The depreciation calculation distinguishes the retrospective effect (triggers recalculation for all prior periods of depreciation) versus prospective effect (affects the current period and all future periods only) of certain changes. There can be changes to the depreciation elements in terms of useful life of asset, salvage value and asset value. The depreciation should be calculated after considering the effective dates of the changes to the depreciable elements.
Such changes to the depreciable elements are stored in the Depreciation Element Changes (DEPEC) page. When the system is calculating deprecation, it first checks whether any eligible records (Active records) exist in the Depreciable Elements Change page and uses the information (”before” and ”after” values that impact depreciation) to calculate the depreciation. If no eligible records are found then the process uses the information stored on the Fixed Asset Registry (Useful Life, Acquisition Date, In Service Date, Last Depreciation Date, Asset Value, Accumulated Depreciation, and Salvage Value) to calculate depreciation updates.
There can be one or more than one active eligible records. If there are multiple matching records for the Asset Number and Component Number, the system compares the Effective Date of the records with the Depreciation End Date. The active eligible records are sorted by Effective Date so that the records with the lowest Effective Date are considered first in the calculation.
The logic for calculating the depreciation is detailed below:
For the first record, depreciation will be calculated for the period from Last Depreciation Date from the asset record to the Effective Date using the ‘old’ values of the record. In this case, both the Last Depreciation Date and the Effective Date should be excluded while calculating the number of days.
For the next record, depreciation will be calculated for the period from Effective Date of the first record to the next record’s Effective Date less one day using the ‘new’ values of the first record. This logic will be continued until it reaches a record where the Effective Date is greater than the Depreciation End Date.
For the record with an Effective Date greater than the Depreciation End Date, depreciation will be calculated using the ‘old’ values of that record for the period from the Effective Date of the last record to the Depreciation End Date. In this case, both the Effective Date and the Depreciation End Date should be considered while calculating the number of days.