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Dynamics 365 Community / Forums / Finance | Project Operations, Human Resources, ... / What are the impacts o...
Finance | Project Operations, Human Resources, ...
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What are the impacts on the depreciation calculation when booking Write Down Adjustments?

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Posted on by ryoung 5

Hello,

Our Company had impaired assets outside of the fixed asset module in our previous system and when we went live with D365 F&O, we decided to utilize the Write-Down function to book these impairments. I have the account setup and have tested the postings correctly, however after I posted the impairment to the asset and ran a depreciation proposal for the current month, it posted a material reversal of depreciation. How does the Write Down adjustment affect the depreciation calculation? And how can I recalculate the amount that was reversed?

We posted the Write Down adjustment on 12/1/20 in this example. Then a depreciation reversal was posted when we ran the depreciation for the month. Is there a way for me to recalculate and arrive at that number? I'm not sure how to vet the depreciation proposal calculation.

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  • Suggested answer
    Michal Krejza Profile Picture
    Michal Krejza on at
    RE: What are the impacts on the depreciation calculation when booking Write Down Adjustments?

    Hello Ryoung,

    You find nice examples about impact of "Write down" to depreciations here: Examples: Depreciation effects with reversals

    One small example here.

    Acquisition: 1 000 000

    Write down adjustment: 300 000


    The formula for the calculating amount to depreciate = Acquisition + AcquisitionAdj + CapitalReserveTransfer + Revaluation + WriteDownAdj + WriteUpAdj.


    After that the system calculates depreciation fur current period. 
    (1000000 - 300000) * 0.250 / 12 = 14.583

  • ryoung Profile Picture
    ryoung 5 on at
    RE: What are the impacts on the depreciation calculation when booking Write Down Adjustments?

    Yes, the impairment would have put the asset underwater. We probably should not have booked the transaction this way but we did not understand the unintended consequences. Our main goal was to get the impairment into the Fixed Asset subledger.

    Can we have some help understanding the effects that write down adjustments have on the basis of the assets and depreciation? Does the total basis reduce and the remaining value depreciated over the remaining life? over the total life?

    Also, we would like to get a better understanding of how the system calculated the $332K reversal. I'm having a hard time trying to get back to that number.

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at
    RE: What are the impacts on the depreciation calculation when booking Write Down Adjustments?

    Hi,

    If I add up all your depreciation data then I arrive at a negative book value on 12/01/2020.

    Is the depreciation that has been posted on 12/31/2020 possibly an adjustment that has been posted to correct this negative value?

    Looks as if the write down adjustment was too much.

    Best regards,

    Ludwig

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