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Assigning Depreciation Types to Categories

Fixed Asset Management Guide
Section 3 – Financial Setup

Assigning Depreciation Types to Categories

Each combination of category and book can have a default depreciation formula assigned. When a new asset is created, it inherits the depreciation settings from its category-book combination. This is the most efficient way to manage depreciation rules - set the defaults at the category level, and only override at the asset level for exceptions.

Prerequisites

Accessing Categories and Books

Navigate to Financial Setup > Depreciation > Categories and Books in the left-hand navigator:

Financial Setup menu showing Categories and Books option for assigning depreciation types to categories

Note: This is different from Classification > Categories, which is used to create and manage the categories themselves. The Categories and Books screen specifically manages the financial/depreciation settings for each category-book combination.

The Categories and Books Screen

Categories and Books screen showing category groups, categories with their book summary, and the book settings grid for the selected category

The screen is divided into three parts:

Section Content
Category Group (left) The top-level groupings of categories (e.g. IT, Plant and Machinery, Land and Buildings, Furniture). Select "All Items in Query" to list every category regardless of group.
Categories grid (top right) Every category in the selected group, with its Category Code and two summary columns: Books with No Depreciation and Books with Depreciation - a quick way to see, at a glance, which books are set to depreciate a category and which are not.
Book Settings for Category (bottom) Once a category row is selected, this grid lists every Book with its current Depreciation Type, Recovery Period, Depreciation Table, Salvage %, and any Depreciation Rule / Maximum Rule assigned.

Configuring Depreciation for a Category

To set or change the depreciation rules for a category:

  1. Select a Category Group on the left (or "All Items in Query" to see every category).
  2. Select a Category in the top-right grid to load its book settings at the bottom.
  3. Click the Depreciation Type link for the book you want to change. This opens the Edit Category Book dialog.

The Edit Category Book dialog lets you set:

Field Description
Depreciation Type The depreciation formula to use (e.g. "Standard 20% Declining Balance", "Straight Line over Recovery Period", "No Depreciation", "GDS Tables"). Click the link to pick a different type.
Apply Indexation Whether to apply annual indexation. Typically used for property assets where the depreciable base is adjusted for inflation or market movements.
Recovery Period The useful life in periods (months). For straight-line depreciation, this determines how many periods the cost is spread over. Not used by rate-table or declining-balance-to-net-book-value methods.
Depreciation Table The rate table to use when the Depreciation Type is table-driven (e.g. MACRS GDS tables such as A02-A05).
Salvage % The residual value, as a percentage of cost, left un-depreciated.
Depreciation Rule / Maximum Rule Optional named rules applied after (or as a cap on) the calculated amount, e.g. IRS Section 280F luxury-vehicle caps. Most categories leave these as NA.
Rule Parameter 1 / Rule Parameter 2 Parameters passed to the Depreciation Rule / Maximum Rule above, when one is set.

Click OK to save the category-book setting for future assets, or Deploy to Existing Assets to also push the change out to assets already in that category (see Important Behaviour below).

Example: Setting Up a New Category

Suppose you create a new category called "Office Furniture" and you have two books: "Corporate" and "Tax".

  1. Navigate to Financial Setup > Depreciation > Categories and Books.
  2. Select the category group that contains "Office Furniture" (or use "All Items in Query").
  3. Select "Office Furniture" in the categories grid.
  4. Click the Depreciation Type for the Corporate book and set:
    • Depreciation Type: Straight Line over Recovery Period
    • Recovery Period: 120 (10 years)
    • Apply Indexation: No
  5. Click the Depreciation Type for the Tax book and set:
    • Depreciation Type: Standard 20% Declining Balance
    • Apply Indexation: No

Any new asset created with the "Office Furniture" category will automatically inherit these settings in both books.

Important Behaviour

Changes only affect new assets by default. When you save the Edit Category Book dialog with OK, the change applies to assets created after you save. Existing assets keep whatever depreciation settings they already have - the screen's own note confirms this: "The above Settings are only applicable to new assets created in the selected Category. Existing Assets in this category may have different Configurations for the Books that they are on."

To apply the updated rule to assets that already exist in the category, you have two options:

  1. Deploy to Existing Assets - the button on the Edit Category Book dialog itself, which pushes the just-edited setting out to existing assets in that category/book without leaving the dialog.
  2. Bulk Update or individual override - select assets directly and change their depreciation settings. See Assigning Depreciation Types to Many Assets and Assigning Depreciation Types to Assets.

Warning: If you change a category's depreciation type and do not deploy it to existing assets, you will have assets in the same category depreciating under different rules. This may be intentional (e.g. a policy change that only applies going forward) but should be documented for auditors.

What Happens When a Book or Category is Created

When you create a new book, the system automatically creates category-book records for every existing category. Similarly, when you create a new category, category-book records are created for every existing book. Review the Book Settings grid for the new book or category afterwards to confirm the defaults are correct for your organisation.