Processing Asset Depreciation

This chapter lists prerequisites, provides overviews of depreciation processing and depreciation of group assets, and discusses how to:

• Process depreciation.

• Expand depreciation by period.

• Create pending depreciation transactions.

• View depreciation-related information.

• Adjust accumulated depreciation.

• Run depreciation reports.

Prerequisites

Before you begin to depreciate assets, you must set them up with required depreciation attributes.

You must set up the following attributes:

• Depreciation method.

• Prorate convention.

• Depreciable basis.

• Estimated useful life.

• Placed-in-service date.

See Establishing Asset Management Business Units.

See Setting Up Asset Profiles.

See Setting Up Depreciation Processing.

See Adding and Maintaining Assets.

Understanding Depreciation Processing

Asset Management can calculate depreciation for more than 18,000 different scenarios, depending on the depreciation attributes that you select. Most standard depreciation methods and prorate conventions are delivered, along with functionality for you to define your own depreciation methods and prorate conventions. In the United States, Asset Management calculates tax credits and tax credit recapture. Standard depreciation reports are provided, as well as reports that enable you to comply with the U.S. Tax 40% Rule, the U.S. Alternative Minimum Tax (AMT), and the U.S. Adjusted Current Earnings (ACE). Outside the U.S., Asset Management provides depreciation methods that are commonly used in Europe, Australia, India, and Japan, as well as other methods that are used globally.

Asset Management calculates the annual depreciation based on the asset’s life, depreciable cost basis, placed-in-service date, and any depreciation limits that you specify. You can set up required depreciation attributes on three levels: You can enter them in your business unit books, define them when you set up asset profiles, or specify them when you add assets to the system.

When you set up your business unit books, specify whether each book is a financial book, a tax book, or a financial book with tax information. This specification acts as a filter, enabling you to select options that correspond to the book type that you specified. For example, if you define a book as a tax book in the United States, Asset Management does not allow you to select depreciation attributes that aren’t supported by U.S. federal tax code.

Asset profiles function as templates. They provide a quick way to enter asset information, especially depreciation criteria. Rather than enter the book, method, convention, life, and tax credit information each time that you add an asset, you can use the asset profile to supply that information by default. When you enter assets, specify the profile ID. If any depreciation information in the profile does not apply, you can override it.

You can also specify depreciation attributes as you add assets to Asset Management. Do this if the asset profile does not contain the depreciation criteria that you want for the asset. If you use more than one book, specify the depreciation criteria for each book.

To ensure correct depreciation processing, the PeopleSoft detail calendar that you use must include at least five years prior to the life of the oldest asset. For example, if the life of the oldest asset began on January 1, 1990, your calendar must begin no later than January 1, 1985. These prior periods are required for correct depreciation processing.

Build detail calendars beyond the end depreciation date of the asset, as well. When you do this, the system calculates depreciation over the longer period correctly for any added assets that have a longer than usual service life. If any short tax years are contained within this five-year period, create a calendar of more than five years to ensure correct depreciation.

If you use a depreciation method that relies on tables specifying the percentage of depreciation that is expensed for each period, review the delivered depreciation schedules. If you use depreciation schedules that are different from those delivered, you must add a schedule with the appropriate percentages for each in-service period for each year of life.

Asset Management provides all standard prorate conventions. In addition, it enables you to build new conventions based on calendars and to copy conventions from one SetID to another as appropriate.

Note. Asset Management enables you to change both deprecation conventions and schedules as you deem necessary. If you change either the schedule or convention, you get a warning that the convention and the schedule do not agree. When you save your change, PeopleCode changes the convention or the schedule for you. The depreciation will calculate correctly whether you enter a change to schedule or convention and in either order.

Steps for Processing Depreciation

Follow these steps to process depreciation:

1. Run the Depreciation Calculation process (AM_DEPR_CALC).

2. Review open transactions.

3. Change depreciation attributes and expand periods as needed.

4. Review the depreciation processing results for errors.

5. Create pending depreciation transactions.

6. Create period depreciation accounting entries.

   When you have completed processing depreciation, you must go on to create accounting entries for the period depreciation. Before you create any accounting entries, check the processing options to determine whether the system runs processes automatically or whether you must schedule processing.

   To create period depreciation accounting entries:

   • Determine which periods are open to ensure that depreciation is expensed to the correct period.

