French Derogatory Depreciation

Derogatory depreciation is calculated from the difference between the tax and accounting depreciation amount over the asset's useful life. You can review the depreciation amount on the Review Derogatory Depreciation page. When the depreciation amount is finalized, the system generates the Derogatory Depreciation Histories. Corresponding derogatory depreciation journals are created to record the difference between the Accounting and Derogatory Tax methods.

Setting Up and Using the French Derogatory Depreciation Method

Before setting up your account to use the derogatory depreciation method, note the following prerequisites:

• Depreciation profiles for both the accounting and tax value models must have the same period frequency.

• The Depreciation Start Date for both Accounting and Tax Methods must be the same.

Note:

Derogatory depreciation isn't available for mid-life assets.

Reviewing Derogatory Depreciation

Important:

You must run the precompute process to generate depreciation values for the derogatory depreciation.

You can review the derogatory depreciation amount from the Review Derogatory Depreciation page. This page displays information about the asset's tax method and the precomputed derogatory depreciation values based on the tax method.

To review the derogatory depreciation amount:

1. Go to Fixed Assets > Lists > Assets.

2. From the FAM Asset List page, click View or Edit next to the Asset record that you want to review.

3. On the Asset Record page, click the Depreciation Histories subtab, and then click the Derogatory Depreciation link.

   Note:

   The Derogatory Depreciation link is only available for new assets.

4. On the Review Derogatory Depreciation page, you can compare the difference between the derogatory tax method and accounting method. The Depreciation Amount sublist shows the depreciation date, tax amount, asset amount, and the difference of the tax and accounting method.

   

5. Make sure to set the values for the following accounts:

   • Appropriations to Derogation Provisions Account

   • Derogation Provisions Written Back Account

   • Derogation Provisions Account

   These accounts record the derogatory depreciation amount. The derogatory histories can't be created if these accounts aren't set up. You can set up these accounts in the Default Alternate Method of the Asset Type or in the Accounts tab of the Tax Method.

6. Click Generate Derogatory DHRs.

   You'll be redirected to the Process Status page where you can view the status of the Generate Derogatory DHRs process.

   The derogatory journal entry is created together with the regular depreciation entries during asset depreciation. The system summarizes journal entries based on the Summarize By option in the FAM System Setup page.

   The journal entry is linked to the Derogatory Depreciation DHR. When the depreciation is completed, you should have two journal entries:

   • Regular depreciation – This entry is linked to the depreciation DHR for the accounting method.

   • Derogatory journal – This entry is linked to the derogatory DHR for the tax method.

   

Related Topics

• Fixed Assets Management Overview
• Depreciation Methods
• Creating Asset Records from Transactions
• Creating Asset Records Manually
• Managing Assets
• Asset Depreciation

• Fixed Asset Recovery Script

• Group Tax Depreciation
• Asset Disposal by Sale or Write-Off
• Partial Disposal of an Asset
• Revaluation of an Asset
• Asset Split
• Deleting Assets

General Notices