Asset Depreciation

Note:

As of the latest version of Fixed Assets Management, custom journals cannot be used with Multi-book accounting.

In the Fixed Assets Management SuiteApp, you can run Asset Depreciation to depreciate assets for the first time or to depreciate an asset following a revision of the depreciation method or period.

Asset depreciation can be performed periodically for a single asset type or for several asset types. This procedure is run to depreciate assets for the next period. The Fixed Assets Management SuiteApp will decide which assets require depreciation by checking the depreciation start date, last depreciation period, and depreciation rules. When posting the depreciation values, the system will create a batch of GL journal entries.

An asset will depreciate for each period set on the depreciation method. An asset will depreciate for each of its period intervals up to the date entered on the Depreciate Assets page.

For example, if an asset has a monthly depreciation period, and its last depreciation is in January, a depreciation run for June will cause a depreciation to happen for February, March, April, May, and June.

Note:

Depreciation processing ends when the last depreciation period has been reached for both the accounting and alternate/tax methods assigned to the asset.

Important:

If you enabled the accounting preferences Make Departments Mandatory, Make Classes Mandatory, and Make Locations Mandatory, but the asset’s department, class, or location is not set, the system will not process the depreciation. No depreciation history records or journal entries will be created.

To depreciate assets for the period:

1. Go to Fixed Assets > Transactions > Asset Depreciation.

2. Enter values for the following fields:

   • Asset Type(s) — Select one or more asset types.

   • Subsidiary(s) — Select one or more subsidiaries. An additional option to Include Children indicates that any selected subsidiaries should also include any child subsidiaries (and their children, to the end of the hierarchy).

   • Depreciation Period —Enter a date up to which assets will be depreciated.

   • Depreciation Reference —Enter a depreciation reference to be used as the base reference on all generated journals. Leave this field blank to use the default reference.

3. Click Depreciate Assets. The Fixed Assets Management SuiteApp calculates the value to be depreciated based on the depreciation method and period entered.

   You will be redirected to the Process Status page, where you can track the status of the depreciation. On the Process Status page, the following processes will be queued for asset depreciation. You can click the Details link on any process to view the process stage details. For more information, see Background Processing of Fixed Assets.

   Process	Process Stage	Process Stage Description
   Asset Depreciation	Generate Depreciation Schedule Values	Creates depreciation history records for assets and tax methods with no existing depreciation schedule. If the asset and tax methods already have a depreciation schedule, the status will show Not Required.
   	Create Journal Entries	Creates journal entries posting to the fixed asset depreciation and expense accounts entered for the assets on the Accounts tab. A journal entry is created per asset type and per period of depreciation.
   	Prepare Data to Update Records	Gets updated values from journal entries, and identifies which records to update. The status will show Not Required if no journal entry was created in the previous step.
   	Update Asset Records	Updates values on the asset record. If Multi-book Accounting is enabled on your account, this process also updates tax methods with accounting books.
   	Update Tax Methods	Updates tax methods. If Multi-book Accounting is enabled in your account, this process also updates tax methods without accounting books.
   	Update Compound Assets	Updates compound asset records.
   	Update Related Records	Updates other records related to this asset.

   If you have enabled the Custom Transactions and Use Custom Journals preference, a specific journal entry will be created for asset depreciation. You can view these journal entries in Fixed Assets > Transactions > Journal Types. Note that you have to manually set the status of the journal entry to Approved before it is posted. For more information, see Viewing and Approving Custom Journal Entries.

   Note that if the Require Approvals on Journal Entries preference is enabled, and you do not have permission to approve journal entries, the system will require administrator approval before a journal entry is posted.

   When an adjustment period is included in the accounting period setup, the depreciation journal entries will be posted to the end of the base period, if the period is still open. If the period is already closed, the journal entry will be posted to the next open period.

   Note:

   When the depreciation amount is zero, a zero-value depreciation history record with a blank Posting Reference field is generated. No journal entry is created.

   The depreciation date should fall within an existing accounting period, otherwise no journal entry will be created. If the accounting period is closed, the depreciation will be posted to the next open accounting period.

Generating Depreciation Schedule Values

The Fixed Assets Management SuiteApp includes the ability to forecast depreciation values for both accounting and tax methods. This process automatically creates the depreciation schedule for the entire life of the asset, upon its acquisition (when asset record is generated from a proposal). This feature is automatically enabled for newly-installed bundles.

For assets that are manually created and imported through the CSV Import Assistant, a scheduled script runs every Sunday to check which assets have no depreciation schedule. The script creates the depreciation schedule based on the asset’s depreciation start date, and depreciation period. The scheduled script will also adjust the depreciation schedule values when there are changes to the depreciation history record during the asset’s life. You can also manually trigger the precompute process from the FAM System Setup page.

Note:

You can set a different schedule for when the script runs, depending on your preference. For more information, see Managing Fixed Assets Scripts.

A depreciation schedule cannot be created for assets in the following cases:

• If the depreciation methods use the CU variable in their formula. For example, Asset Usage.

• If the asset is included in a group depreciation.

• If the Use Accounting Period Dates for Depreciation preference is enabled in your account, a depreciation schedule will be created only up to the accounting period you have set up.

