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What effect will a cost change have on depreciation calculations?

Changes in cost primarily affect assets with posted depreciation. Changes do not affect assets for which you have not yet begun computing and posting depreciation.

The system will compute increased or decreased depreciation as a result of cost changes based on your selection in the System-Wide Configuration for Depreciation Calculations group box on the Configure Fixed Assets Settings screen. The option you select controls how the system distributes "catch-up" depreciation to ensure that the correct adjustment amount of any "delayed" depreciation for the current year (purchase year or fiscal year) will be computed. A "catch-up" situation could occur, for example, if changes were made to fields used to calculate depreciation (such as Cost) after depreciation for that asset had already begun and was posted (or if the acquisition of an asset was communicated after-the-fact, or if there was a delay in computing depreciation after acquisition, and so on).

"Catch-up" depreciation is not "extra" depreciation. Provided that the correct depreciation start date was entered for the asset, the total amount of annual depreciation will be correct at the end of the current depreciation year.

Two system-wide "catch-up" options are available:

  1. Spread among remaining periods in PY or FY

    Select this option to spread the amount of "catch-up" depreciation evenly throughout the remaining periods in the current purchase year or fiscal year, as applicable. If you choose this option, the system divides the amount of catch-up depreciation by the number of periods remaining in the depreciation year and includes this amount in each period's depreciation.

  2. Added to current period amount

    Select this option to include the total amount of catch-up depreciation in the depreciation for the current period, regardless of basis.

Regardless of the "catch-up" methodology you select, you can always apply a different methodology on an asset-by-asset basis by making manual edits. As long as the asset is still in its first year of depreciation, however, the depreciation computed and posted by the end of the year will be correct when considering the change.

Cost changes discovered after the initial depreciation year should be set up as a separate asset with the same asset ID but a different Item Number. This will ensure that the costs depreciate correctly.