15.04. Asset Depreciation

Depreciation Methods

Depreciation methods can be define for asset groups in the accounting setup tab, Asset Group window or for individual assets in the Asset Setup tab, Asset (Customer) window. The following rules are applied to the asset depreciation methods:

• the adjustments or additions to asset cost will affect future depreciation rate calculations;

• asset disposal will not generate depreciation rates at the time of exit;

• depreciation methods cannot be change during an asset's lifespan;

The settings available for asset depreciation are described below:

Depreciation Type:

• Straight Line - this is based on calculating and uniformly allocating the accounting entry value for all the asset life time expressed in years;

• Accelerate - this is based on calculating and including, in the first year of use, in the exploitation expenses, of a % depreciation (up to 50%) of the asset's entry value. The yearly depreciations for the subsequent financial periods are calculated based on the amount left to be depreciated, by a linear method, for the remaining years.

  • First Year percent - depreciation registered in the first year of use;

• Monthly Declining Balance - this is based on multiplying the corresponding linear rates by a coefficient that varies along with the currently admitted life span for the respective asset, until the moment when the calculated rate is smaller or equal to the one that would have been realized via the linear depreciation method for each separate month.

  • Depreciation Tables - contains the list of coefficients and corresponding months applied to the linear depreciation amount in order to obtain the declining depreciation rates;

• Declining Balance - this is based on multiplying the corresponding linear rates by a coefficient that varies along with the currently admitted life span for the respective asset, until the moment when the calculated rate is smaller or equal to the one that would have been realized via the linear depreciation method.

  • Depreciation Tables - contains the list of coefficients and corresponding months applied to the linear depreciation amount in order to obtain the declining depreciation rates;

  • Depreciation Spread Type - method used to spread the depreciation amount obtained per year into monthly rates;

Depreciation Convention:

• Day - the depreciation for the first year will be adjusted to the number of days between the asset's first day in service and the last day of the year, divided by the number of days in a year;

• Mid Month - the depreciation for the first year will be adjusted to the number of months from the middle of the asset's first month in service until the last day of the year, divided by 12;

• Full Month - the depreciation for the first year will be adjusted to the number of months from the asset's first day in service and the last day of the year, divided by 12;

• Mid Quarter - the depreciation for the first year will be adjusted to the number of quarters from the middle of the asset's first quarter in service until the last day of the year, divided by 4;

• Half Year - the assets allocated to this convention will have their depreciation calculated from the middle of the year, with a 50% adjustment;

• Full Year - the assets allocated to this convention will have their depreciation calculated from the beginning of the year, depreciating the entire year;

Depreciation Method:

• Month - Current Period - this will recalculate the actual depreciation expenses for any adjustments that are necessary due to the error corrections or additions to the asset. Depreciation expenses adjustments are considered for the current month;

• Year - Remainder of year - this will recalculate the actual depreciation expenses for any adjustments that are necessary due to the error corrections or additions to the asset. Depreciation expenses adjustments will be accounted for each month out of those left in the year;

• Life - Remainder of life - this will recalculate the actual depreciation expenses for any adjustments that are necessary due to the error corrections or additions to the asset. Depreciation expenses adjustments will be accounted for each month out of those left in the asset's life.

Depreciation Tables

The Depreciation Tables window, located in the Customer Assets -> Setup And maintain -> Depreciation Setup menu, can be used to review and adjust the tables used for declining balance depreciation calculations. The following fields are available:

• Depreciation Table Code, Description

• A_Term - period type used:

  • • "Yearly" - the coefficient will be applied to the linear depreciation amount per year;

    • Period - the coefficient will be applied to the linear depreciation amount per month

• A_Table_Rate_Type - the applied coefficient can be a percent (Rate) or a fixed amount (Amount);

The Depreciation Schedule Details tab is used to allocate the declining balance coefficients to depreciation periods. A record should be added for each depreciation period. The following fields are available:

• A_period - month or year to which the coefficient is applied (e.g. 3 represents the third month after the "In Service Date");

• Depreciation Rate - the declining balance coefficient

Depreciation Spread Type

The Depreciation Spread Type window, located in the Customer Assets -> Setup And maintain -> Depreciation Setup menu, is used to review and adjust the methods used to spread annual declining balance amounts into monthly rates. The following fields are available:

• • Period (1 - 12) % - percent of total yearly amount allocated to each month;

Depreciation Processes

The processes used used for depreciation operations in SocrateCLoud can be found in the Customer Assets -> Processing -> Depreciation Processing menu and are described below:

Generate Batch Depreciation Rates

The process allows you to generate depreciation rates for asset groups. Before running the process you can specify the following parameters:

• Accounting Schema, In Service Date, Asset Group, Depreciation Type, Posting Type - selection filters for the assets for which rates will be generated;

• Period - period (month) for which depreciation rates will be generated.

Press Start to generate and post depreciation rates, according to the selected parameters and depreciation settings defined for each asset. For an asset, the generated rates can be viewed in the Depreciation Rates tab from the Asset (Customer) window -> Accounting Setup tab.

OBS: the process calculates depreciation rates based on the records entered in Cost Details with the "Account Date" older than the 1st day of the first depreciation month (the first depreciation month is determined by the "In Service Date" and the "Period Start");

Unpost Depreciation Rates

The process allows you to un post the depreciation rates for an asset or asset groups. Before running the process you can specify the following parameters:

• Asset Group, Asset, In Service Date, Depreciation Type - selection filters for the assets that will be unposted;

Press Start to unpost depreciation rates, according to the selected parameters. Unposting is used before updating asset information for which the depreciation rates have been posted.

Delete Depreciation Rates

The process allows you to delete depreciation rates for an asset or asset groups. Before running the process you can specify the following parameters:

• Organization, Accounting Schema, Asset Group, Asset, In Service Date Depreciation Type, Account Date, Posting Type - selection filters for the assets for which rates will be deleted;

Press Start to delete depreciation rates, according to the selected parameters. The process is used when rates that were generated are no longer valid due to unexpected events (e.g. the asset gets sold and the depreciation was calculated for the entire lifespan).

Delete Investment Rate

The process allows you to delete investment rates for an asset or asset groups. Before running the process you can specify the following parameters:

• Organization, Asset Group, Asset, In Service Date, Account Date - selection filters for the assets for which investment rates will be deleted;

Press Start to delete investment rates, according to the selected parameters. The process is used multiple investment rates need to be deleted.

Generate Batch Investment Rates

The process allows you to generate investment rates for asset groups. Before running the process you can specify the following parameters:

• Asset Group, In Service Date - selection filters for the assets for which investment rates will be generated.

Press Start to generate and post investment rates, according to the selected parameters and the investment details defined for each asset. For an asset, the generated rates can be viewed in the Investment Rates tab from the Asset (Customer) window -> Investment Details tab.

Set Fully Depreciated Asset

The process checks if depreciation rates have been posted for the entire asset value and marks the asset as "Fully Depreciated". Before running the process you can specify the following parameters:

• Organization, Asset Group, Asset - selection filters for the assets that will be checked;

Depreciation Reports

The Yearly Depreciation Report displays, depending on the selected parameters a list of assets and the corresponding asset depreciation rates registered in a specific year, period amounts and total amount.

The Monthly Depreciation Report displays, depending on the selected parameters a list of depreciation rates registered per month in a specific interval.