When you check the status of the precompute process, you may see multiple entries for Generate Depreciation Schedule Values. The duplicate entries do not impact any of the FAM records. The number of entries in the FAM Process Stage Details reflects the number of times the script has been queued. The scripts can be queued multiple times for any of the following reasons:

• Application server restart – When this happens, the scripts will resume processing the record from where it was interrupted.

• Map/Reduce yielding – This is a feature of the scripts that enables it to yield or resume processing if certain limits are exceeded. For more information, see Map/Reduce Yielding.

• Batch processing limits – The Generate Depreciation Schedule process can manage up to 5,000 records at a time. The script will run again if there are more than 5,000 records to process.

Depreciation of Compound Assets

Although the components are depreciated together with the compound asset, they are treated as individual assets. Each component will have a depreciation history record on its asset record. The compound asset record will have a list that shows the total of all the component depreciation, including alternate depreciation, but will have no journal entries. You can find the journal entries in the component asset record under the Components > Depreciation History subtab.

The depreciation start date of the compound asset is set to the date of the component with the earliest depreciation start date. The end date will follow the date of the component with the latest depreciation end date.

For more information about depreciating an asset, see Asset Depreciation.

Sample Scenarios for Compound Asset Depreciation

The following describes different scenarios that you may encounter when depreciating a compound asset. A corresponding table shows sample values for the compound asset and the component before and after depreciation. For each scenario described, the straight line accounting method is used to depreciate the assets on a monthly basis.

Scenario 1: Depreciate a new compound asset that contains new components, all of which have the same depreciation start date, for 1 month. Selected depreciation period is 1/31/2015.

	Before Depreciation			After Depreciation
	Compound	Component 1	Component 2	Compound	Component 1	Component 2
Asset Status	New	New	New	Depreciating	Depreciating	Depreciating
Depreciation Start Date	1/1/2015	1/1/2015	1/1/2015
Asset Life	6	3	6
Asset Original Cost	900	300	600
Asset Current Cost	900	300	600
Current Net Book Value	900	300	600	700	200	500
Cumulative Depreciation				200	100	100
Last Depreciation Period				1	1	1
Last Depreciation Amount				200	100	100
Last Depreciation Date				1/31/2015	1/31/2015	1/31/2015

Scenario 2: Fully depreciate all components of a compound asset. Each component has a different depreciation end date. Selected depreciation period is 9/14/2015.

	Before Depreciation			After Depreciation
	Compound	Component 1	Component 2	Compound	Component 1	Component 2
Asset Status	New	New	New	Fully Depreciated	Fully Depreciated	Fully Depreciated
Depreciation Start Date	1/1/2015	6/15/2015	1/1/2015
Depreciation End Date	9/14/2015	9/14/2015	8/14/2015
Asset Life	9	3	6
Asset Original Cost	900	300	600
Asset Current Cost	900	300	600
Current Net Book Value	900	300	600	0	0	0
Cumulative Depreciation				900	300	600
Last Depreciation Period				9	3	6
Last Depreciation Amount				100	100	100
Last Depreciation Date				9/30/2015	9/30/2015	8/31/2015

Scenario 3: Depreciate a compound asset whose component depreciation history record has no transaction amount. Selected depreciation period is 1/31/2015.

	Before Depreciation		After Depreciation
	Compound	Component 1	Compound	Component 1
Asset Status	New	New	Depreciating	Depreciating
Depreciation Start Date	1/1/2015	1/1/2015
Depreciation End Date	3/31/2015	3/31/2015
Asset Life	3	3
Asset Original Cost	0	0
Asset Current Cost	0	0
Current Net Book Value	0	0	0	0
Cumulative Depreciation			0	0
Last Depreciation Period			1	1
Last Depreciation Amount			0	0
Last Depreciation Date			1/31/2015	1/31/2015
Depreciation history record: 1/1/2015 — 1/31/2015; Transaction amount: 0

Depreciation of Assets with Zero and Negative Costs

The Fixed Assets Management SuiteApp supports the depreciation of assets that have zero and negative costs, so long as the combination of the affected asset costs is any of the following:

Original Cost	Current Cost	Residual Value
Negative	Negative	Negative
Negative	Negative	Zero
Negative	Zero	Zero

The minimum value that you can enter for an asset's Residual Value is zero. By default, the system uses the absolute value of all negative asset costs. Therefore, depreciation for assets with negative values is calculated using the absolute values of the original and current costs up to the zero or absolute Residual Value.

You can manually enter negative values in asset records only if the Allow Negative Asset Cost preference is enabled. For more information, see Setting Up the Fixed Assets Management System.

Important:

For the Accounting method, the system does not depreciate assets with negative costs if Allow Negative Asset Cost is not enabled. No depreciation history records or journal entries are created. Note that even if the Allow Negative Asset Cost preference is not enabled, negative costs can be entered in asset records depending on preference settings for CSV import. For more information, see General Guidelines for Importing Fixed Asset Records.

Related Topics

Fixed Assets Management Overview

Depreciation Methods

Creating Asset Records from Transactions

Creating Asset Records through CSV Import

Creating Asset Records Manually

Managing Assets

Group Tax Depreciation

French Derogatory Depreciation

Asset Disposal by Sale or Write-Off

Partial Disposal of an Asset

Revaluation of an Asset

Asset Split

Asset Transfer

Fixed Asset Recovery Script

Deleting Assets

General Notices