     To verify periods, use the Establish Business Units component, and access the Asset Management Definition page. Click the Update Open Periods link to review open and closed periods on the Open Period Update page.

     If the open periods show that the current accounting period is open, you can create period depreciation accounting entries. If not, you must close the prior period manually and open the current period before creating period depreciation accounting entries.

   • Account for any depreciation that is allowed for time during which an asset was not established in Asset Management.

     When you acquire assets (or place assets in service) during one accounting period but add them to Asset Management during a different accounting period, you need to account for any depreciation that is allowed for the time during which the asset was not established in Asset Management. You can do this by adjusting the transaction and accounting dates.

     Typically, the transaction date represents the date that you actually acquired the asset and the accounting date represents the date that you want the transaction expensed. The accounting date is validated against the open periods for Asset Management that are stored in the FIN_OPEN_PERIOD table to determine the period to which it is expensed. The difference between the transaction date and the accounting date determine whether any prior period depreciation needs to be calculated. For example, suppose that a computer was acquired and placed in service on March 15, 2000, but the information was not entered into Asset Management until August 1, 2000. All periods prior to August are closed. Asset Management automatically calculates depreciation starting in March, and it reflects this depreciation in the August period. When period depreciation accounting entries are created for August, they will reflect all depreciation activity since March.

     Note. This is the only time life-to-date calculations take place without being selected.

   • Create accounting entries for the amount that you enter during the Add process for assets with accumulated depreciation.

     When you add an asset with accumulated depreciation, you can create accounting entries for the amount that you enter during the Add process. When the asset has been added, accumulated depreciation is updated each time that you create new period depreciation accounting entries.

   • Set up the depreciation allocation calendar.

     The amount of depreciation that you can expense for each period depends on how you set up your calendar. You can define the periods as months. When you set up your calendar, specify the year, the number of periods in each year, the beginning and ending date of each period, and the name of each period. For example, if you use a monthly calendar, the first period might be called January or April.

     You also specify the portion of depreciation to be allocated for each period. For example, if you use a monthly calendar, you can specify that 1/12 of the annual depreciation amount is allocated to each period.

   • Close accounting periods.

     When you have created accounting entries for depreciation for an accounting period, you must close it.

See Also

Creating Asset Management Accounting Entries

Running the Depreciation Close Process

Establishing Asset Management Business Units

Understanding Depreciation of Group Assets

Group assets are treated differently from regular assets for depreciation purposes. Before you run depreciation on group assets, you must run a process that consolidates group member asset cost information at the group level. Then, you can depreciate group assets using a depreciation process that is separate from the process is used to depreciate regular (nongroup) assets. Asset Management supports only the flat-rate depreciation method for group assets.

See Also

Using Group Asset Processing

Processing Depreciation

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

• Run the Depreciation Calculation process (AM_DEPR_CALC).

• Review open transactions.

• Change depreciation attributes.

• Review the depreciation processing results for errors.

Understanding Depreciation Processing

You must run depreciation to account for every transaction that you perform on an asset. For example, when you transfer an asset, you may need to run depreciation to correctly reflect the new department that is using the asset. For some transactions (including adjustments, transfers, and recategorizations), the depreciation calculation process moves the stored depreciation amounts from department to department or category to category, depending on the transaction that you are performing and the ChartFields that you specify.

Pages Used to Process Depreciation

Running the Depreciation Calculation Process (AM_DEPR_CALC)

Access the Run Depreciation Calculation page.

Note. Accumulated depreciation for group member assets is loaded at the member asset level.

See Configuring Asset Lifecycle Management Background Processes.

Reviewing Open Transactions

Access the Open Transaction Detail page.

You can review open transactions broadly—for example, by searching for them by business unit. Review open transactions more specifically by including more criteria in your search.

Open Transaction Searches

Use broad or narrow search criteria to identify a list of open transactions. In addition to business unit, you can specify asset identification, asset book name, transaction date, or accounting date. Alternatively, you can specify the action type of a pending transaction. Also, each open transaction can have a status, which you can use to further narrow the search criteria.

