Straight Line Depreciation not calculating correctly

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Verified
zachs asked a question on 4 May 2015 4:36 PM

Ok so I'm currently entering in assets into the fixed asset module and I can't seem to figure out how GP is calculating the depreciation. Here is the relevant information

 

Cost Basis: 80,809.50

Place in service date: 12/29/14

Dep to date: 12/28/14

0 LTD and YTD

Life: 5 years 0 days

Dep method: Straight line Orig

No Averaging Convention

No Switchover

So based on all of this I am expecting the period depreciation to be $1,346.83 (80,809.50 / 5 / 12 ) since there isn't any depreciation taken on it yet. That would roughly $44.89 per day. However, it is calculating out periodic depreciation to be $1,571.30 and daily depreciation to be $50.82.

For the most part changing the averaging convention does very little but I set it to none because I want the assets to depreciate exactly based on their placed in service date. However, when I change the depreciation method to SL remaining life, it calculates periodic depreciation to be $1,368.22. This is better but still off from what I would expect.

 

Does anyone have an idea?

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Suggested Answer
Mahmoud M. AlSaadi responded on 4 May 2015 5:41 PM

Hello,

Your assumptions for the calculations are totally correct, I have just simulated a similar case on a test environment and here is my perspective on how Dynamics GP calculates according to the configuration you've provided above

Depreciation Percentage is 20, which is associated with 5 years and 0 days. >> This means, the asset will be depreciated through 1825 days (5 years * 365 + 0 Days)

Calculating the daily depreciation rate:

( Acquisition Cost - Salvage values ) /  number of days for the asset to be depreciated

(80,809.50 - 0 ) / 1825 = 44.279

This means a periodic depreciation would be around 1372.

Here is the result as entered on Dynamics GP :

The calculation below reflects the exact numbers in the proposed scenario, which are totally correct.

Your feedback is highly appreciated,

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Suggested Answer
Harry Lee responded on 4 May 2015 9:13 PM

Zachs,

Mahmoud's math checks out. The problem with your calculations is decimal place precision. Using $89,809.50 / 5 / 12 gives you a rough approximate periodic depreciation rate, not an exact one, because some months have 30 days, others 31 and February has 28. Using an approximate periodic depreciation to calculate a daily depreciation rate yields yet another approximation; this is why your calculations produce inaccurate results.

Using $89,809.50 / 5 / 365 yields an exact daily depreciation rate of $44.2792 (to the ten thousandth decimal place precision). Multiplying the daily depreciation rate by the days in a period then yields an exact periodic depreciation rate.

This is fairly typical during implementations, when new depreciation figures challenge those in spreadsheets, long considered accurate. In every situation I've been asked to explain, Dynamics GP was calculating depreciation correctly, but each time we're asked we do the math nonetheless.

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zachs responded on 4 May 2015 10:29 PM

His math is fine and I would be happy if I could get GP to calculate out to anywhere near those numbers, as I mentioned though, the numbers Great plains is actually calculating is the $1,571.30 per period. I double checked my service dates and numbers and everything is showing up the same.

I feel that a $224 difference per month has to be something other than a decimal place error.

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Harry Lee responded on 4 May 2015 10:51 PM

Zachs,

You are right, you have a distinctly different problem than decimal place accuracy. Please post an image of your Asset Book record for this asset.  If you cannot get that small enough to fit, include current values for all of the fields, especially Averaging Convention. With the settings you described, I get the exact same figures as Mahmoud.

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Suggested Answer
Harry Lee responded on 4 May 2015 11:16 PM

Zachs,

One other thing, please capture and image and upload your fiscal period setup and Fixed Asset Calendar Setup. I believe your 12-2014 period may not be 31 days. Are you perchance using a 4-4-5 week setup? 35 days (7 days X 5 weeks) @ $44.89 = $1571.15 (pretty close to $1571.30).

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Verified Answer
Harry Lee responded on 5 May 2015 12:10 AM

If you are running a 4-4-5 fiscal period setup, here is a post on resolving issues associated with this setup:

community.dynamics.com/.../overstated-depreciation-on-a-4-4-5-manufacturing-retail-calendar

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zachs responded on 5 May 2015 9:52 AM

The 53 week issue was the problem. I'm surprised it doesn't automatically realize the issue considering it has the calendar set up.

