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Depreciation

Depreciation spreads an asset's cost over its useful life. Each month's charge is worked out, shown to you, and then written and posted as a journal; it is never recalculated afterwards, so a change to an estimate affects future months only. A month already charged is never charged twice.

Where to find it

Architect Panel → ERP - Operations:

  • Depreciation — opens the Asset Register on its Depreciation run tab: preview, post, catch up missed months and repost unposted charges
  • Asset Register — the console, with each asset's depreciation schedule

Architect Panel → ERP - Reference Data:

  • Depreciation Methods — the methods available

Admin Panel → Fixed Assets:

  • Fixed Assets — the same console

The methods

  • Straight line: cost less residual, divided by the useful life in months. After an impairment, revaluation or opening balance, the remaining amount is spread over the remaining life.
  • Reducing balance (annual rate): net book value times the annual rate, divided by twelve. Needs a rate on the asset or its class.
  • Double-declining balance (2 / life): net book value times two divided by the life, switching to straight line when that is larger.
  • Units of production (meter): the depreciable amount times the usage recorded on the asset's meter in the month, divided by the units still expected.
  • Not depreciated: land, for example.

No charge takes an asset below its residual value. Each class sets a Month of acquisition convention (Full month, No charge in that month, Half a month, or Pro rata by days) and a Month of disposal convention. Only assets In use or Impaired depreciate; an asset held for sale stops until it is returned to use.

Running a month

  1. Open the Depreciation run tab and choose the Month (it defaults to last month) and the Book (every book the company keeps, or one).
  2. Click Preview. Each line shows the asset, book, month, method, opening NBV, charge, closing NBV, a result (Will charge, Already charged, Skipped, Not depreciated, Behind - catch up) and what it Posts to.
  3. If earlier months were never charged, the preview holds those assets back. Tick Catch up missed months and preview again; each missed month is journalled at its own month end, or in the month you are running if its own period is not open.
  4. Click Post depreciation and confirm. It posts exactly what the preview showed.

Each charge posts Dr depreciation expense / Cr accumulated depreciation, dated the last day of its month. An asset with neither account set is charged in the register only; with only one set, its charge is held as unposted. Charges so far lists the last runs by month and book.

Unposted charges

A charge that cannot post (a closed or missing period, a missing account) is held, not lost, and a banner says how many. Fix the cause and click Repost all, or Repost on one. If the month is closed, enter Book into month to journal them on a later month's last day; each stays the charge for its own month. Transfers, impairments, revaluations and disposals of an asset are refused while it has unposted charges.

Running it automatically

The scheduled task Asset Depreciation charges the previous month for every company, in every book, with catch-up on, and reports a failure if anything is unposted or still behind. It ships disabled and in preview mode; the hosting administrator or an architect switches it on in the platform's scheduled tasks (see Scheduling).

What goes wrong

  • "Preview this month first - the post button posts exactly what the preview showed."
  • "reducing balance needs an annual rate - set one on the asset or its class" (a skip reason).
  • "a later period … is already charged": you cannot charge an earlier month after a later one; catch up instead.
  • "… is not a book this company keeps": add the book on Books & classes first.

Worked example

A company goes live in October and forgets to run September. On 2 November the finance controller previews October: twelve assets show Behind - catch up. They tick Catch up missed months, preview again, see September and October charges for each, and post. September's period is already closed, so the run books those catch-up charges in October instead and says so on each line; each still counts as September's charge. They then ask for the Asset Depreciation task to be switched on so a month is never missed again.

Recommendations

  • Hold method, life and conventions at class level, not per asset.
  • Always preview before posting, and read the Posts to column.
  • Run depreciation before closing the period.
  • Switch the task on once a manual month has posted cleanly.