Actions of Open Transactions

Each pending transaction can have an action type associated with it. The following list shows the action types that are available:

• Asset Addition

• Asset Cost Adjustment

• Asset Recategorization

• Asset Reinstatement

• Asset Retirement

• Asset Transfer

• Book Adjustment

• Budgeted Depreciation

• Budgeted Lease Payments

• Depreciation

• Inflation Adjustment

• Lease Payment

• Manual Reserve Adjustment

• Prior Period Adjustment

• Resume Depreciation

• Retro Rate Change for Group Assets

• Suspend Depreciation

Depreciation Calc Status

Acctg Entry Creation Status

Group Consolidation Asset Status

When you have searched for all open transactions based on specified criteria, you can view particular open transactions in detail.

Changing Depreciation Attributes

Asset Management enables you to change depreciation attributes as necessary. You may find it necessary to:

• Change the effective date.

  Changing the effective date of depreciation attributes may become necessary to accommodate changes in tax law or company policy. You can set up anticipated changes for future use by effective-dating them. You can also affect prior periods by changing the effective date.

• Change the depreciation limit.

  Changing the depreciation limits on assets may change the amount of depreciation that you can expense on an asset in a given year. This, in turn, changes the depreciation amount that is allocated to each period. If necessary, the life of the asset is extended to depreciate the asset fully.

• Change the status.

  Asset depreciation status is book-specific. Therefore, an asset can be depreciable for one book and nondepreciable for another. There is no limit to the number of times that an asset can have its depreciation suspended. Also, there is no limit on the length of time for which it can be suspended.

  When you change the status of an asset from Depreciable to Nondepreciable, the system deletes future depreciation calculations. All transactions that are performed while the asset is suspended take into account only the depreciation that has occurred as of that time.

  While an asset is in a suspended state (that is, has a status of Nondepreciable), you can still perform financial transactions on it. Those transactions generate appropriate accounting entries with a transaction date indicating when the transaction actually took place. Adjustments generate one accounting entry for the cost adjustment. Transfers generate two accounting entries—one for the cost transfer and one to transfer accumulated depreciation. Retirements generate accounting entries for cost, accumulated depreciation, and any gain or loss.

  Note. You cannot perform InterUnit transfers on assets that have been suspended.

  When you change a nondepreciable asset to a depreciable asset, Asset Management performs a remaining value calculation and calculates depreciation based on all depreciation parameters. The time during which depreciation was suspended is not taken into account against the asset’s life.

Reviewing the Depreciation Processing Error Log

Access the Asset Processes Error Log page.

You can review each processing instance for errors that may have occurred during processing. You can view the business unit, asset ID, and other information that is related to the error along with a message describing the problem. You can then correct the problem or continue.

Expanding Depreciation by Period

To maintain optimal table size and increase depreciation processing efficiency, store depreciation entries by fiscal year. However, if you need to store depreciation entries by period rather than by fiscal year, use the Expand Depreciation by Period page to expand fiscal year storage to period storage.

This section discusses how to expand the depreciation period.

Page Used to Expand Depreciation by Period

Expanding the Depreciation Period

Access the Expand Depreciation by Period page.

Enter a fiscal year and process frequency. You can run the process for only one fiscal year at a time.

Run Options

Creating Pending Depreciation Transactions

This section discusses how to create open depreciation transactions.

Page Used to Create Pending Depreciation Transactions

Creating Open Depreciation Transactions

Access the Depr Recalc page.

Use this page to run a process that opens transactions. This is necessary when you have used the Future Depr Years (future depreciation years) option to limit depreciation calculations to a specific number of years rather than the asset’s useful life. For example, if you had limited future depreciation years to two, and you were now entering the third year, you would run this process before running depreciation so that the depreciation calculations would account for all open transactions.

Run Options

Select an asset type. Options are:

Process Scheduler runs the Create Pending Depreciation Transactions (AMOPNTRNS) process at user-defined intervals.

Viewing Depreciation-Related Information

You can view depreciation-related information for both regular assets and parent-child assets online.

This section discusses how to:

• View basic asset depreciation information.

• View net book value and depreciation.

• View period depreciation.

• View child asset depreciation.

Pages Used to View Depreciation-Related Information

Viewing Basic Asset Depreciation Information

Access the Asset Depreciation - Asset page.