Thank you both for your help.

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Joe.M. responded on 25 Aug 2015 11:55 AM

Have you ever experienced a problem where several assets are Straight Line Depreciation but GP changes the depreciation to a larger amount in the last year of the assets life?  On one asset it changes from $2k a month to $225k for the several months of it's life.

Any help is appreciated as this Fixed Asset system is new to us. 

Thanks,

Joe

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Brenda Willey responded on 13 Sep 2017 3:26 PM

Ok so i have the same issue.  Not sure how to explain this to the client how the Periodic Depr Rate is calculated.  

I get the 60.6745 Daily rate = 110,731/5/365  AND if I multiply the daily rate by 365 i get $22,146.19 which is the number the client is looking for the Yearly Depr but the Yearly Depr Rate is 18,505.7288  Why??

Also i can not get to the 1,856.57 Cur Run Depr.  This should have been for July which has 31 days.  31*60.6745 = 1,880.9095.   Even if i use 30 days ... 30 * 60.6745 = 1,820.235

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Suggested Answer
Harry Lee responded on 20 Oct 2017 3:24 PM

Brenda -

Hold onto your hats...

Here's what GP is doing:

The asset was placed in service on 3/2/2017.  March to December, minus March first accounts for 305 days of the current year. So your yearly depreciation rate for 2017 in GP is calculated as follows:    

Annual Rate / 365 * 305

OR

$22,146.20 / 365 * 305 = $18,505.7288

Could you share more of your settings for Fixed Assets, like your fiscal period setup, quarters, etc. As this will shed light on what GP is being asked to calculate?

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Brenda Willey responded on 23 Oct 2017 3:49 PM

The Calendar for FA is calendar year and the quarters are

01/01/2017    3/31/2017    2/14/2017

04/01/2017    6/30/2017     5/16/2017

07/01/2017     9/30/2017     8/15/2017

10/1/2017     12/31/2017     11/15/2017

I tried attaching a screenshot but it is not working for me today.

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Suggested Answer
Harry Lee responded on 23 Oct 2017 5:35 PM

Brenda -

This one just clicked, and it wasn't because you sent the calendar/quarters info.  At first, I too struggled with how GP was calculating your periodic depreciation rate.

GP is showing the total depreciation for the year of $18,505.7288, which I covered off how GP calculated in my earlier post.  

It is also showing the total depreciated to-date as $9,222.96.  

The remaining depreciation is therefore $9282.77, which when divided by 5 months left in the year, you get $1856.55.  If you are looking for the $.02, it is the catch-up that is necessary to fully depreciate the $18,505.73 ($1856.55 * 5 leaves you $.02 short of the total amount).

I would be curious if GP doesn't actually depreciate $1880.91 in August, October and December and $1820.24 in September and November, which when you add them all up and divide by five comes out to $1856.64.

You should check your Book Setup (Dynamics GP >> Tools >> Setup >> Fixed Assets >> Book) to determine if your Depreciation Period setting is set to Periodically or Daily, as this will impact the way GP calculates depreciation.

Sincerely,

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Brenda Willey responded on 24 Oct 2017 9:24 AM

The book is set to Periodic.

It depreciated 1,856.57 for August and September. 

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Brenda Willey responded on 24 Oct 2017 9:25 AM

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Harry Lee responded on 24 Oct 2017 9:32 AM

Brenda -

That makes sense.  GP has literally divided the remaining depreciation into periodic amounts.  If any period is different, it should be at the end of the year, and it should have slightly less depreciation than each of the other periods.

Final question... What depreciated in each month, prior to August and September?

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Verified Answer
Harry Lee responded on 5 May 2015 12:10 AM

If you are running a 4-4-5 fiscal period setup, here is a post on resolving issues associated with this setup:

community.dynamics.com/.../overstated-depreciation-on-a-4-4-5-manufacturing-retail-calendar

Reply
Suggested Answer
Mahmoud M. AlSaadi responded on 4 May 2015 5:41 PM

Hello,

Your assumptions for the calculations are totally correct, I have just simulated a similar case on a test environment and here is my perspective on how Dynamics GP calculates according to the configuration you've provided above

Depreciation Percentage is 20, which is associated with 5 years and 0 days. >> This means, the asset will be depreciated through 1825 days (5 years * 365 + 0 Days)

Calculating the daily depreciation rate:

( Acquisition Cost - Salvage values ) /  number of days for the asset to be depreciated

(80,809.50 - 0 ) / 1825 = 44.279

This means a periodic depreciation would be around 1372.

