Setting Up Depreciation Processing

This chapter provides an overview of depreciation processing and discusses how to:

• Set up depreciation calendars.

• Set up depreciation conventions.

• Set up depreciation schedules.

• Define depreciation terms.

• Define depreciation limits.

• (DEU) Set up multishift codes for German depreciation processing.

Understanding Depreciation Processing

Asset Management supports all common methods for depreciation processing and corresponds to Generally Accepted Accounting Principles (GAAP) and International Accounting Standards (IAS). Commonly used depreciation functionality is delivered and ready to be personalized for your enterprise needs. How you define your depreciation processing here determines the depreciation calculation conventions, schedules, terms, and limits for your assets and to meet subsequent periodic asset depreciation reporting requirements.

Some assets may be depreciated on an annul basis, while others accumulate depreciation monthly or quarterly. Defining depreciation calendars enables you to apply periodic depreciation allocations to assets.

Defining depreciation conventions enables you to establish the start of date for asset depreciation. This is used in conjunction with an asset’s placed-in-service date to calculate the correct depreciation amount for an asset.

A depreciation schedule is a special type of depreciation method. Depreciation schedules are tables specifying the percentage of depreciation expensed for each period and must be defined for assets using this treatment.

Depreciation terms are typically used in global environments where it is necessary to adjust depreciation calculations to meet local requirements.

Usually, depreciation limits are imposed by local taxing authorities. Defining depreciation limits enables you to apply the limits to assets so required.

Multishift codes are used in Germany to accelerate asset depreciation by specifying usage across multiple production shifts. Depreciation is increased as useful life is decreased. Enabling multishift codes applies this treatment to depreciation calculations.

Setting Up Depreciation Calendars

To set up depreciation calendars, use the Detail Calendar (DETAIL_CALENDAR) component.

This section lists the pages used to define calendars for depreciation allocation.

Page Used to Set Up Depreciation Calendars

Setting Up Depreciation Conventions

To set up depreciation conventions, use the Depr Convention Builder (CONV_BLDR_PNLG), Depr Convention Definition (DEPR_CONVENTION), Depr Convention Multiple Copy (CONV_COPY_ALL_COMP), and Depr Convention Single Copy (CONV_COPY_PNLG) components.

This section provides an overview of depreciation conventions and discusses how to:

• Generate conventions.

• Modify conventions.

See Also

Processing Asset Depreciation

Understanding Depreciation Calculations

Understanding Depreciation Conventions

Depreciation conventions, in combination with an asset’s placed-in-service date, determine when depreciation starts. For example, where a following month convention is used and an asset is placed in service on February 1, depreciation begins on March 1. Asset Management is delivered with a wide selection of depreciation tables, including depreciation conventions. Before you set up your own Depreciation Conventions table, review the delivered tables to determine if you can use them as is or if modifications are required.

Asset Management provides a series of pages that enable you to:

• Define a depreciation convention and automatically generate start, end, and begin depreciation dates based on a selected calendar.

• Modify the dates associated with a convention without regenerating it.

• Copy conventions associated with a setID or calendar:

  • Copy one convention associated with a setID or calendar to another setID or calendar.

  • Copy all conventions associated with a setID or calendar to another setID or calendar.

Pages Used to Set Up Depreciation Conventions

Generating Conventions

Access the Depreciation Convention page.

System Maintained	Select to use standard depreciation conventions that are delivered with and maintained by the PeopleSoft system.
Period Option	Select Mid Period or Days. Days to begin depreciation based on the value specified in the Which Day field. Use Mid Period for mid-month and mid-quarter conventions.

Generate Options

This table summarizes how the system determines the begin depreciation date for each convention type, and indicates which fields can be overridden:

Modifying Conventions

Access the Depreciation Convention page.

Select System Maintained to use standard depreciation conventions that are delivered with and maintained by the PeopleSoft system.

Note. You cannot enter the from date, to date, or the begin depreciation date for system-maintained depreciation conventions.

Setting Up Depreciation Schedules

To set up depreciation schedules, use the Depreciation Schedule Definition (DEPR_SCHEDULE_DEFN) component.

This section provides an overview of depreciation schedules and discusses how to define depreciation schedules.

Understanding Depreciation Schedules

There are several different methods for calculating depreciation. Each depreciation method is an equation by which depreciation is calculated. In most methods, the same equation is used to calculate depreciation for each period. A depreciation schedule is a special type of depreciation method. Depreciation schedules are tables specifying the percentage of depreciation expensed for each period. Currently, the PeopleSoft system delivers schedules (DEPR_SCHED_TBL system table) for the following standard IRS depreciation methods:

• Declining balance with straight-line switch:

  • 200 percent

  • 175 percent

  • 150 percent

  • 125 percent

• Sum-of-the-years’ digits.

