How to Assign a Depreciation Type to an Asset Category
This page explains how to assign a depreciation type (formula) to an asset category for a specific book. When new assets are created, they inherit the depreciation settings from their category-book combination, so setting defaults at the category level is the most efficient way to manage depreciation rules.
Before You Begin
- Ensure you are in the Fixed Asset Management profile.
- You must have already created your Books and Depreciation Types.
- Know the depreciation formula, recovery period, and indexation requirements for the category you are configuring.
Step-by-Step Procedure
Step 1: Open Categories and Books
Navigate to Financial > Depreciation Setup > Categories and Books.
This screen is divided into three sections:
| Section | Content |
|---|---|
| Category Groups (left) | The top-level groupings of categories |
| Categories (right) | The individual categories within the selected group |
| Book Settings (bottom) | The depreciation settings for each book, for the selected category |
Step 2: Select the Category
- Select the Category Group on the left to see its categories.
- Select the Category on the right to display the book settings at the bottom.
Step 3: Configure the Depreciation Settings
Click the Depreciation Type for the book you want to configure. For each category-book combination, set:
| Field | Description |
|---|---|
| Formula | The depreciation calculation method (e.g. "SL 5yr" for straight-line over 5 years) |
| Default Recovery Period | The useful life in periods (typically months). For straight-line depreciation, this is how many periods the cost is spread over. |
| Indexation | Whether to apply annual indexation. Typically used for property assets where the depreciable base is adjusted for inflation. |
Step 4: Repeat for Other Books
If you have multiple books (e.g. Management and Tax), configure the depreciation settings for each book separately. Different books commonly use different formulae and recovery periods.
Step 5: Save
Click Save to apply the changes.
Example
Setting up an "Office Furniture" category with two books:
| Book | Formula | Recovery Period | Indexation |
|---|---|---|---|
| Management | Straight-Line | 120 months (10 years) | No |
| Tax | Declining Balance 25% | N/A (uses rate) | No |
Any new asset created with the "Office Furniture" category will automatically inherit these settings in both books.
Important Notes
- Changes only affect new assets. Modifying category-book settings does not change depreciation rules on existing assets. To update existing assets, use Bulk Update or edit each asset individually.
- When a new book or category is created, the system auto-generates category-book records using the book's default depreciation type. Always review these defaults.
- If you change a category's depreciation type without updating existing assets, assets in the same category may depreciate under different rules. Document this for auditors if intentional.
Related Articles
- Depreciation Types — The different depreciation calculation methods available
- Assigning Depreciation Types to Assets — Detailed reference for assigning depreciation types to individual assets
- Assigning Depreciation Types to Categories — Assigning default depreciation types at the category level
- How to Review Depreciation Before Posting — Reviewing depreciation calculations before month-end
- Books — Configuring depreciation books