Here is the result as entered on Dynamics GP :

The calculation below reflects the exact numbers in the proposed scenario, which are totally correct.

Your feedback is highly appreciated,

Reply
Suggested Answer
Harry Lee responded on 4 May 2015 9:13 PM

Zachs,

Mahmoud's math checks out. The problem with your calculations is decimal place precision. Using $89,809.50 / 5 / 12 gives you a rough approximate periodic depreciation rate, not an exact one, because some months have 30 days, others 31 and February has 28. Using an approximate periodic depreciation to calculate a daily depreciation rate yields yet another approximation; this is why your calculations produce inaccurate results.

Using $89,809.50 / 5 / 365 yields an exact daily depreciation rate of $44.2792 (to the ten thousandth decimal place precision). Multiplying the daily depreciation rate by the days in a period then yields an exact periodic depreciation rate.

This is fairly typical during implementations, when new depreciation figures challenge those in spreadsheets, long considered accurate. In every situation I've been asked to explain, Dynamics GP was calculating depreciation correctly, but each time we're asked we do the math nonetheless.

Reply
Suggested Answer
Harry Lee responded on 4 May 2015 11:16 PM

Zachs,

One other thing, please capture and image and upload your fiscal period setup and Fixed Asset Calendar Setup. I believe your 12-2014 period may not be 31 days. Are you perchance using a 4-4-5 week setup? 35 days (7 days X 5 weeks) @ $44.89 = $1571.15 (pretty close to $1571.30).

Reply
Suggested Answer
Harry Lee responded on 20 Oct 2017 3:24 PM

Brenda -

Hold onto your hats...

Here's what GP is doing:

The asset was placed in service on 3/2/2017.  March to December, minus March first accounts for 305 days of the current year. So your yearly depreciation rate for 2017 in GP is calculated as follows:    

Annual Rate / 365 * 305

OR

$22,146.20 / 365 * 305 = $18,505.7288

Could you share more of your settings for Fixed Assets, like your fiscal period setup, quarters, etc. As this will shed light on what GP is being asked to calculate?

Reply
Suggested Answer
Harry Lee responded on 23 Oct 2017 5:35 PM

Brenda -

This one just clicked, and it wasn't because you sent the calendar/quarters info.  At first, I too struggled with how GP was calculating your periodic depreciation rate.

GP is showing the total depreciation for the year of $18,505.7288, which I covered off how GP calculated in my earlier post.  

It is also showing the total depreciated to-date as $9,222.96.  

The remaining depreciation is therefore $9282.77, which when divided by 5 months left in the year, you get $1856.55.  If you are looking for the $.02, it is the catch-up that is necessary to fully depreciate the $18,505.73 ($1856.55 * 5 leaves you $.02 short of the total amount).

I would be curious if GP doesn't actually depreciate $1880.91 in August, October and December and $1820.24 in September and November, which when you add them all up and divide by five comes out to $1856.64.

You should check your Book Setup (Dynamics GP >> Tools >> Setup >> Fixed Assets >> Book) to determine if your Depreciation Period setting is set to Periodically or Daily, as this will impact the way GP calculates depreciation.

Sincerely,

Reply
Suggested Answer
Harry Lee responded on 20 Nov 2017 9:59 AM

Bari -

Just a quick note. If the Begin Depreciation Date is 3/31/2017, then the math works.  $693.39583333 repeating times 9 months (April to December inclusive) = 6240.5625.  

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Suggested Answer
Harry Lee responded on 21 Nov 2017 2:53 PM

Bari -

As you can see from the detail activity report, there is no clear path to how the asset was added, and depreciated.  The periods and amounts jump around, and there are FACHG source documents, which indicates a depreciation sensitive field was edited on the Asset Record.

In cases like this, I typically suggest using the Fixed Asset Delete Utility to remove the asset and re-add it to the system.  Then you should be able to rerun the depreciation through the current period, and get a clearer picture of the asset record.  It is important to make any necessary adjustments to the General Ledger for the asset, as deleting it does not reverse the GL transactions.

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