Understanding Depreciation Processing

PeopleSoft Asset Management can calculate depreciation for more than 18,000 different scenarios, depending on the depreciation attributes that you select. Most standard depreciation methods and prorate conventions are delivered, along with functionality for you to define your own depreciation methods and prorate conventions. In the United States, PeopleSoft Asset Management calculates tax credits and tax credit recapture. Standard depreciation reports are provided, as well as reports that enable you to comply with the U.S. Tax 40% Rule, the U.S. Alternative Minimum Tax (AMT), and the U.S. Adjusted Current Earnings (ACE). Outside the U.S., PeopleSoft Asset Management provides depreciation methods that are commonly used in Europe, Australia, India, and Japan, as well as other methods that are used globally.

PeopleSoft Asset Management calculates the annual depreciation based on the asset's life, depreciable cost basis, placed-in-service date, and any depreciation limits that you specify. You can set up required depreciation attributes on three levels: You can enter them in your business unit books, define them when you set up asset profiles, or specify them when you add assets to the system.

When you set up your business unit books, specify whether each book is a financial book, a tax book, or a financial book with tax information. This specification acts as a filter, enabling you to select options that correspond to the book type that you specified. For example, if you define a book as a tax book in the U.S., PeopleSoft Asset Management does not allow you to select depreciation attributes that are not supported by U.S. federal tax code.

Asset profiles function as templates. They provide a quick way to enter asset information, especially depreciation criteria. Rather than enter the book, method, convention, life, and tax credit information each time that you add an asset, you can use the asset profile to supply that information by default. When you enter assets, specify the profile ID. If any depreciation information in the profile does not apply, you can override it.

You can also specify depreciation attributes as you add assets to PeopleSoft Asset Management. Do this if the asset profile does not contain the depreciation criteria that you want for the asset. If you use more than one book, specify the depreciation criteria for each book.

To ensure correct depreciation processing, the PeopleSoft detail calendar that you use must include at least five years prior to the life of the oldest asset. For example, if the life of the oldest asset began on January 1, 2000, your calendar must begin no later than January 1, 1995. These prior periods are required for correct depreciation processing.

Build detail calendars beyond the end depreciation date of the asset as well. When you do this, the system calculates depreciation over the longer period correctly for any added assets that have a longer than usual service life. If any short tax years are contained within this five-year period, create a calendar of more than five years to ensure correct depreciation.

If you use a depreciation method that relies on tables specifying the percentage of depreciation that is expensed for each period, review the delivered depreciation schedules. If you use depreciation schedules that are different from those delivered, you must add a schedule with the appropriate percentages for each in-service period for each year of life.

PeopleSoft Asset Management provides all standard prorate conventions. In addition, it enables you to build new conventions based on calendars and to copy conventions from one SetID to another as appropriate.

Note:

PeopleSoft Asset Management enables you to change both depreciation conventions and schedules as you deem necessary. If you change either the schedule or convention, you get a warning that the convention and the schedule do not agree. When you save your change, PeopleCode changes the convention or the schedule for you. The depreciation will calculate correctly whether you enter a change to schedule or convention and in either order.