
Initial Term Apport | A code for additional depreciation information. This code is used for Investment Tax Credit (ITC) and averaging conventions. The system validates the code you enter in this field against user defined code table 12/AC. Valid codes are:
0 – No ITC Taken 1 – Three Year Method (3 1/3%) 2 – Five Year Method (6 2/3%) 3 – Seven Year Method (10%) 4 – ACRS Method with Basis Reduction (10% ITC) 5 – ACRS Method without Basis Reduction (2% ITC or No ITC) A – Actual Date of Depreciation Start Period M – Mid-Month Convention Q – Mid-Quarter Convention Y – Mid-Year Convention P – Middle of Period F – First-half/Second-half W – Whole Year N – First Day of Next Period R – First Day of Next Year S – Actual Start Date for Primary Rule/First Day of Period for Secondary Rule Note: Numeric codes apply to standard depreciation methods only. To determine the date for F (First-half/Second-half), use the following guidelines:
|
Compute Direction | A code that indicates the method of computation that the system uses to calculate depreciation based on the depreciation method you specify.
Valid codes are: C – Current year to date. Calculates only the current year's depreciation. I – Inception to date. Recalculates the entire depreciation amount from the start date through the current year. Prior-year depreciation is then subtracted to determine current year depreciation. This method results in a one-time current period correction for any errors in prior period depreciation. F – Inception to date. Calculates inception to date for the first rule (if there are two rules) and uses a C for the second rule. P – Current period. Calculates depreciation for the current period and then extrapolates the annual amount based on the cumulative percent from the period pattern and year-to-date posting. Any depreciation calculated for the current period is subtracted. R – Remaining months. Depreciates the net book value as of the beginning of the current tax year over the remaining life of the asset. This results in the amortization of prior period calculation errors over the remaining life of the asset. |
Date From | The beginning date for which the transaction or code is applicable.
Form-specific information The date the asset is placed in service or the modified depreciation start date. The system validates this date against the company date patterns. If you leave this field blank, the system uses a default value of 01/01/00 (January 01, 1900). If only the date differentiates two or more depreciation rules, the system will not allow overlapping dates. |
Date Thru | The ending date for which the transaction or code is applicable. |
Date - Beginning Effective | The date on which an address, item, transaction, or table becomes active or the date from which you want transactions to display. The system uses this field depending on the program. For example, the date you enter in this field might indicate when a change of address becomes effective, or it could be a lease effective date, a price or cost effective date, a currency effective date, a tax rate effective date, and so on.
Form-specific information The date from which a depreciation rule is effective. The system validates this date against the company date patterns. If you leave this field blank, the system uses a default value of 01/01/00 (January 01, 1900). If only the dates differentiate two or more depreciation rules, the system will not allow overlapping dates. |
Date - Ending Effective | The date on which the item, transaction, or table becomes inactive or through which you want transactions to display. This field is used generically throughout the system. It could be a lease effective date, a price or cost effective date, a currency effective date, a tax rate effective date, or whatever is appropriate.
Form-specific information The date through which a depreciation rule is effective. The system validates this date against the company date patterns. If you leave this field blank, the system uses a default value of 01/01/00 (January 01, 1900). If only the dates differentiate two or more depreciation rules, the system will not allow overlapping dates. |
Pattern Ref | A code that identifies date patterns. You can use one of 15 codes. You must set up special codes (letters A through N) for 4-4-5, 13 period accounting, or any other date pattern unique to your environment. An R, the default, identifies a regular calendar pattern.
Form-specific information Use this field to reference a date pattern that is specific to the initial term for asset depreciated under the rule. This is particularly useful if the date patterns your company uses now are different from previous years due to mergers or short years. The system refers to this pattern in order to adjust the depreciation start date. |
Depreciation Method | The user defined code (system 12, type DM) that indicates the method of depreciation for the specified book. In addition to any user defined depreciation methods you set up for your company, the following standard depreciation methods are available in the Fixed Assets system:
00 – No depreciation method used 01 – Straight Line Depreciation 02 – Sum of the Year's Digits 03 – 125% Declining Balance to Cross-Over 04 – 150% Declining Balance to Cross-Over 05 – Double Declining Balance to Cross-Over 06 – Fixed % on Declining Balance 07 – ACRS Standard Depreciation 08 – ACRS Optional Depreciation 09 – Units of Production Depreciation 10 – MACRS Luxury Cars - Domestic 11 – Fixed % Luxury Cars - Foreign 12 – MACRS Standard Depreciation 13 – ACRS Alternative Depreciation 14 – ACRS Alternate Real Property 15 – Fixed % of Cost 16 – Fixed % on Declining Balance to Cross-Over 17 – AMT Luxury Auto 18 – ACE Luxury Auto Note: Any additional depreciation methods you create for your organization must have an alpha code. |
Depr Expense Business Unit | A code that allows an override of the destination of the depreciation expense.
