Weekly Dynamic: What REALLY happens with FA Recalculate

Working with Fixed Assets, when you change a depreciation sensitive field, you get a box with three RESET choices that pops up. The choices are to reset: Life, Year or Recalculate.

Reset Life
As a reminder, resetting Life adjusts the depreciation to date for the changes and makes an adjusting entry in the current period to catch up depreciation.

Example: 3,600 asset, SL depreciation, no Salvage, 3 year life = $100 depreciation.mo. In month 8, year 1 add 1,000 to the cost, reset life. The Aug. entry is $322 for Aug. depreciation and catch up. Go forward depreciation is ~$127/month.

Reset Year
Resetting a Year adjusts the current year's depreciation for the changes and makes an adjusting entry in the current period to catch up annual depreciation.
 
Example: 3,600 asset, SL depreciation, no Salvage, 3 year life = $100 depreciation/mo. In month 8, year 2, add 1,000 to the cost, reset year. The Aug. Y2  entry is $322 for Aug. depreciation and catch up. Go forward depreciation is ~$155/month. Year 1 is unchanged, Year 2 catches up ~$155/mo. is depreciation going forward.

So far, so good.

Recalculate
In GP, the help describes recalculate in multiple places as:

"Recalculate   Calculates a new rate of depreciation using the new cost basis data, but does not make adjusting entries for depreciation already taken. The new rate of depreciation will be used the next time the depreciation routine is completed."

 This makes it sound like Net Book Value (NBV) is used to simply recalculate depreciation from the point of the change. Based on that statement, we expect GP to do this:

Example: 3,600 asset, SL depreciation, no Salvage, 3 year life = $100 depreciation/mo. In month 8, year 2 add 1,000 to the cost, recalculate. You would expect the August depreciation, and subsequent periods, to be 158.52. (3,600cost-1,900accum=1,700nbv+new 1,000=2,700newNBV / 17 remaining months).

That's not how it works. GP calculates it as 166.66/mo for the remaining periods in year 2 and 155/mo in year 3.What GP actually does with recalculate is to perform a reset year. Then is spreads the reset adjustment over the remaining periods in year. Finally it recalculates the remaining years going forward. You'll notice that the Y3 amount for recalc is the same as the amount used for  reset year from the example above.

This means that if you change an asset in the last month of the year, Reset Year and Recalculate give you the same answer.

Buried in the help (Search for Recalculating Depreciation) is this comment:

"The difference between the new yearly rate and the current year-to-date depreciation amount will be allocated over the remaining time in the current fiscal year."

This is the only place that I can find where this calculation is, sort of, documented.

It's not that the Recalculate process is necessarily wrong, it's just that it doesn't work the way we expect it to based on the name and brief description provided in the help. For most folks, this isn't a problem. However, if you make a large change to an asset late in the year, you can see a dramatic change in depreciation, when you might have been expecting a very small change.

[H.T. to Marty Rubin, Sandra Dodge and Amy Walsh of I.B.I.S. for this.]

GL Posting Batch does not balance to depreciation in Fixed Assets

The GP Support Team looks at what to research if the GL Posting Batch does not balance to depreciation in Fixed Assets

Weekly Review: Amortization vs. Straight Line Depreciation

Folks often have questions about the difference between Amortization and Straight Line Depreciation in the GP Fixed Assets module. This is how the various calculations work:

For Amortization:

Amortization Code	Calculation
Daily	Amortization Amount * 365 (or 366 if leap year)
Weekly	Amortization Amount * 52
Monthly	Amortization Amount * 12
Quarterly	Amortization Amount * 4
Yearly	Yearly Depreciation Amount = Amortization Amount
Percentage	(Cost Basis - (LTD Depreciation - YTD Depreciation)) * Percentage
Rate	(Cost Basis - Salvage Value - Special Depreciation Allowance) * Rate

For Straight Line:

Depreciation Method	Calculation
Straight-line Orig Life	(Cost - Salvage Value - Special Depreciation Allowance) ÷ Original Life in Years If the Original Life includes days, the days will be converted to a fraction with days as the numerator and 365 as the denominator. For example, if the number of days is 146, the fraction would be displayed as 146/365.
Straight-line Rem Life	(Cost - Salvage Value - (LTD Depreciation Amount - YTD Depreciation Amount)) ÷ Remaining Life in Days This calculation determines the daily depreciation rate, which must be multiplied by the number of days in the year. This method is used when you select the Switch to Straight-Line option.

Since Amortization doesn't consider the life of the asset, only the cost, users need to calculate the life of an asset when using amortization, unlike depreciation.

[H.T. to Xen Osorio who clarified this beyond the help documents in a Partner newsgroup post.]