• ACRS (Accelerated Cost Recovery System), GDS (General Depreciation System), ADS (Alternative Depreciation System).

• MACRS (Modified Accelerated Cost Recovery System), GDS, ADS.

Note. Standard depreciation schedules cannot be used for short tax year processing. For short tax year processing, you need to set up special schedules that have the short tax year worked into them.

Asset Management depreciation schedules are based on the percentage depreciation tables found in IRS Publication 534. You can modify existing depreciation schedules or add new schedules, by using the Depreciation Schedule page. On the Depreciation Schedules page, the method is DB150 with a switch to straight line. The in-service period for each year of the asset’s life is the key to determining the percentage of depreciation allowed for any one year. For example, suppose that your organization runs on a monthly calendar and places an asset in service in January 1997. View Year of Life 1, In-Service Period 1 to find the percentage allowed in the first year; view Year of Life 2, In-Service Period 1 to find the percentage allowed for the second year, and so on.

Page Used to Set Up Depreciation Schedules

Defining Depreciation Schedules

Access the Depreciation Schedules page.

Note. The schedule periods that you set up should reflect the periods set up in your calendar.

See Also

Processing Asset Depreciation

Understanding Depreciation Calculations

Defining Depreciation Terms and Rates

To set up depreciation terms, use the Terms Definition (DEPR_TERMS_DEFN) component, the Rate-User Defined (UD_DEPR_RATE) component, and the Period Allocation (RUN_AMCALLOC) component.

This section lists the pages used to set up depreciation terms and rates and discusses how to define depreciation terms.

Pages Used to Define Depreciation Terms

Defining Depreciation Terms

Access the Depreciation Terms page.

Depreciation terms are used to adjust depreciation calculations so that they comply with specific country requirements. Using additional terms affects how depreciation is calculated:

See Also

Processing Asset Depreciation

Understanding Depreciation Calculations

Defining Depreciation Limits

To set up depreciation terms, use the Limits (DEPR_LIMIT_DEFN) component.

Depreciation limits are used to specify the maximum amount of depreciation that you can expense on your assets for each year of life.

This section discusses how to define depreciation limits.

Page Used to Define Depreciation Limits

Defining Depreciation Limits

Access the Depreciation Limits page.

If you choose, you can use the delivered Depreciation Limit table to reduce the number of table setup tasks. Asset Management is delivered with limits based on U.S. tax law. Currently, this defines depreciation limits for luxury automobiles.

See Also

Processing Asset Depreciation

Understanding Depreciation Calculations

(DEU) Setting Up Multishift Codes

To set up multishift codes, use the Multi-Shift Codes (MULTI_SHIFT_DEFN) component.

This section provides an overview of multishift codes and lists the page used to define multishift codes.

Understanding Multishift Codes

German businesses can accelerate their depreciation by specifying usage across multiple production shifts. This increases the depreciable amount and reduces the useful life. This functionality was developed to satisfy German asset accounting rules. You can do so by establishing codes for each additional shift that indicate the rate by which annual depreciation should increase. Once you have defined these codes, you can select them for assets as they are added to the system. When you run depreciation, the Depreciation (AM_DEPR_CALC) application engine applies the rates to the depreciation calculations. As annual depreciation increases, the useful life of an asset decreases.

The following tables show the effect of multishift codes on depreciation amounts and useful life. In the tables, the example assumes that the asset has a cost of 1,000 EUR, a useful life of 10 years, and an in-service date of January 1, 2001. The end depreciation date is December 31, 2010. It is being depreciated by using the Straight Line method.

Example Without Multishift Rates

The following table shows depreciation with no multishift rates applied.

Example with Multishift Rates

In the following multishift operation, the Two Shifts Factor has been established as 50 percent and the Three Shifts Factor has been established as 100 percent. Annual depreciation therefore increases, and the asset’s useful life decreases from ten years to seven years:

Example with Multishift Rates by Accounting Period

The next multishift operation demonstrates multishift rates by accounting period:

Note. Zero or no accounting period denotes that the whole fiscal year uses the same number of shifts. Accounting period 1 to 13 indicates multishift operation applies only to that specific period. If you don’t set up the fiscal year or accounting period, one shift operation appears by default.

Page Used to Set Up Multishift Codes