Spotlight On Dynamics 365 Fixed Assets Depreciation
Fixed Assets. That is the topic of the day. From Acquisition to Depreciation to Disposal, Dynamics 365 for Finance and Operations (D365) offers several ways to accomplish managing the assets. Within each transaction, there is a myriad of options to ensure the transactions are recorded with detail and precision.
This blog will focus on depreciation and as usual with D365, there are options to choose from.
Configuration
Parameters
Within the Fixed asset parameters, there are specific settings applicable to depreciation. Navigate to Fixed assets > Setup > Fixed asset parameters.
- Minimum depreciation amount – enter the minimum amount of depreciation to be posted for a single fixed asset. This is a required field.
- Automatically create depreciation adjustment amounts with disposal – Yes or No.
- Calculate prorated depreciation – Select Yes if prorated depreciation should be calculated for a partial year IF no Depreciation convention is selected for a fixed asset.
- Reason codes – Reason codes can be required for Depreciation, Depreciation adjustment, or extraordinary depreciation transactions.
Depreciation Profiles
The Depreciation profile setup is the real meat of the depreciation functionality. D365 supports the fact that not all assets are depreciated using the same method.
Navigate to Fixed Assets > Setup > Depreciation profiles to setup the different depreciation profile that will be necessary for the various fixed assets to be created. The Depreciation profile determines the frequency of depreciation.
D365 supports several standard depreciation methods from which to choose:
Once the depreciation profiles are created, Fixed asset books need to be created. A depreciation profile can be assigned to each book. And eventually, Fixed asset groups are created and books are assigned to the groups resulting in sets of Fixed asset value models by asset group.
Fixed Asset Books
Each asset can have more than one Book value assigned to it and maintained. The Books to be selected from must be set up by navigating to Fixed Assets > Setup > Books.
Each Book has a name and contains whether or not depreciation is calculated, and whether or not the values calculated for this book are posted to General ledger as well as other settings such as the Depreciation profile.
Fixed Asset Groups
Fixed assets can be categorized into Fixed asset groups. The Asset group a Fixed asset is assigned to can be used to determine details about the asset to insure consistency among the assets in that group.
The grouping of assets may look something like the following:
- Buildings
- Automobiles
- Land
- Furniture/Fixtures
- Office Equipment
The Fixed Asset group determines the Type of assets in the group, an asset number sequence for the group (if auto numbered), the capitalization threshold for the group, bar code settings, etc.
The Fixed asset group also determines the Books to be maintained for the assets in the group. When assigning a book to a group, addition details are determined for the book and group combination including Service life and Depreciation convention. The convention defines the depreciation cycle for the book and group combination.
The Fixed asset groups are also put to use in defined the Fixed asset posting profiles. This means the accounting for assets within a group, by transaction, will be the same.
The combination of the Fixed asset group and Book is sometimes referred to as a Value Model.
Fixed asset depreciation
As Fixed assets are acquired, the depreciation clock starts ticking, but a Depreciation journal is normally posted to General ledger according to the Financial reporting requirements. Typically, depreciation is calculated and booked monthly or quarterly.
D365 offers a very simple depreciation journal process because all of the data has been set up previously, as Fixed assets are created and acquired. Due to the fact that the Fixed asset records contain all of the decisions made regarding depreciation, D365 can generate what is called a Depreciation proposal. The proposal can be reviewed and adjusted, if necessary, then posted in just a few clicks.
Navigate to Fixed assets > Journal entries > Fixed asset journal.
Select New.
Select the journal name created specifically for depreciation.
Select Lines.
From the journal line form, select Depreciation proposal.
How the depreciation proposal is to be calculated depends on the parameters selected.
To date – Enter or select the date depreciation is to be calculated to. This can be a date in the future.
Summarize depreciation – If the depreciation proposal contains multiple depreciation periods, the amounts can be summed by asset so the entry contains one line per asset, if preferred. If detail is preferred, leave as No.
Records to include – The depreciation proposal can be an for specific Fixed assets, a group or groups of assets, specific Books, or a myriad of other Fixed asset values by selecting the Filter button and updating the query to be used.
Once the parameters are filled in, click OK.
The Fixed asset journal form will populate with the depreciation amounts by asset and book combination (for books set to include depreciation) and include a line (if summary not selected) for each depreciation period since the last time depreciation was booked for the asset. Said another way, if depreciation for fixed assets, which fall within the parameters entered, have not had depreciation booked for multiple depreciation periods, the proposal will include those past periods and amounts, by date.
In this example, there are multiple periods not yet booked, so there are lots of lines in the journal.
Adjustments can be made to the journal before it is posted.
Fixed asset record
The fixed asset record can be a great source of information, especially in regards to the depreciation history.
Navigate to Fixed assets > Fixed assets > Fixed assets.
Select a Fixed asset to be reviewed by clicking the Fixed asset number in the grid.
Select Books to see the details.
An asset can have multiple books, and not all books need to have depreciation included. Open the Depreciation fast tab.
The Depreciation fast tab contains critical information that will determine the results of the depreciation proposal:
- Calculate depreciation – This must be yes to be considered in the proposal.
- Date when depreciation was last run – Will determine the ‘from date’ for the proposal for this asset and book combination.
- Depreciation periods – How many periods is depreciation to be calculated for this asset/book (Service life stated in depreciation periods).
- Depreciation periods remaining – How many periods of depreciation remain for this asset/book. There must be periods remaining or the proposal will not include this asset/book.
- Method – The method determines how will the proposal will calculate the depreciation amounts.
The list of posted transactions can be reviewed by selection the Transactions button, including the depreciation journals.
