Fixed asset with a negative acquisition cost and positive depreciations? Can it be done in Business Central?

Working as an Microsoft Dynamics 365 Business Central consultant is a very interesting and of course also sometimes a challenging job. And you can come across customer requirements and business cases that makes you have to twist your mind to find a solution.

A while ago i was talking to a customer that raised an interesting question. Does Business Central handle fixed assets with a negative acquisition cost and can you do a positive depreciation on that negative acquisition cost?

And i thought – wow that is really a new one. Never came across that request in my years of consulting. Why would a business have a need for a solution that supported that kind of fixed assets?

I will try to do a simple explanation of the business case. The company is acquiring a fixed assets that they will own but it will be used by a group of the companies customers. And for the customers to be able to use this asset they need to pay a contribution to the company to cover part of the investment that the company needs to spend on the asset. So to find the acquisition cost for the fixed asset you they deduct the contribution from the customers from the invested amount.

F.ex. if the invested amount was 1 000 000,- and the contribution from the customers was 300 000,- the acquisition cost that will be the base amount for the depreciation will be 700 000,-.

But sometimes they can end up in a situation where the total contribution from all the customers are larger then the invested amout.

F.ex invested amount again at 1 000 000,- and the contribution in total was 1 200 000,- So the acquisition cost will actually be negative 200 000,-. And then instead of doing a traditional depreciation for the assets lifetime where the depreciation will be a cost they must do a positive depreciation that will be posted as revenue. So if the expected lifetime of the asset is 20 years they will post a yearly revenue of 10 000,- every year.

So can we do this in Business Central? The short answer is no, because the system will not allow you to post an asset with a negative acquisition cost. But there is a workaround that might work for a case like this.

When we define the depreciation book in Business Central we have a setting that asks us if we want to allow depreciation below zero. I doubt that function is widely used and i have even seen other Business Central consultants arguing that the function is unnecessary and should be removed from the system. But in my case i think this is the function that actually can save me.

Given the example above and with the depreciation book configured to allow depreciation below zero, the idea is to do as follows.

When we put this asset into the system we post in with an acquisition cost of 1 000 000,-
And at the same date we post a manual depreciation of 1 200 000,-. That will bring our booked value down to negative 200 000,-.

The system will not allow us to do negative depreciation so instead we need to post the negative depreciation as an Appreciation. And because the depreciation book will not allow us to plan for a periodical appreciation we can set up a recurring fixed assets journal where register the appreciation to be posted with the frequency we want until the fixed assets reach a booked value of zero.

This work around will also probably require some special setup in the fixed asset posting groups. So i think it will be smart to define some special depreciation books and some special fixed asset posting groups for this scenario.

So yes – Microsoft Dynamics 365 can handle fixed assets with a negative acquisition cost and positive depreciation. Maybe not in the most efficient way but doable.

And please @Microsoft – don’t listen to the people who tells you that the option to “Allow Depreciation Blow Zero” should be removed – because i really need it for this case.

Do you have other ideas about how i should solve this case? Please comment below or reach out to me.