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Fixed assets - wear and tear calculations relating to taxation - method is manual

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Posted on by Louis van WIjck

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Good day everybody.

I have an issue with fixed assets - wear and tear calculations relating to taxation.

For depreciation purposes we are using the straight line life remaining method (capture 1)

For taxation purposes we are allowed to claim wear and tear as follows (capture 2), (capture 3):

Year 1 40% (we are allowed to claim the full 40% in the year of acquisition even if the acquisition date was the last date of the financial year).

Year 2 20%

Year 3 20%

Year 4 20%

I have created a fixed asset group (capture 4)

Value model for this group (capture 5)

Depreciation book for this group (capture 6)

Depreciation is 100% accurate, I have also created a schedule of what the wear and tear should be over the 4 years but I am having difficulties reconciling output from AX (capture7)

Does anybody have an idea on what my mistake might be.

Kind Regards 7183.Capture-1.PNG

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Ludwig Reinhard Microsoft Employee on at

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RE: Fixed assets - wear and tear calculations relating to taxation - method is manual

Hello Louis,

Sounds great that you got this fixed :-)

If there is nothing else left open for the moment then please be so kind and verify the answers.

Many thanks and best regards,

Ludwig
Louis van WIjck 20 on at

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RE: Fixed assets - wear and tear calculations relating to taxation - method is manual

Hi Ludwig,

Thank you for your response.

I did set the depreciation start date to 01 April 2017 in my depreciation book.

This totally resolved the problem.

The value I expected for FAPM in Mar-18 was R 125.45 (((R140,000/3)/12) = R 3,888.88*1/31 and the value for TXPM R 56,000.00 (R 140,000.00*40%).

You and AX = spot on.

Thank you for your help and assistance, this was really much appreciated.

Kind Regards
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Ludwig Reinhard Microsoft Employee on at

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RE: Fixed assets - wear and tear calculations relating to taxation - method is manual

Hi,

If you set the depreciation start date to 01 April 2017 in your depreciation book, does that fix the issue?

What is the value you expect to see for the depreciation book in March 2017? Is it $0 or $120.97 that you have for the FAPM value model?

Regards,

Ludwig
Louis van WIjck 20 on at

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RE: Fixed assets - wear and tear calculations relating to taxation - method is manual

Hi Ludwig,

Thanks for your feedback.

I have inserted my comments in green:

You have a fixed asset group "FPM03-S12C", right? – Correct

This group has two value models assigned (TXPM and FAPM), right? - Correct, FAPM was created to calculate depreciation using the Straight Line Life Remaining method (value model), TXPM was created to calculate taxation over 4 years. Year 1 40%, Year 2 20%, Year 3 20%, Year 4 20% (depreciation books)

FAPM uses the straight line depreciation and TXPM the manual depreciation plan, right? - Correct

The TXPM has a different fixed asset calendar assigned that follows the calendar year, right? No - FAPM: Method - Straight line life remaining, Depreciation year - Accounting or financial, Period frequency - Financial period. TXPM: Method - Manual, Depreciation year - Accounting or financial, Period frequency - Yearly

Did you link the fixed asset books? - Yes, derived depreciation books were linked (capture 8 & 9)

If so, for what transactions? An acquisition for R135,000.00 was created on 31/03/2017 - Correct

How did you create the excel sheet? I have attached the sheet for you, the section highlighted in green is what I expected the depreciation and tax should be, and is formula driven. The section highlighted in orange is the output from AX relating to depreciation (run depreciation proposal) and is in agreement with our calculations (capture10). The section highlighted in blue is the output from AX relating to taxation (run depreciation book journal) and does not agree to our calculations (capture 11) (capture 12).

Is this the fixed asset depreciation proposal or something self-created? - FAPM - fixed asset depreciation proposal is used. TXPM – depreciation book journal depreciation proposal is used (capture 12).

Have you checked the profiles of your two books? Yes – they correspond (capture 13 & capture 14)

Kind Regards
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Ludwig Reinhard Microsoft Employee on at

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RE: Fixed assets - wear and tear calculations relating to taxation - method is manual

Hi Louis,

I think I don't understand your problem completely.

You have a fixed asset group "FPM03-S12C", right?

This group has two value models assigned (TXPM and FAPM), right?

FAPM uses the straigt line depreciation and TXPM the manual depreciation plan, right?

The TXPM has a different fixed asset calender assigned that follows the calendar year, right?

Did you link the fixed asset books?

If so, for what transactions?

How did you create the excel sheet?

Is this the fixed asset depreciation proposal or something self created?

Have you checked the profiles of your two books?

Best regards,

Ludwig
Louis van WIjck 20 on at

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RE: Fixed assets - wear and tear calculations relating to taxation - method is manual

Hi Ludwig,

Thank you for the communication.

Our current issue is around depreciation books for taxation purposes and not the value models for depreciation.

According to local taxation law we are allowed to claim 40% of the acquisition price for taxation in the year of acquisition.

The Financial year end was 31 Mar-17 and we acquired the asset on 31 Mar-17.

The asset was still acquired in the financial period ending 31 Mar-17 and our expectation is that R54,000 (40% of R135,000.00) would be calculated by AX as a tax deduction in the financial period ending 31 Mar-17 (Year1).

(Year2) R27,000 (20% of R135,000.00)

(Year3) R27,000 (20% of R135,000.00)

(Year4) R27,000 (20% of R135,000.00)
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Ludwig Reinhard Microsoft Employee on at

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RE: Fixed assets - wear and tear calculations relating to taxation - method is manual

Hi,

The first depreciation seems to account for some days in March 2017.

To me it looks as if depreciation was calculated for 2 days in 2017.

Can you see how your depreciation convention is setup and what date the asset was placed in service and depreciated the first time?

Best regards,

Ludwig