Creating a New Depreciation Method
In the Fixed Assets Management SuiteApp, you can create depreciation methods such as Units-of-Production Depreciation Method, or Units of Time Depreciation.
To create a new depreciation method:
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Go to Fixed Assets > Setup > Depreciation Methods > New.
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On the New FAM Depreciation Method page, enter the following details:
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Name – Enter a name for the depreciation method.
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Depreciation Method Description – Enter a brief description of the depreciation method.
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Depreciation Period – Select the period units for depreciation calculation. Monthly and Annually are both supported for Other Methods, but only Monthly is currently supported for the Accounting Method
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Monthly – This option computes depreciation amounts monthly.
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Annually – This option computes depreciation amounts annually.
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Annual Depreciation, Monthly Posting – This option computes the depreciation amount annually, but divides the amount into 12, and posts in the depreciation journal entries every month.
In accordance with the Japanese National Tax Authority requirement, a different computation will be used to determine the depreciation amount for months 1-11 and for month 12. For month 12, the depreciation value will be computed as the difference between the total annual depreciation and the sum of the first 11 months. For example, if an asset is valued at $1,000,000 and should be depreciated by $500,000 on Year 1, depreciation amount will be computed as follows:
Depreciation for Months 1-11:
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$500,000 / 12 = $41,666.66
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Round up = $41,667
Depreciation for Month 12:
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$500,000 - Sum of depreciation for Months 1-11
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$500,00 - ($41,667*11)
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$500,000-458,337 = $41,663
Note:For this depreciation period, the asset lifetime reflects the number of fiscal years for the asset. Selecting this depreciation method will adjust the asset depreciation end date to the end of the last fiscal year in the asset lifetime. This depreciation period is only available for Japan.
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End Period Number – If this depreciation method covers a limited period (for example, only the first 12 months of the asset lifetime), enter a value to indicate the number of periods that the depreciation method can be used for. If this field is blank then depreciation will continue until the asset has been completely depreciated or has been retired.
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Next Depreciation Period – This feature enables depreciation methods to be linked. If the current depreciation method covers a limited period (for example, only the first 12 months of the asset lifetime), select the next depreciation method which should take effect after the current method's end period.
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Depreciation Rate Table – Select the depreciation table that the system will use to determine the depreciation rates to apply to this method. The options in the depreciation rate table are currently only applicable to Japan depreciation.
See FAM 20.2 Japan Depreciation Rate Table to check the rates that are used to compute the depreciation amount for each rate table.
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Depreciation Formula – Using the terms listed on the screen, enter a formula expression for this depreciation method. The formula will be displayed with underlining to show how the terms are grouped with the operators so that it is seen if extra parentheses are required to change the evaluation order.
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Select from the following Final Period Convention options:
Note:This field is relevant only to accruals.
If you do not select a value for this field, Fully Depreciate is assigned by default.
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Fully Depreciate – The remaining balance will be included in the final period calculation so that the remaining value becomes zero.
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Retain Balance – The final period will be calculated using the relevant accrual convention without including any remaining balance. The remaining value will not become zero.
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Value Based – Asset depreciation will be extended beyond the asset life, until the net book value equals the residual value.
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