Entering Capital Asset Assumptions

Add or modify assumptions for planning capital assets such as depreciation and amortization, funding assumptions, cash flow and funding assumptions, and other expense assumptions.

These assumptions drive calculations using the built-in best practice and formulas, using driver values you enter.

You can set these default assumptions at the entity level or at the No Entity (global) level. If no assumptions are set at the entity level, global assumptions are used in calculations.

  1. Click Investments Capital Investments icon, Existing Assets Capital Existing Assets icon, or Intangibles Capital Investments icon.

    Note:

    You enter assumptions for each asset type and they are stored separately.
  2. Click Assumptions Capital Assumptions icon.
  3. Select the horizontal tab for the asset assumptions you want to enter and enter assumption details. Change the members on the Point of View if needed to enter assumptions for other members.
    • Depreciation Assumptions—For each asset, enter:
      • Useful Life (in Years)—Indicates the useful life (in years) of assets: the period during which an asset is expected to be usable for the purpose it was acquired and used for depreciation and amortization calculations.

      • Depreciation Method— For new and existing assets only. Straight Line, Sum of Years’ Digits, Declining Balance Year, Declining Balance Period, or No Depreciation.

      • Depreciation Convention—For new and existing assets only. ProRate Beginning Period, ProRate Actual Date, Mid Period.

      • Amortization Method—For intangibles only. Indicates the amortization method to use for assets. Only applicable for assets with a finite useful life. Finite (spreads the asset value evenly over the useful life of the asset), Indefinite lived (no amortization). Only Straight Line method is supported.

      • Low Value Lease Term (in Months)—For lease assets, if IFRS16 – Standard is enabled, enter a threshold value. Lease assets that meet the low value threshold you enter, for example a lease value term less than 12 months, are calculated using the IFRS16 standard for low value assets, and are charged off on the P&L rather than being treated like other assets.

      • Low Value Lease Amount—For lease assets, if IFRS16 – Standard is enabled, enter a threshold value. Lease assets that meet the low value threshold you enter, for example a lease value less than $5,000, are calculated using the IFRS16 standard for low value assets, and are charged off on the P&L rather than being treated like other assets

    • Funding Assumptions—For each asset, enter:
      • Cash Flow Incidence—Determines the cash flow for capital purchases; the assumption by which the pattern of cash flow is defined. Selections are: Before 2 Months, Before 1 Month, Same Month, Next Month, After 2 Months, After 3 Months, After 4 Months, or Staggered. The selection made directly impacts the Cash Flow statement.

        In a 13-period application, Month does not represent a calendar month but the period defined through the 13 period calendar.

      • Cash Flow Staggered Periods—Determines the number of cash flow periods if the cash flow incidence is staggered.

      • Funding %—Percentage of the capital purchases funded by an external source.

      • Funding Incidence— Determines the funding for the capital purchases; the assumption by which the pattern of cash inflow is defined. Selections are: Before 2 Months, Before 1 Month, Same Month, Next Month, After 2 Months, After 3 Months, After 4 Months, or Staggered.

      • Funding Staggered Periods— Determines the number of funding periods if the Funding Incidence is staggered.

    • Other Expenses—Enter assumptions for other expenses such as the percentage for Repairs, Insurance, Maintenance, and Taxes.

      To assign expense drivers to another plan year, select Assign % Drivers from the Actions menu. This option allows you to copy drivers from one year to another, varying by a specified increase in percentage. For example, if insurance is 2% and you select Assign % Drivers and increment by 2, then the insurance becomes 4%.

When there is a change made in assumptions, for example adding new assumptions or modifying assumptions, on the Other Expense Assumptions page, highlight the asset class you modified, and then select Synchronize Drivers from the Actions menu.

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Learn about IFRS16 in Capital.

video png Overview: Lease Assets in Capital Planning for IFRS 16