Contents of the Manage Depreciation Methods Screen
Use the fields and options to configure the Manage Depreciation Methods screen.
The Depr Method Code field is system-required in Asset Master and Asset Template records for depreciable assets based on "Years." The validated depreciation method codes from this screen are the only data available for selection for this field.
The data specified on this screen for each depreciation method code details specific computation parameters for the system to access during depreciation calculations, including useful life, basis for depreciation (Date of Purchase or Fiscal Year), and percentage of total depreciation per year.
Depreciation method codes from this screen are assigned to individual books in Asset Master records, as applicable, thus supplying system instructions for depreciation calculations.
Depreciation method codes are not applicable for non-depreciable records or for depreciable records for which the basis of depreciation is Units of Usage or Lease Periods.
This application consists of a primary screen, a secondary screen, and a subtask link, Auto Calc, as follows:
- Use the primary screen to define or view the depreciation code, description, parameters, basis and salvage value option.
- Use the secondary Table Window screen to define or view the percentages to be used for each year defined for the depreciation method's useful life.
- Use the optional Auto Calc subtask screen to enable automatic system calculations for the depreciation methodology that you specify. After you select the appropriate depreciation method and click the OK button, the system will calculate the appropriate percentage for each year and will display the results in the Table Window.
You should set up depreciation method data as one of the first steps in the initialization process, before you begin to add data in an Asset Master record (and in an Asset Template record if you use this optional feature).
If you have multiple companies and you need depreciation methods that are specific to one company that should not be used by other companies, you should create the special-purpose depreciation method codes along with those codes that will be used by all companies. Because this is a "Corporate" table for use by all companies and the system cannot therefore enforce company-specific rules, you should establish specific internal control procedures on the use of depreciation method codes.
You should set up depreciation method data as one of the first steps in the initialization process. The Depr Method Code field is a system-required field in the G/L Book Info tab of the Manage Asset Master Information screen (and/or the Manage Asset Template Information screen) if you have indicated that the asset is Depreciable and that depreciation is based on Years in those two screens. Depreciation method codes are not applicable for non-depreciable records or for depreciable records for which the basis of depreciation is Units of Usage or Lease Pds. Refer to a related topic, Initialization Procedures, for additional information.
Although you can add to, delete, or change the information in this screen (within the system rules) at any time, use caution in the timing of your edits, which could alter the calculation of depreciation and produce unexpected results when you post depreciation to the General Ledger.
Identification
Use the fields in this block to define or view the depreciation method code and description.
| Field | Description |
|---|---|
| Depreciation Method Code |
For a new code, enter the depreciation method code. For an existing code, use Query (or press F11) to select the desired code. The codes that you establish for use with your asset records should be specific to your company requirements. For ease in recognition, you may want to establish meaningful codes that identify the type of depreciation method (such as straight-line, declining balance, or sum-of-the-years'-digits) as well as the years of useful life. For example, a straight-line method used for an asset with a three-year useful life might be set up with an "SL3" depreciation method code. There is no virtual limit to the number of depreciation method codes that you can set up on this screen. You may set up codes of different lengths up to a maximum of six characters, and there can be a mix of alphabetic, numeric, and/or combinations in your code definitions. |
| Description |
For a new code, enter the description for this depreciation method code. Although only a single character in this field fulfills the system requirement for a description, you will find it more beneficial to supply a meaningful description, since your entry will display when using Lookup on depreciation methods codes and in reports that use this field. |
Depreciation Method Parameters
Use the fields in this group box to define or view the years of useful life and the total percentage to depreciate.
| Field | Description | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Years of Useful Life |
Enter the number of years (useful life) over which an asset should be depreciated using this depreciation method. Accepted values in this field range from 1-99. Note: The
Years of Useful Life field on this screen is used only for depreciation calculations, and it may be different from the optional value that you enter in the
Useful Life field of the Asset Master record.
For half-year convention methods, you will need to enter a value in this field that exceeds the actual useful life. Example Straight-Line Method, 5-Year Life, Half-Year Convention
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| Total % to Depreciate |
Enter a percentage in this numeric field to indicate the percentage of the asset to be depreciated using this depreciation method. Your entry in this field must be greater than zero and cannot exceed 100%. You can enter up to three integers and four decimal places (for example, 100.0000%). You should not reflect your overall company policies regarding salvage percentages in this field. Although you can indicate whether salvage value should be deducted before depreciation is calculated for each depreciation method elsewhere on this screen, you should specify a salvage value and salvage percentage, if applicable, on a record-by-record basis directly in the Asset Master records. |
Depreciation Basis
Use the fields in this group box to select or view the depreciation basis. The Date of Purchase basis option is selected by default. The differences between a Date of Purchase basis and a Fiscal Year basis are specifically explained in the FAQs section.
