Fixed Asset Depreciation with Reducing Method

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Posted on by Deepak Varma

Hi all,

I am using AX2012 R3 version and I am getting issue while running reducing method depreciation. System is calculating depreciation like straight line method and i am not understanding why it is happening. Can you please help me to solve the issue. please see below my case :

I have posted one fixed asset acquisition through purchase order with cost 600000 on date 01-Jan-2019. Service life of this asset is 15 Years.
Value Model group as is available in my screenshot. I have attached fixed asset calendar (Day Based) with the value model group.
I created a depreciation profile with Reducing method, Depreciation Percentage is 18.10%. Depreciation profile is available in my screenshot.

Now I want to post depreciation on 31-Mar-2019 for last 3 months as per reducing method, so I run Depreciation proposal and system calculate depreciation like straight line method as per screenshot attached.

According to me system should calculate depreciation for each month as per below :
Jan Dep-9223.562 590776.438 NBV (600000-9223.562)
Feb Dep-8202.890 582573.548 NBV (590776.438-8202.89)
Mar Dep-8955.672 573617.876 NBV (582573.548-8955.672)

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Ludwig Reinhard Microsoft Employee on at

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Hi,

Can you run a depreciation proposal for periods that cover multiple years?

In the following years the propsed amounts should be reduced.

Please test this and let us know the outcome.

Many thanks and best regards,

Ludwig

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Deepak Varma 52 on at

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Hi Ludwig,

Thanks for your quick reply. I have tried to run depreciation proposal till April and system calculate same figure till march and for April system changed the figure as per following details :

Jan 9050

Feb 9050

Mar 9050

Apr 8640.48

but according to me, if I am correct than system should calculate depreciation for reducing method as per below :

Jan 9223.56

Feb 8202.89

Mar 8955.67

Apr 8533.54

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Ludwig Reinhard Microsoft Employee on at

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Hi Deepak,

What I would expect to see is that the depreciation amount changes on an annual basis.

That is why I asked to run the depreciation proposal for the next couple of months/years.

Within a certain fiscal year, AX will depreciate the same amount on a monthly basis but in the next year, the monthly depreciation amount will be adjusted to achieve a reducing balance depreciation.

Can you just run the depreciation forecast until 2025 - as an example - and compare the monthly depreciation amounts and how they change when your fiscal year changes?

Many thanks,

Ludwig

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Ludwig Reinhard Microsoft Employee on at

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Hello Deepak,

I tried replicating your issue and got the following for a fixed asset aquired for 600000 with a life time of 15 year and 18.1% reducing balance depreciation.

If I scroll down further, you can see that the depreciation changes only on an annual basis

Hope this example explains what AX calculates using this method.

Note: I noted an additional parameter 'shift depreciation' in your screenshot that I do not have in my standard environment.

Not sure what this parameter is doing. Might be an adjustment that has an influence on what you see as proposals.

Hope this answers your questions.

Best regards,

Ludwig

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Deepak Varma 52 on at

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Hello Ludwig,

First thanks a lot for your such kind of support and quick response with your idea and replicating my scenario in your system. I understand the working of AX in this but my client is reducing FA cost after each months depreciation.

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guk1964 10,888 on at

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Ax does not use a new balance for each month.

However you can decide at frequency you want the depreciation updated in the fiscal year.

When you select Calendar, in the Depreciation year field in the Depreciation profiles page. the following options are available in the Period frequency field, which defines the depreciation accrual posting dates and amounts throughout the calendar year:

• Yearly posts on December 31.

• Monthly posts a monthly amount at the end of each calendar month. (the same amount for each month in the year)

• Quarterly posts a quarterly amount at the end of each calendar quarter (March 31, June 30, September 30, and December 31).

• Half-Yearly posts a half-yearly amount at the end of each calendar half-year (June 30 and December 31).

• Daily posts the depreciation amount for the daily depreciation method using one transaction for each day.

When you select Yearly, the yearly depreciation is posted only one time, on December 31 of each year.

When you select Monthly, the monthly depreciation is posted each month as 1/12 of the yearly depreciation amount.

I can't think of any business reason to reduce the balance each month. If it is short life asset i.e. less than year then it is more likely to be treated as an expense and if it has a life of several years then I don't see it makes any real difference.

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