Edit

Set Up Fixed Assets with User-Defined Depreciation Methods

  • Article

You can use Business Central to set up the user-defined depreciation methods as described here.

For each user-defined method, you use the Depreciation Tables page, where you must enter a depreciation percentage for each period (month, quarter, year, or accounting period). Then, when you assign a depreciation book with a user-defined method to a fixed asset, you must set the First User-Defined Depr. Date and Depreciation Starting Date fields on the FA Depreciation Books page for the specific fixed asset.

The formula for calculating the depreciation amounts is:

Depreciation Amount = (Depreciation % x Number of Depreciation Days x Depr. Basis) / (100 x 360)

Note

While the date in the field First User-Defined Depr. Date is used to determine the time intervals, it is the Depreciation Starting Date that is used to determine the number of depreciation days. If the First User-Defined Depr. Date is earlier than the Depreciation Starting Date, the percentage for the first period in the depreciation table will be only partially used when the program calculates the first depreciation. This means that the asset will not be completely depreciated by the end of the last period.

To assign a depreciation book to a fixed asset with a user-defined depreciation method

  1. Choose the Lightbulb that opens the Tell Me feature. icon, enter Fixed Assets, and then choose the related link.

  2. Select the fixed asset that you want to set up a fixed asset depreciation book for.

  3. Choose the Related action, and then choose Fixed Asset, and then Depreciation Books. This opens the FA Depreciation Books page.

    By default, some of the fields that need to be filled in per the instructions below are hidden, so you must display them. To do this you need to personalise the page. For more information, see To start personalising a page through the Personalising banner.

  4. In the field Depreciation Method, select User-Defined.

  5. In the field Depreciation Table Code, select the Depreciation Table you want to use.

  6. In the field Depreciation Starting Date, select the starting date for the depreciation calculation.

  7. When you use a user-defined method, the First User-Defined Depr. Date field must be set to a date that is the same or earlier than the field Depreciation Starting Date. If you have selected a value in the Period Length field in the depreciation table, the date in the field First User-Defined Depr. Date must be the starting date of an accounting period.

  8. Either fill in the field No. of Depreciation Years or the field Depreciation Ending Date. Hover over a field to read a short description.

To set up user-defined depreciation methods

On the Depreciation Table page, you can set up user-defined depreciation methods. For example, you can set up depreciation based on number of units.

  1. Choose the Lightbulb that opens the Tell Me feature. icon, enter Depreciation Tables, and then choose the related link.
  2. On the Depreciation Table List page, choose the New action.
  3. On the Depreciation Table Card page, fill in the fields as necessary. Hover over a field to read a short description.

Tip

Use the Create Sum of Digits Table function to define a depreciation table based on the Sum of Digits method.

With the Sum of Digits method, if a fixed asset is depreciated over 4 years, then the depreciation for each year is calculated in the following way:

Sum of Digits = 1 + 2 + 3 + 4 = 10 Depreciation:

  • Year 1 = 4/10
  • Year 2 = 3/10
  • Year 3 = 2/10
  • Year 4 = 1/10

Depreciation Based on Number of Units

This user-defined method can also be used to depreciate based on number of units, for example, in the case of production machines with an established lifetime capacity. On the Depreciation Tables page, you can enter the number of units that can be produced in each period (month, quarter, year,or accounting period).

Example - User-defined Depreciation

You use a depreciation method that allows you to depreciate assets in an accelerated manner for income tax purposes.

You would use the following depreciation rates for a fixed asset with a three-year lifetime for tax purposes:

  • Year 1: 25%
  • Year 2: 38%
  • Year 3: 37%

The acquisition cost is LCY 100,000, and the depreciable lifetime is five years. Depreciation is calculated annually.

Date FA Posting Type Days Amount Book Value
01/01/20 Acquisition Cost (Depreciation starting date) 100,000.00 100,000.00
12/31/20 Depreciation 360 -25,000.00 75,000.00
12/31/21 Depreciation 360 -38,000.00 37,000.00
12/31/22 Depreciation 360 -37,000.00 0
12/31/23 Depreciation None None 0
12/31/24 Depreciation None None 0

In the previous example, both the First User-Defined Depr. Date and Depreciation Starting Date fields would be set to 01/01/20 in the FA Depreciation Books page for the specific fixed asset. If, however, the First User-Defined Depr. Date field contained 01/01/20 and the Depreciation Starting Date field contained 04/01/20, the result would be:

Date FA Posting Type Days Amount Book Value
01/01/20 Acquisition Cost (Depreciation starting date) 100,000.00 100,000.00
12/31/20 Depreciation 270 -18,750.00 81,250.00
12/31/21 Depreciation 360 -38,000.00 42,250.00
12/31/22 Depreciation 360 -37,000.00 6,250.00
12/31/23 Depreciation 90 -6,250.00 0
12/31/24 Depreciation None None 0

See Also

Setting Up Fixed Assets
Fixed Assets
Set Up Fixed Asset Depreciation
Depreciation Methods for Fixed Assets

Find free e-learning modules for Business Central here