French Derogatory (Method 21)

Use the French Derogatory method to calculate the difference between the French Declining Balance method (Method 20) and the French Straight Line method (Method 19). The French Derogatory method requires you to set up these AAIs for depreciation to calculate correctly:

• DSA1 - Use this AAI to retrieve the amount from the AA ledger inception-to date balance from the Asset Account Balances File table (F1202) for the account that is identified on this AAI.

• DSA3 - Use this AAI to retrieve the amount from the D1 ledger inception-to-date balance from table F1202 for the account that is identified on this AAI.

The account that is used for both of the AAIs should be the Accumulated Depreciation account from the Depreciation Default Coding. The AAIs should appear as follows for DSA1 and DSA3:

The French Derogatory method also requires you to set up this depreciation default coding information:

Ledger Type	Depreciation Method
AA	French Straight Line (Method 19)
D1	French Declining Balance (Method 20)
D3	French Derogatory (Method 21)

This illustration shows how depreciation default coding should be set up for a cost account that is used for 48 life-month French fixed assets:

When you add assets to this account, the depreciation default information automatically uses these depreciation methods. Ensure that cost amounts are copied from the AA ledger to the D1 and D3 ledgers.

After setup is complete and assets are entered in the system, Method 21 computes the difference between the D1 ledger and the AA ledger. The results of 21 are stored in the D3 ledger.

Note: To compute the depreciation for method 21, you must compute depreciation in final mode for the French Straight Line method and the French Declining Balance. You can compute depreciation for all three ledgers concurrently in final mode.

For the example that follows, these assumptions apply:

• Actual start date: June 15, 1997.

• Modified start date: June 1, 1997.

• Cost: 100.000 FRF (without tax).

• Asset life: 4 years (48 life periods).

This example shows the depreciation of an asset when using depreciation method 21:

Year	End of Year Date	Declining Balance	Straight Line	Derogatory Depreciation
1997	December 31, 1997	28.125	17.809	10.316
1998	December 31, 1998	26.953	25.000	1.953
1999	December 31, 1999	22.461	25.000	-2.539
2000	December 31, 2000	22.461	25.000	-2.539
2001	December 31, 2001	0	7.191	-7.191

Note: This example uses the straight-line method in the AA ledger type and the declining balance method in a separate ledger type. The formula uses the calculated final balances to produce the balance adjustments for derogatory depreciation.

Alternatively, you can calculate derogatory depreciation using the JD Edwards EnterpriseOne Report Design Aid tool in one of these ways:

• From the amounts that are computed on the D3 ledger, create a journal entry to the AA ledger for the appropriate offset accounts.

  Use one account for negative amounts, and the other account for positive amounts. The government can provide the company with the necessary statutory account numbers.

• Calculate the difference between the two ledger types, and create journal entries for posting.

This table explains the requirements for method 21:

Requirement	Explanation
Asset life	The demonstration data includes versions of method 21 for an asset life of 48 life periods and 60 life periods.
Balance adjustments	Year-end with annual depreciation Apportioned by period in the year, based on percent Straight-line and declining balance methods must be updated before derogatory depreciation can be calculated.
Modified start date	The modified start date is the start of the period.
Conventions	Allow Over Depreciation is set to option 3 (accumulated depreciation might exceed adjusted basis and continue beyond the asset's life). Negative depreciation is allowed.
Life year rules	The life year from 1 to 998.
Calculations	Calculate the difference between declining balance and straight-line balance.
Disposals	Method 21 has no disposal rules.