Valid codes are: blank – No Override 1 – Responsible Business Unit 2 – Location Business Unit 3 – Work Center Business Unit |
1st Year Spread | A code that designates how you want the system to apportion the first year of depreciation for an asset. Valid codes are:
Blank – Modified Depreciation Start Date 1 – Entire Year 2 – Actual Depreciation Start Date 3 – Placed in Service Period |
Last Yr Spread | A code that designates how you want the system to apportion the last year of depreciation for an asset. Valid codes are:
blank – Modified depreciation end date 1 – Entire year |
Disposal Year | A code that designates how you want the system to apportion depreciation when you dispose of the asset.
Valid codes are: blank – To End of Disposal Period A – Actual Disposal Date Y – Mid-Year Q – Mid-Quarter M – Mid-Month P – Middle of Period F – First-Half / Second-Half L – Last Day of Previous Period I – Inverse of Initial Term Apportionment N – None |
Secondary Acct/% | A code that designates how the system uses the amount calculated by the Secondary Account/Percent rule when determining the annual depreciation amount. Valid codes are:
blank – No secondary percentage 1 – Greater of amounts calculated by Rule 1 or Rule 2 2 – Lesser of amounts calculated by Rule 1 or Rule 2 6 – Amount from Rule 1 to Accumulated Deprecation Account 1; amount from Rule 2 to Accumulated Deprecation Account 2 7 – Amount from Rule 1 to Accumulated Deprecation Account 1 plus Depreciation Expense Account 1 equals Rule 1 amount; amount from Rule 2 to Accumulated Deprecation Account 2 plus Depreciation Expense Account 2 equals Rule 2 amount 8 – Two Amounts - Two A/D Accounts and Three D/E Accounts The system uses this field in conjunction with the Secondary Percent Continuation field. |
Life Year Reference | A code that designates the beginning reference point from which you want the system to determine the current life year of an asset. Valid codes are:
blank – 1st day of depreciation start year 1 – Depreciation start date (modified) |
Allow Over Depreciation | A code that indicates whether you want the system to allow over depreciation for an asset. Use this field when you want the system to allow depreciation in excess of the basis, or when you want to allow depreciation beyond the period you define as the life of the asset, as in the ACRS Luxury Autos depreciation method. Valid values are:
blank – Over depreciation NOT allowed during asset life, take remaining basis at end of asset life 1 – Accumulated depreciation may EXCEED adjusted basis during asset life, take remaining basis at end of asset life 2 – Over depreciation NOT allowed during asset life, allow depreciation beyond asset life 3 – Accumulated depreciation may EXCEED adjusted basis during and beyond asset life The default for this field is blank. The system uses this field in conjunction with the Allow Negative Depreciation field. |
Allow Negative Depreciation | A code that indicates whether you want to allow depreciation formulas to calculate negative amounts. Valid codes are:
N – Negative depreciation not allowed Y – Accumulated depreciation may be less than adjusted basis You can enter a 1 for yes (Y) or a 2 for no (N). The default value is N. |
Asset Life Year - Start | The first asset life year to which the rule pertains. You must set up detail annual rules for a depreciation rule, beginning with year 1 and extending through every year in the life of the asset. The system does not allow "gaps" between years.
You can set up the detail annual rules beyond the life of the asset. A single record may represent several contiguous years, but the system does not allow duplicate years. Valid values are 1 through 998, and 999. Use 999 only to set up a specific rule for the disposal year of an asset. |
Asset Life Year - Through | The last year in the life of an asset to which the rule pertains. You can set up the detail annual rules beyond the life of the asset. Each rule must have a rule for contiguous years beginning with 1. A single record can represent several contiguous years, but the system does not allow duplicate years. |
IS Mo | This field refers to the month the asset is placed in service. You can specify rules by inclusive ranges. When you use the value of blank, the system continues to use the annual rule for the last specified placed in service month until it finds a higher placed in service month value.
