Recalculate replacement costs and insured values for fixed asset groups

Article
06/03/2022

This article explains the process to update the replacement costs and insured values for fixed assets.

Periodically, you might be notified that the cost to replace or insure specific fixed assets has changed. For example, your manager might inform you that inflation was 3 percent last year, so you need to increase the replacement cost of all fixed assets by 3 percent.

Although you can edit the replacement cost and insured value for individual fixed assets in the Fixed assets page, you can use the Update replacement costs and insured values page to update these values for a group of assets at one time. This information describes how to update values for fixed asset groups or for specific assets in the groups.

How values are updated

To recalculate replacement costs and insured values for fixed asset groups, you must first specify the percentage by which to change the existing replacement costs and insured values, and then perform the periodic update to actually recalculate the values. You specify the percentage in the Replacement cost factor and Insured value factor fields in the Fixed asset groups page. Although you specify these factors for the fixed asset group, when you use the Update replacement costs and insured values page, you can select to recalculate the replacement cost and insured value for only specific fixed assets in a group.

When you use the Update replacement costs and insured values page to recalculate the replacement cost and insured value for the assets, the following formulas are used:

[(Asset group's replacement cost factor / 100) + 1] * Asset's existing replacement cost
[(Asset group's insured value factor / 100) + 1] * Asset's existing insured value

Note

When you use the Update replacement costs and insured values page, both the replacement cost and insured value are updated for the selected assets; you cannot specify that only one value be updated. To leave one value the same and update the other value, enter 0 (zero) as the factor in the Fixed asset groups page. A zero or blank factor causes the calculation to be skipped in the update. The book value and net book value of fixed assets are not affected by the periodic update.

How to use a date to select which items to update

By default, the update process updates the selected assets that have not been updated on the current day, but that might have been updated on previous days. For example, < current date means “before today.” You can change the date in the Update replacement costs and insured values page by clicking the Select button. The date criteria that you specify is compared to the date of the last periodic update for the asset (the Last periodic value/cost update field in the Fixed assets page). Each time that you successfully update the replacement cost or insured value for a fixed asset, the Last periodic value/cost update field is automatically updated with the current date.

Example

You updated the replacement cost of the Vehicles, Office Furniture, and Buildings groups by 5 percent yesterday, and you now consider these assets to be accurately updated. To exclude these assets when you update all other fixed assets today, you enter a date in the Last periodic value/cost update field that is before yesterday (< yesterday's date), because the last update for the Vehicles, Office Furniture, and Buildings groups occurred outside the date criteria you entered.

Cumulative effect of each update

Each update has a cumulative effect. Therefore, you should plan your updates carefully. For example, if you increase all assets by 3 percent on Tuesday and then increase office furniture by 4 percent on Friday, office furniture will increase by a total of 7.12 percent.

Scenario

Your manager notifies you of the following changes to fixed assets:

Increase the replacement cost of all fixed assets, except computers, by 3.25 percent.
Increase the replacement cost of all office furniture by an additional 1 percent.
Decrease the replacement cost and insured value of all computers by 10 percent.

You make the following changes:

In the Fixed asset groups page, for all fixed asset groups except the Office Furniture group and Computers group, you type 3.25 in the Replacement cost factor field and 0 in the Insured value factor field.
For the Office Furniture group, you type 4.25 in the Replacement cost factor field and 0 in the Insured value factor field.
For the Computers group, you type -10 in the Replacement cost factor field and -10 in the Insured value factor field.
In the Update replacement costs and insured values page, you click OK to perform the recalculation for all fixed assets.

The next day, your manager informs you that computers decreased 8 percent instead of 10 percent, so that you have to correct the replacement costs and insured values. To fix the error, you can use either of two methods:

Manually change the Insured value and Replacement cost fields in the Fixed assets page for each fixed asset in the Computers fixed asset group. Calculate and manually enter the values as if you had decreased the original amount by 8 percent. By using this method, you do not use the Update replacement costs and insured values page.
Enter replacement cost and insured value factors for the Computers group in the Replacement cost factor and Insured value factor fields in the Fixed asset groups page. This will both reset the assets back to their original value (before the 10 percent decrease) and apply the 8 percent decrease to the original value. Then use the Update replacement costs and insured values page to recalculate the values, depending on the factors that you entered.