Question

Depreciation of additional investments

  • 25 April 2024
  • 6 replies
  • 36 views
J
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Sometimes it happens to my customer that they receive invoices they would like to include in the acquisition value (and depreciation base) after they have activated and depreciated an object for a period of time. They normally process those additional invoices as “additional investments”. The problem we have is that subsequent depreciation is not taking into account that the remaining life time is shorter. This leads to a lump sum depreciation an the end of life. My customer would like to depreciate the original acquisition value + additional value - accumulated depreciation evenly over the remaing life time.

Any help highly appreciated.

Example:

Acquisition value: 12000

Life: 1 year

Additional investment after two months of depreciation: 6000

 

6 replies

JJäthing
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Did you try to alter the depreciation Method Type to RemValue/RemMonths or RemValue/RemPeriods?

And did you try to alter the change Base Value from Depreciation Year to Depreciation Period?

Best regards

Jonas

J
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Hi,

Please take a look at the right column of the table in my original posting.

  1. I buy something for 12000 and specify that it should be depreciated over 12 months.
  2. I depreciate the object 1000 in January and 1000 in February.
  3. I add 6000 to the acquisition value
  4. I now want the remaining book value (12000-1000-1000+6000=16000) to be depreciated over the remaining life (10 months). I.e. 1600 per month.

(The reason I got different values when I tested your set-up was most likely because I used RemValue/RemDays)

/Johan

 

 

JJäthing
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In your example 2, could you please explain how you get all the different depreciation values after the added investment, 

in period 3 you get 1525,

in period 4 you get 1475,

in period 5 you get 1525 again,

in period 6 you get 1475.

It seems there are other issues to address before we can come to a conclusion on how to get the depreciation method right.

 

 

JJäthing
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Hi johant,

I must have misunderstood your requirement. With the depreciation method I proposed you get to keep the depreciation length, i.e. the added investment does not prolong the life of the asset. 

Am I getting it right that the added investment is expected to prolong the life of the asset? 

J
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Hi Jonas,
I still can’t get this to work. See examples below.

I still get a bigger depreciation amount the last period.

Am I doing something wrong?

/Johan

Example 1 - Alternative Life

Example 2 (Estimated Life)

 

JJäthing
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IN IFS there are several pre-defined depreciation methods, I would assume you can find one that is named REM AP, Rem Value Rem Life, Assigned Period with the method type RemValue/RemDays. 

If there is no such depreciation method in your installation of IFS APPS then you can make one. The method type RemValue/RemDays is what you need to select to get the depreciation you are looking for. For the starting principle I would select Beginning of period. For depreciation Rate Type I would select Divided by life.

/Jonas

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