| Field | Description |
|---|---|
| Date of Purchase |
This option is selected by default. If you link a Date of Purchase basis with your depreciation method, the system references the date of purchase for each asset. This "starting" point for each book is normally entered in the Depr Start Date field in Asset Master records. For this basis, depreciation begins in the month of purchase (or in the month following the purchase, and so on, depending on your company policy) and continues for the specified number of years of useful life. Regardless of where you are positioned in your fiscal year, the Date of Purchase basis expenses depreciation in the first year that is proportional to the amount of time that the property was owned during the fiscal year. Unless the date of purchase coincides with the first period of your fiscal year (in which your purchase year is identical to your fiscal year), a purchase year crosses fiscal years. |
| Fiscal Year |
If you link a Fiscal Year basis with your depreciation method, the system expenses the full annual depreciation amount in the current fiscal year and allocates the annual amount among the number of accounting periods remaining in the first fiscal year. Use of the Fiscal Year basis generally accelerates depreciation in the first fiscal year when compared to depreciation using the Date of Purchase basis (except when the date of purchase coincides with the first period of the fiscal year). If you use a half-year convention, the same methodology is applicable, but the percentage of annual depreciation is half that of a full year in the first and last years. |
Salvage Value
Use the single field in this group box to specify if you want the system to subtract salvage value from asset cost prior to calculating depreciation.
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| Subtract Salvage Value Before Calculation |
You can specify salvage value or salvage percentage on a record-by-record, book-by-book basis in Asset Master records. If you specify a salvage percentage, the system automatically computes the salvage value based on the value(s) in the Total Cost field(s), as applicable. Select the Subtract Salvage Value Before Calculation check box if you want the system to subtract applicable salvage value from the cost of an asset before performing depreciation calculations, for all assets to which this depreciation method has been assigned. If you select this check box, the system will deduct the salvage value displayed in the Asset Master record from the total cost for each book before depreciation calculations begin. This value, which represents the total cost adjusted for salvage, automatically displays in the Amount to Depreciate field(s) in Asset Master records. You can also specify default salvage percentages for the G/L book and the other optional books if you set up Asset Templates. If you clear this check box, the system will ignore any salvage value amount(s) displayed in the Asset Master records before depreciation calculations begin. In this circumstance, the value in the Amount to Depreciate field(s) for any book in an Asset Master record should be equal to the value in the Total Cost field. Refer to the specific examples below, each of which illustrates a different way in which to handle salvage value relative to the computation of depreciation based on years:
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| Cumulative % |
As you enter percentages in the Percent field for each year in the Table Window, the system automatically displays the cumulative total in this non-editable field. In order to save this record, the value in the Cumulative % field must equal the value in the Total % to Depreciate field. |
Table Window
Use the fields in this Table Window to enter or view depreciation years and percentage data. You can enter this data manually or you can specify data in the Auto Calc subtask that enables the system to automatically populate this data.
The information from this Table Window is used to direct the system calculation of depreciation on a method-by-method basis, based on your specifications and the characteristics of the individual asset record.
| Field | Description | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year |
Enter which year of the useful life you are defining. For example, if you entered "3" in the Years of Useful Life field, you will probably enter values of "1," "2," and "3" in this field for a conventional three-year method. You cannot enter a value in this field that is greater than the number of years entered in the Years of Useful Life field in the Depreciation Method Parameters group box. If you need to enter a year that is greater than the total years specified, you should first edit the value in the Years of Useful Life field. |
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| Example |
The example below illustrates how you should set up the data in this Table Window for a straight-line depreciation method with a five-year life using a half-year convention. Example: Straight-Line Method, 5-Year Life, Half-Year Convention
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| Percent |
Enter a corresponding percentage for each year specified in the Years of Useful Life field. Although there is no system validation that requires you to make an entry for each specified year, the system will not compute depreciation for a year that is excluded or for a year in which the percentage is zero. As you enter percentages in this field, the cumulative total will automatically display in the field in the Cumulative % field. To save this record, the value in the Cumulative % field must equal the value in the Total % to Depreciate field. The example below illustrates how you should set up the data in this table window for a straight-line depreciation method with a five-year life using a half-year convention. |
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| Example |
Example: Straight-Line Method, 5-Year Life, Half-Year Convention
Note: As an option, you can choose to have the system calculate the depreciation year and percentage data for you in the Table Window using the Auto Calc subtask on this screen.
In the Auto Calc subtask you can select the depreciation methodology and conditions to be used in the calculation. Automatic system calculations can be executed for three common depreciation method types: straight-line, declining-balance, and sum-of-the-years'-digits. Automatic system calculations can be overwritten as needed. |
Subtask
| Subtask | Description |
|---|---|
| Auto Calc | Click this button to open the Auto Calc subtask where you can have the system calculate the depreciation percentage data using standard depreciation methodologies. After you select the appropriate depreciation method and click the OK button, the system will calculate the appropriate percentage for each year and will display the results in the Table Window. |