 

Originally Posted by Mark Polino at 3/01/2010 09:00:00 AM

Dynamics GP Fixed Assets Depreciation and Reporting

Steve Chapman continues his look at fixed assets with Dynamics GP Fixed Assets Depreciation and Reporting

Weekly Dynamic: Fix Bonus Depreciation

I’ve covered a couple of times how Microsoft Dynamics GP lets companies deal with bonus depreciation. What happens if year end comes an goes and you missed taking bonus depreciation? Hopefully the accountants will catch it when preparing the tax return and now you’ve got to fix in GP.

Some of the obvious solutions won’t work because once you’ve closed the year, resetting the year’s depreciation only works in the current year, not last year.

This came up recently and this is best solution I’ve come up with.

• Set the date in GP back to the previous year

• Open the Tax book for an item that didn’t get bonus depreciation.
• Change the LTD depreciation to be the depreciation as of year end from the tax return for that asset PLUS the YTD depreciation.

For example: 1,200 asset, depreciation with bonus should have been $700 as of 12/31. YTD is $50. New LTD would be $750.

• GP will book the transaction as of the GP date and will reflect the date of the change in the Financial Detail window

Bonus depreciation is tax only so this shouldn’t change the ledger. Bonus depreciation should only apply to assets placed in service during the year, not all assets. Don’t forget to change the GP system date back when you’re done.

I haven’t found any way to get GP to recalc the bonus depreciation and after I thought about it, you really want GP to reflect what was on the tax return right or wrong.

Weekly Review: Matching Fixed Asset Costs In Multiple Books

As I work on year end tax returns for the company, one of the things we look at every year is our tax vs. book depreciation. One thing we find every year is that there are a few assets where the cost is different between tax and book. In our case, they should always be the same. It's getting better each year but we've still got a small handful this year.

This happens when we adjust the cost of an asset after the fact for additional costs that come in later. These are things like freight, tax, installation, etc. Sometimes these bills arrive 60 days after the asset is on the books. We tend to get the corporate book right and forget to make the same changes on the tax book. Also, if it's a new category for us, the Federal book relationship might not be setup (life, depreciation type, etc.). In that case, we get an error when setting up the asset but if you don't go back and fix it, you end up with a corporate book and no tax book at all.

Consequently, one of our processes at year end is to export the tax and corporate books to Excel via a Smartlists and then compare the two. We then make any adjustments to reconcile the two books. Since it's always federal that's out in our case (we're really conscientious about the corporate book) I can do this process after the year is closed and just rerun the depreciation on the federal book for any adjustments.
For this year, we've quit doing adjustments and are setting up second assets with the same asset number but a different suffix. It looks like a bunch of little assets when you glance at the FA ledger but it's simple to explain, easier to trace to source documents  and our auditors have been happy with it.

So there's really two tips that come out of this:
1) Compare your cost basis for your various books on some kind of regular basis.
2) Avoid adjusting asset costs whenever you can and use a suffix or master asset ID to keep all the pieces of an asset together.

Originally Posted by Mark at 2/15/2007 11:41:00 AM

Tags: Depreciation, Fixed Assets, Tax, Troubleshooting, Weekly Tips

Weekly Dynamic: Matching Fixed Asset Costs In Multiple Books

As I work on year end tax returns for the company, one of the things we look at every year is our tax vs. book depreciation. One thing we find every year is that there are a few assets where the cost is different between tax and book. In our case, they should always be the same. It's getting better each year but we've still got a small handful this year.
This happens when we adjust the cost of an asset after the fact for additional costs that come in later. These are things like freight, tax, installation, etc. Sometimes these bills arrive 60 days after the asset is on the books. We tend to get the corporate book right and forget to make the same changes on the tax book. Also, if it's a new category for us, the Federal book relationship might not be setup (life, depreciation type, etc.). In that case, we get an error when setting up the asset but if you don't go back and fix it, you end up with a corporate book and no tax book at all.
Consequently, one of our processes at year end is to export the tax and corporate books to Excel via a Smartlists and then compare the two. We then make any adjustments to reconcile the two books. Since it's always federal that's out in our case (we're really conscientious about the corporate book) I can do this process after the year is closed and just rerun the depreciation on the federal book for any adjustments.
For this year, we've quit doing adjustments and are setting up second assets with the same asset number but a different suffix. It looks like a bunch of little assets when you glance at the FA ledger but it's simple to explain, easier to trace to source documents  and our auditors have been happy with it.
So there's really two tips that come out of this:
1) Compare your cost basis for your various books on some kind of regular basis.
2) Avoid adjusting asset costs whenever you can and use a suffix or master asset ID to keep all the pieces of an asset together.