Depreciation and Asset Accounting

Overview

xAssets Fixed Asset Management Software implements depreciation calculation and period end processing as a simple and efficient process, and the month end process is based on a simple three step process:

• Calculate depreciation for one or more periods
• Generate Journals and post them to the accounting system
• Close the period

Despite the simplicity of this process, the software is deeply configurable to be able to calculate any depreciation formulae. The system caters for multiple currencies, multiple companies, multiple books, and multiple depreciation formulae. Transfers and Disposals are correctly accounted for, and the system supports accounting for Construction in Progress (CIP). Catch-up depreciation is supported to allow for errors in previous periods to be corrected.

Depreciation calculations can be based on any mathematical formula or computer program.

• Comprehensive depreciation calculation engine
• Model depreciation and amortization formulae
• Actual and forecast depreciation are calculated at month end
• Track total cost of ownership (TCO) of assets
• Multi company, multi currency, unlimited books
• Each user can move forward and back in time
• Supports unusual accounting periods and year end changes
• Define posting rules to specify exactly how transactions are posted
• Create journals for purchase, depreciation, disposals and transfers
• Lease accounting and amortization
• Disposal and obsolescence calculations can be configured

In general, companies depreciate assets (and amortize leases) which are in service (or available for service). xAssets allows flexibility in defining when an asset is in service, and allows for assets to be in service for part of a period, e.g. based on the date in service or the date out of service (or date of disposal).

Multi Company Support

Multiple companies are supported. Companies with the same accounting periods can be depreciated together so groups of companies can be managed as if they were one company. Companies with different accounting periods can still be stored and reported together. Companies with different nominal code structures can be stored together and even depreciated together.

Support for Unusual Accounting Periods

The system supports companies with unusual accounting periods. Accounting periods can be automatically generated or manually set up. Different companies can have different sets of accounting periods, or many companies can utilise the same set as required.

As well as standard monthly periods, 4-4-5 periods are also supported, and the system can allow for changed, or other financial year adjustments such as extended or shortened financial years.

Multiple Financial Book Support

Depreciation support is comprehensive. Assets can belong to an unlimited number of books. Depreciation profiles can change over time (so for example you can calculate one formula such as double declining balance up to a certain date, then switch to another formula such as straight line) and you can specify which formulae or tables are used in depreciation calculations. The system exposes a number of "variables" for use in depreciation calculations. Indexation of assets is easy to set up and is defined per category group per financial year per currency.

Multi-Currency Support

xAssets Fixed Asset Management Software is also multi currency. True multi currency support is achieved by storing a currency code against every value stored in the system, so an asset can be purchased in Yen, Depreciated in Pounds and then Euros and then disposed of in US Dollars. Exchange rates are automatically downloaded from the web on a regular basis, and you can decide which exchange rates API service to use.

Depreciation Formulae

The depreciation engine is designed to work with any depreciation formulae, lookup tables or scenario including the most complex USA depreciation rules. Users can build, model and compare depreciation formulae to understand their effect.

The system include these formulae by default, but any formulae or depreciation table lookups (as done in MACRS and ACRS) can be configured into the system

Financial Transactions

All financial data is stored in transactions. Each transaction has a transaction type. Some transactions types are fixed and others can be defined by users. Examples of Transaction Types are: Purchases, Depreciation, Disposal, Cost Incurred, Insurance Cost, Routine Maintenance Cost.

Each transaction type has a set of posting rules associated with it. For example, a disposal’s posting rules might say:

                            
        DR 1020 – AP Disposals - Cars
        CR 1030 – Depreciation
        DR 2020 – Depreciation – Cars
        CR 3020 – Gain/Loss on disposal
                            
                        

Posting rules can be across the board, specific to a category group or specific to a category.

The depreciation calculation engine will choose the most specific posting rule over any others which apply.

Writing Journals

The xAssets period end processing software creates journal files in the format required by your accounting software.

Transaction Integrity and Catch Up Depreciation

In general, once a journal is posted, reversing it in your accounting system is undesirable. Therefore xAssets depreciation calculations supports catch-up depreciation, so some calculations were incorrect in a period, you can catch up the depreciation in the next month. Catch-up covers the following scenarios:

• Assets which were purchased in a closed period but not entered into the system
• Data entry errors in asset purchase amounts
• Depreciation calculated with the wrong formula, rate, start date or recovery period
• You later found that and asset was not in service in a period
• Assets were disposed of but this was not recorded in the system
• Assets were transferred (e.g. to another location or cost center) but this was not recorded in the system