Parent assets that are created on the Parent Asset page (parent-only assets) do not have cost or basic information. They cannot be viewed in the Parent Child Basic Information component. Also, you cannot view them or perform transactions on them in the Asset Cost/Adjust Transfers component; the Asset Retirements component; or the Parent-Child NBV component. If you want to use a parent asset as an umbrella asset for reporting purposes only and access these components to manipulate child assets in mass, create a 0-cost parent asset as opposed to a parent only asset. Also, to transact against parent and child assets at once, parent and child must use the same asset profile.

Viewing Net Book Value and Depreciation

Access the Asset Depreciation - Depreciation page.

Net Book Value	To calculate the net book value of the asset, enter values in the As Of Fiscal Year field and the Period field, and click the Calculate NBV (calculate net book value) button. The system displays the cost, salvage value, accumulated depreciation, and net book value for the selected asset, fiscal year, and accounting period.
Yearly Depreciation	Displays depreciation amounts by year through the last year of the asset’s life.

Note. Yearly depreciation amounts are not shown for parent-child assets.

Viewing Period Depreciation

Access the Asset Depreciation - Period Depreciation page.

Get Period Depreciation

Note. If you do not select Expense, but you do select Accum, only the amounts that affected accumulated depreciation appear. The system does not show the expense for that year. For example, when an asset is added with accumulated depreciation, no corresponding expense amount exists. If you do not select Accum, but you do select Expense, the system displays the amounts that affected the expense account, but not the accumulated depreciation for that year.

Period Depreciation

Click the Depr. Accum Adjustment (depreciation accumulated adjustment) link to make adjustments to accumulated depreciation.

Note that if you perform two transfers on the same asset in the same accounting period (on the same set of ChartFields), the Asset Depreciation - Period Depreciation page displays only a net result of both transfers. For example, suppose that an asset with an Asset Management convention is added to department 12000 on August 31, 1997, with a cost of 10,000.00 JPY and a life of five years. On September 30, 1997, the asset is transferred to department 14000. The asset is then transferred again on the same day to department 21100. The Asset Depreciation - Period Depreciation page displays the following entries for the transfers:

12000  1997  8  DPR  166.66
12000  1997  9  TFR  -166.66
21100  1997  9  TFR  +166.66

No entry exists for the transfer in and out of department 14000 on the same day, as this is a net 0. Note, however, that the depreciation table has two additional rows for both transfer out and transfer in.

Viewing Child Asset Depreciation

Access the Child Assets page.

Click the Select All button to include all child assets with the parent in the net book value calculation.

To include particular child assets, select the Selected check box for a row.

The Include Parent Asset check box is selected by default. Clearing it enables you to calculate net book value at once for all or selected child assets while excluding the parent asset from the calculation.

Adjusting Accumulated Depreciation

Use the Depreciation Accumulated Adjustment page to adjust accumulated depreciation. After saving the page, click the Asset Depreciation link to view the adjustment.

Note. Each book has to be adjusted separately. If multiple books are associated with the same ledger group with KLS activated, the adjustment amount is converted and copied from the primary book to the secondary books if no adjustment amounts are entered in the secondary book.

This section lists the page that you use to adjust accumulated depreciation.

Page Used to Adjust Accumulated Depreciation

Running Depreciation Reports

This section discusses how to load the depreciation reporting table.

Understanding Depreciation Reports

Asset Management provides a full complement of depreciation-related reports. Before you can run depreciation reports, you must load the Depreciation Reporting table (PS_DEPR_RPT). The table stores life-to-date and year-to-date depreciation amounts. You should run the process once at the beginning of the year for all assets in your system, and on a monthly or other regular basis thereafter for new open transactions.

To run depreciation reports:

1. Load the Depreciation Reporting table.

2. Run the Depreciation by Period report.

3. Run the Depreciation by Fiscal Year report.

4. Run the Depreciation Activity report.

Pages Used to Run Depreciation Reports

Loading the Depreciation Reporting Table

Access the Load Depr Reporting Table page.

Select the Process in Parallel check box to use parallel processing. Parallel processing works by running multiple requests of the same process that specify different parameters against different temporary tables.

Run Options

Note. The Depreciation Reporting table should be loaded only for the current fiscal year, or at most two fiscal years (depending on your reporting requirements).

Note. You should run the AMDPREPT_RQST process throughout the year to account for new transactions that were created during the year by selecting the Use Open Trans check box.