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Fixes asset's depreciation after subsequent acquisition

pter_forr
Participant
0 Kudos

Dear Experts,

An asset has the following values:

APC = 27,300

Useful life = 37

Remaining life = 8

and its depreciation type has:

Depreciation Method = straight-line

Calculation Method = Percentage of Acquisition Value

Percentage = 33%

Following a subsequent acquisition of 27,300 the monthly depreciation is not the double of the original one (acquisition value was doubled by the subsequent acquisition),

but the original monthly depreciation + 27.300 / 8 (the subsequent acquisition's value / the remaining life)

I would expect such a behaviour only if the Calculation Method was "Net book Value / Remaining Life".

Am I misunderstanding how it should work? How to have it to increase the depreciation "by the amount which would have been necessary to fully depreciate the addition over the original useful life of the asset" as told in the FA help?

In fact I am a little bit confused also by having the opportunity to set the useful life when the calculation method is "Percentage of Acquisition value", so should be based on a percentage. The same confision on the other side, when a percentage is to be set at the depreciation type's calculation despite choosing a time based calculation method.

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Answers (1)

Answers (1)

Joselito
Advisor
Advisor
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Dear Mr Forró

How the acquisition and subsequent acquisitions affect the base of depreciation will depend on how the period-control settings are set in the depreciation type:

From your description I do believe that your settings for period control are ' pro-rata temportis'/'exact daily'

meaning that the base of depreciation is a affected taking into account the date of the acquisition and subsequent acquisition.

I will use a simple example

Depreciation type

method: straight line

period control: pro-rata temportis'/'exact daily'

Calculation: percentage of acquisition value, 30%

The Fixed asset is defined with 24 months Total useful life

The Fiscal year definition is : start 01.01.2010 to 31.12.2010, sub period 'month' and 12 sub periods

First fiscal year 2010

1- Perform first acquisition on 01.07.2010 (at the half of the Fiscal year) for 1200

Depreciation for a full year = 1200 * 30% => 360

Because the period control is set to 'exact daily basis' , the depreciation for 2009 will be 180 (since 01.07.2010 until 31.12.2010)

2- On 1.10.2010 we add a subsequent acquistion for 600

- For this subsequent acquisition, depreciation for a full year = 600* 30% = 180

- Because the period control is is set to 'exact daily basis', the depreciation for this part will be 45 (since 01.10.2010 until 31.12.2010)

As a result the total planed depreciation for Fiscal year 2010 is 180+45 =225

During the second fiscal year 2011

(in case that no other acquisition is entered)

APC = 1800 , so depreciation for Fiscal year 2011 = 1800*30% = 540

During the third and last Year 2011

because is the last year of useful life, the system will automatically depreciate the rest

of net book value remaining

In this example:

Total APC = 1800

Depreciation Accumulated until 31.12.2011 = (225+540) => 765

To fully depreciate the asset at end of useful life the depreciation of year 2011 = 1035

I do hope that this example will help you to understand the calculations done by the Add-on

Jose Antonio Castillo

SAP Business One Support Senior Consultant

pter_forr
Participant
0 Kudos

Dear Mr. Castillo,

You are right, we are using "pro-rata temporis" and "exact daily". And yes, it is working as you indicate it, which is actually the problem. Thank you to confirm not only our system is working that way. We do set the depreciation to percentage of acquisition value because we want it to depreciate by a fix percentage, and not by the life time as it seems to be working.

I tried to set a high life time in order not to run in the problem of having the assets depreciated at a higher rate than intended at the end of life, but is does not work, it leads to a lower depreciation than expected.

The goal would be to reach the functionality indicated in the help, which means increasing the depreciation

"by the amount which would have been necessary to fully depreciate the addition over the original useful life of the asset". It may probably be done, if we calculate and set each time the suitable useful life needed for that. It sounds weird however having to help the addOn with a calculation when doing a subsequent aquisition. Is that really the only way?

Peter Forro

atif_farooq
Active Contributor
0 Kudos

Dear Forro:

We are facing the same issue. Were you able to resolve it ?

Thanks

pter_forr
Participant
0 Kudos

Dear Atif,

I do still find it weird, but it seems to be its intended behavior. We have made an xls datasheet we are using each time when we do a subesquent acquisition to calculate the new life time, and do adjust manually in SAP the usefull/remaining life time which brings the depreciation to the right value.

It was the case with the addon even in 8.8, for version 9.0 I cannot tell, because the fixed assets data did not migrate as expected when upgrading in the beginning of this year, and we are still waiting for the support to get a solution.

Peter Forro

Joselito
Advisor
Advisor
0 Kudos

Hi:

Some observations

The concept of calculation is that changes on the base for calculation (APC , or NBV) caused by subsequent acquisition or a retirement will only take effect, from the moment when this change happens. (the system allows, depending on the definition of the depreciation type to move that moment to a certain date in the same fiscal year of that change, before or after according to the: 'Depreciation Convention' for subsequent acquisitions and retirements ),

So the change will only affect the planned depreciation , increase or decrease, from then and until end of useful life, but not from the start depreciation date. This is the reason why a subsequent acquisition does not cause an increase in planned depreciation in the same proportion.

Peter Forro, by changing the life parameters shows this logic because by changing the remaining life is as if the additional acquisition had had the effect of extending the life of the asset in same proportion.

Jose