The system uses the values you enter in this field as follows:
For example, if you set up annual rules for the Placed In Service Months of 01, 03, 06, and 09, the system uses the rule you specify for 01 during the first and second months, the rule you specify for 03 during the third, fourth, and fifth months, the rule you specify for 06 during the sixth, seventh, and eighth months, and the rule you specify for 09 for the remaining months. Valid values are blank, 01, 02, 03, 04, 05, 06, 07, 08, 09, 10, 11, and 12. |
Annual Multiplier | A percentage that you can use as an element within a formula, or by itself. The system applies this percentage to the basis of an asset to derive depreciation. If no basis is defined for the asset, then the system applies this percentage to the cost.
Enter a value in this field as a decimal. For example, enter 10% as .10 and 150% as 1.5. |
Per Pat | The code for a specific depreciation spread pattern. A pattern determines how the annual depreciation amount is to be apportioned to periods within a year. You can designate spread patterns for individual years, or for a group of years. |
Secondary % Continuation | Use this code to indicate whether an annual depreciation rule is a primary or secondary rule. |
You can define or revise depreciation formulas. You can then attach the formulas to the elements of the depreciation equation in a life year rule. Use the four basic mathematical functions (+ - * /) and parentheses for nesting amounts or quantities to construct depreciation formulas in algebraic format.
The Fixed Assets system includes codes that you can use to represent the elements that the system uses to retrieve the related amounts or quantities from the Item Balance table, Item Master table, Date Pattern table, and so on. For example, you can define a depreciation method that is based on a formula that you create to subtract salvage value from cost.
A comprehensive list of the elements that you can use to define formulas to include in depreciation rules appears in Appendix A.
You can access the Depreciation Formula Revision screen directly from the menu, or you can access the screen from Depreciation Rule Revision. For example, if you are revising depreciation rules, and you want to update a formula associated with the rule, you can access Depreciation Formula Revision to review and revise formulas you have previously defined without exiting from the Depreciation Rule Revision program.
Note:
User defined depreciation formulas must have alphabetic identifiers to distinguish them from standard depreciation formulas. You can modify only the alpha formulas, but you can use the numeric formulas as a starting point to create your own formulas with alphabetic identifiers.To set up depreciation formulas
On Depreciation Formula Revision
Figure 24-7 Depreciation Formula Revision screen
To set up or locate an existing formula, complete the following field:
Formula ID
Choose the field sensitive help for Formula ID to review a list of valid formulas or to search for a specific formula by code or description.
To revise or define the formula, complete the following fields:
Description
Formula
Multiplier/Constant
Field | Explanation |
---|---|
Formula | The system uses the formula you enter in this field to calculate an amount for an associated formula ID. You can attach the formulas you define on Formula Revisions to the Depreciation Rule Revisions screen. You can define the following depreciation formulas:
Formulas can include a combination of formula elements listed on the Depreciation Formula Revisions screen, the four basic mathematical functions, and parentheses for nesting amounts or quantities. Use the following valid symbols for these basic mathematical functions: + – Addition - – Subtraction * – Multiplication / – Division ( ) – Left and right parentheses |
Multiplier/Constant | A percentage or amount that can be incorporated into a formula as an element to derive depreciation. |
When you run depreciation, the system calculates an annual depreciation amount. Then, the system calculates depreciation for a particular period based on a percentage. You set up period pattern spread rules to specify how you want to recognize the annual deprecation amount within a year. If you do not set up a spread pattern for your depreciation rule, the system spreads the annual depreciation amount equally among the normal number of periods that you set up for your organization.
You can enter spread amounts for periods 01 through 14. The total of the spread percentages that you enter must sum to 100 before the system will allow the pattern to be added or an existing pattern changed.
The system stores depreciation spread patterns in the Depreciation Spread Pattern table (F12854).
To set up depreciation spread patterns
On Depreciation Spread Patterns
Figure 24-8 Depreciation Spread Patterns (Set Up) screen
To set up or locate a depreciation pattern code, complete the following field:
Budget Pattern Code
To define or revise a depreciation pattern code, complete any of the following fields:
Period 01-14
Field | Explanation |
---|---|
Period 01 | Enter the percentage of depreciation you want to record for the asset in the first period. You can enter spread percentages as:
You can enter spread percentages for up to 14 periods. The total of the spread percentages must sum to 100. Note: You set up the default periods for the fiscal year on Date Pattern Revisions for company 00000. |