Straight-line depreciation / not what I expected

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I am new to GP and just recently had our fixed assets uploaded in a test environment. All assets uploaded are associated with an acquisition. Because of this, an asset that would normally depreciate over 5 years, may only depreciate over a period of 2 years and 5 months. This is the case with the following asset:

Acquisition cost: $94,109.05

Acquisition date: 6/1/2017

I was expecting the depreciation to be $3,245.15 each month from June 2017 through October 2019.

The system is generating the following:

$3,252.82 each month Jun 2017 through Nov 2017

$3,252.83 for Dec 2017

$3,252.82 each month Jan 2018 through Nov 2018

$3,252.83 for Dec 2018

$3,262.12 each month Jan 2019 through Sep 2019

$2,946.37 for Oct 2019

We get the same results using Straight-line orig or rem; no averaging convention and no switchover.

Any idea why the numbers aren't consistent?

Thanks

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MG-16101311-0 26,225 on at

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What depreciation method are you using? Straight Line - Original Life or Straight Line - Remaining Life? What Averaging Convention method are you using? Are you using any Amortization Code? If so, what amount or percent? Any allowances? Any special depreciation allowance? It would help if you post a screenshot of the setup of this asset.

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L Vail 65,271 on at

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Hi,

I'm missing something here. With an Acquisition Date of 06/01/2017, cost of 94,109.05, life of 5 years (60 mos), straight line, no averaging, no salvage and start depreciation as of 06/01/2017, I would expect it to calculate 1,568.48 per month instead of 3,245.15 per month. What am I missing? at 3,245.15 per month you would have it fully depreciated in 29 months instead of 60.

Where did I go wrong?

Leslie

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MG-16101311-0 26,225 on at

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L Vail, I didn't want to make any assumptions, but you are correct. Still a few dollars off though, so something must be off with the setup as clearly the system is providing other numbers

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Community Member on at

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Hi Mariano,

I am an end user but was enable to locate the attached detail. No amortization codes or allowances are being used. The total acquisition cost is what is being depreciated.

Thanks,

Sandy

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Community Member on at

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Hi Leslie,

The asset in question should only be depreciated over 29 months. We acquired it "used". This particular asset would be depreciated over 5 years if purchased new. The asset was entered in GP to an asset class that has a 5 year original life. I mention both the 29 months and 5 years because I am wondering if this might be part of the reason for the discrepancy.

Thanks,

Sandy

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MG-16101311-0 26,225 on at

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You said you are depreciating the total acquisition cost. Was that the cost of the asset when you acquired it used or is it the cost of the asset when first purchased? When you set up the asset, you should have assigned it the 2 years and 5 months of remaining life for the depreciation to work and you should have changed the Averaging Convention to none to produce the results you were looking for, but that should have been done directly on the asset card, after assigning the CORP book.

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Community Member on at

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Ultimately, GP is depreciating the $94,109.05 to $0 within 29 months. I just don't understand why the monthly amount isn't consistent from month to month. I will further review the settings, etc. Thanks.

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L Vail 65,271 on at

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Hi,

GP is depreciating based on the number of days in the month. So, months with 31 days will have more depreciation than months with 30 days. If you make the changes Mariano recommended - Set Averaging convention to none and also setting your Book depreciation period to Periodic, here's my understanding of the calculation

Calculate the total amount of depreciation using how many days in the month, divide the total cost by the number of days to figure how much depreciation per day. Then, using the amount per day, calculate the depreciation per year. Once you get the depreciation per year, divide it by the number of months in that year and you'll get an even amount per month for that year. In our case the years have a different number of days, so the calculation isn't dead even. Here's how I think it works:

Total Life = 852 days

Total Cost 94,109.05

Cost / Life = 110.45663 per day

7 mos in 2017 = 214 days * 110.45663 per day = $23,637.72 for 2017. Per period = 23,637.72 / 7 mos = 3,376.82 per month

12 mos in 2018 = 365 days * 110.45663 per day = $40,316.17. for 2018. Per period = $40,316.17 / 12 mos = 3,359.68 per month

9 mos in 2019 = 273 days * 110.45663 per day = $30,154.65 for 2019. Per period = $30,154.65 / 9 mos = 3,352.52 per month

If you want a depreciation period of Daily, you would take the 110.45663 and multiply it by the number of days in each month. At the end of the day, the depreciation is the same - it's just a matter of which period it falls in.

Does that help?

Kind regards,

Leslie

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Community Member on at

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Thank you for these calculations; they are easy to follow. The individual implementing this for me finally provided calculations for "my" numbers. I will compare to what you've provided here. I've asked our implementation team to re-run my assets using the Daily depreciation method and was told that this request would require a rebuild of the test environment we are currently working in. Is this true? I thought that quick changes in "setup" and then a re-run/calculation would do the trick. Any thoughts on this would be appreciated. Thanks.

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L Vail 65,271 on at

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Hi,

I'm surprised that they cannot do it with a Mass Change transaction using Reset Life. If the Asset Classes are set up such that all assets in a class share the same attributes it would be easy. Even if they aren't, they can build an asset group and use Mass Change to reflect the change in method. It's hard for me to say since I haven't had any involvement in building the environment. I would trust that they have valid reasons for their approach. If you want to know more about it, just ask, I'm sure they would be happy to explain it so that you are satisfied with their answer.

Leslie

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