Question

Adding an investment to a Fully Depreciated Object

  • 30 September 2021
  • 3 replies
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Userlevel 7
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How do you add investment to a fully depreciated object and get the added investment amount to begin depreciating over the assigned useful life?

Thanks & Best Regards,
Thanushi


3 replies

Userlevel 6
Badge +10

Hi, 

The “real” answer mostly depends on accounting standards. 

In north America most clients would create a new object with new life expectancy and new depreciation method. The new object would be connected to the old object. But we (North America) would create a new object. 

Other parts of the world may create a new posting to the same acquisition account as the original posting. In doing this IFS will create an add investment transaction.  That add investment will need to be handled in IFS via the add investment progress. The transaction must be activated (i believe that’s the term). Then you need to review the asset book, for expected life and depreciation method.  So many options exist and they all depend on the accounting standards. 

From a North American perspective we create a new object as the life and perhaps the depreciation method may be different.  Having different books for internal and tax allows us the greatest flexibility for the added investment.  

Best regards, 

Thomas

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Hi

If you do add investment and want the new added investment to depreciate over the useful life the original asset had, how do you make that happen?  The system currently takes as depreciation the full added investment amount in one month.

 

Thank you,

Hayxa Escobar

Userlevel 6
Badge +10

Hi, 

It really depends on the depreciation method and time,  For example Straight Line works very differently as compared to the remaining balance type methods.  For many clients in NA straight line is a common method type. Straight line works as described above.   If your planning to use the add investment process, then other method types can produce better results. 

See the IFS help. 

This is the section on method type. 

Method Type:
The method type used for the calculation of depreciation. The method types specified in the system are;

Declining - This method uses the net value of the object as the remaining depreciable basis. The net value equals the depreciable basis minus the accumulated depreciation up to and including the previous depreciation year/period. You can specify the factor to be used with this method. If you select Fixed Factor or Divided by Life  as the depreciation rate type, the fixed assets object will be depreciated at a higher rate in the earlier years of the object life.

Straight Line - This method involves calculating the same amount of depreciation for a fixed assets object every year. The depreciable basis is depreciated evenly over the planned period of time.

RemValue/RemMonths - The remaining value is divided by the number of remaining months. If there is a change in a value used to calculate depreciation (e.g. estimated life or the base value), the remaining depreciable basis amount will be depreciated evenly over the remaining life of the object. The remaining life is calculated in calendar months and not according to the depreciation calendar defined. Unlike RemValue/RemPeriods method, the depreciation for each FA year will be the same regardless of the number of periods defined in the depreciation calendar.

Customized - This is a customized method which always uses the basis of the base value type.

RemValue/RemPeriods - The remaining value is divided by the number of remaining periods. The remaining life is calculated based on FA periods defined in the depreciation calendar instead of normal calendar months. Since depreciation amounts are calculated regardless of the length of the FA period, different FA periods can have different depreciation amounts.

RemValue/RemDays - The remaining value is divided by the number of remaining days. The calculation is based on the number of days within the period and the remaining days of the object’s estimated life.

 

Best regards, 

Thomas

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