Depreciation Process

The following describes how the system processes depreciation:

1. It only considers records that have the Depreciable checkbox selected for the asset record.
2. It references the Last Post Date field to see when the record was last processed. Proceed to Step 3 if the asset has a Last Post Date. If this field is blank (the record has not been processed), the Date Acquired field is used to calculate the Last Post Date, as described below.
   
   • If the Date Acquired is before the Current Fiscal Year Start Date (from the Fixed Assets Profile), the Last Post Date is set to the Fiscal Year Start Date. This should only occur if an asset was acquired in the previous year and originally had its Depreciable checkbox cleared. If the Depreciable checkbox is selected in the new fiscal year, you must start depreciating the asset. 
     1. Example: Your fiscal year begins on July 1, 2018, and the asset is acquired on June 17, 2018. The Depreciable checkbox is originally blank. On August 28, 2018, you select the checkbox and post the depreciation. Depreciation for this asset begins accumulating on July 1, 2018, the beginning of the fiscal year.
   • If the Date Acquired is after the Current Fiscal Year Start Date (from the Fixed Assets Profile), the Last Post Date is set to the Date Acquired. 
     1. Example: The fiscal year start date is July 1, 2018, an asset is acquired on July 17, 2018, and you have not posted depreciation for it. The Last Post Date is set to July 17, 2018.
3. This step only applies if the system calculated the Last Post Date in Step 2. The system takes a second step to determine the Last Post Date to use for calculating the depreciation period for the asset:
   
   • If the Last Post Date is on or before the 15th of the month, the system uses the first day of the month to calculate the depreciation period. The asset is depreciated for a full month the first time it is depreciated. Example: For an asset with a calculated Last Post Date of January 8, 2018, the system resets the Last Post Date to January 1, 2018.
   • If the calculated Last Post Date is after the 15th of the month, then the calculation is based on the first day of the next month. Example: An asset's calculated Last Post Date is January 17, 2018. Depreciation begins on February 1, 2018 for this asset.
4. The system refers to the Disposal Date to determine how depreciation will be calculated for the asset:
   
   • If the Disposal Date is after the Depreciation Posting Date (current system date), then Depr. Period = [(Depreciation Posting Date Month - Last Post Date Month) + 12 (Depreciation Posting Date Year - Last Post Date Year)] ÷ 12. Proceed to Step 6. 
     1. Example: The Depreciation Posting Date is February 28, 2018. The Last Post Date is January 31, 2018. If the Disposal Date is blank or after February 28, 2018, then the Depr. Period = [(2 - 1) + 12(0)] ÷ 12 = 1 ÷ 12 = 0.08333333333333.
     2. Example: The Depreciation Posting Date is February 28, 2018. The Last Post Date is December 31, 2017, and the Disposal Date is blank or after February 28, 2018. The Depr. Period = [(2 - 12) + 12(1)] ÷ 12 = 2 ÷ 12 = 0.1666666666667.
   • If the Disposal Date is on or before the Depreciation Posting Date, then Depr. Period = (Disposal Date Month - Last Posting Date Month) ÷ 12 and the system next refers to the day of the Disposal Date to determine whether depreciation should be accumulated. Refer to Step 5.
     1. Example: The Last Post Date for an asset is January 31, 2018, and the Depreciation Posting Date is February 28, 2018. If the Disposal Date is February 15, 2018, then the Depr. Period = (2 -1) ÷ 12, and the system performs Step 5.
5. This step only applies to assets with a Disposal Date on or before the Depreciation Posting Date. For this kind of asset record, the system next checks the day from the Disposal Date to determine whether to accumulate depreciation.
   
   • If the Disposal Date is on or before the 15th of the month, no depreciation is accumulated in the month for the asset.
     1. Example: The asset's Disposal Date is February 15, so no depreciation is accumulated in February.
   • If the Disposal Date is after the 15th of the month, then depreciation is accumulated for that month.
     1. Example: The asset's Last Post Date is January 31, 2018, and the Depreciation Posting Date is February 28, 2018. If the Disposal Date is February 17, 2018, then depreciation is accumulated for February.

6. The system uses the asset's Depreciation Method to calculate depreciation:

   Method	Calculation
   Straight-line method	Depr. Amount = (Depr. Period ÷ Depr. Life) x Depr. Basis
   Double Declining Balance method	Depr. Amount = (Depr. Period ÷ Depr. Life) x 2 x (Initial Cost - Accumulated Depreciation)
   150 method	Depr. Amount = (Depr. Period ÷ Depr. Life) x 1.5 x (Initial Cost - Accumulated Depreciation)

   Examples: Each example assumes the asset has an Initial Cost of $1000, a Depreciable Life of five years, and a Date Acquired of January 1, 2018. The Depreciation Posting Date is January 31, 2018.

   • Straight-line method: If there is no Salvage Value, the Depr. Basis = $1000. The Depr. Amount = (0.08333333333333 ÷ 5) x 1000 = 16.6666666667 or $16.67.
     If the asset has a Salvage Value of $100, the Depr. Basis = $900. The Depr. Amount = (0.08333333333333 ÷ 5) x 900 = $15.00.
   • Double Declining Balance method: Since this is the first month of depreciation, Accum. Depreciation = 0. The Depr. Amount = (0.08333333333333 ÷ 5) x 2 (1000 - 0) = 33.3333333333 or $33.33.
     If this were the second month of depreciation, Accum. Depreciation = 33.33. The Depr. Amount = (0.08333333333333 ÷ 5) x 2 (1000 - 33.33) = $32.22.
   • 150 method: Since this is the first month of depreciation, Accum. Depreciation = 0. The Depr. Amount = (0.08333333333333 ÷ 5) x 1.5 (1000 - 0) = $25.00.
     If this were the second month of depreciation, Accum. Depreciation = 25.00. The Depr. Amount = (0.08333333333333 ÷ 5) x 1.5 (1000 - 25.00) = $24.37.
7. The system checks results and adjusts them as follows:
   
   • If the Depr. Amount is negative, it is reset to zero.
   • If the (Depr Amount + Accum Depreciation) > (Initial Cost - Salvage Value), the Depreciation Amount is set equal to (Initial Cost - Salvage Value - Accum Depreciation).
   • If Initial Cost = (Accum Depreciation + Depr. Amount), the asset has been fully depreciated.
8. The system updates the Accumulated Depreciation, Last Post Date, and Remaining Book Value fields.
9. The Depreciable checkbox clears when the asset is fully depreciated.