Issue/Symptom/Question

How is a fixed asset's depreciation calculation impacted when the useful life is extended? 

Environment

Fixed Asset Management => Asset Information window

• Depreciation tab => Depreciable Life (In Years):

Finance & Accounting => Processing => Fixed Assets => Depreciation Projection

Option 248

Resolution/Fix/Answer

This answer applies specifically to an asset setup to calculate depreciation based on a straight line method (or straight line with a 1/2 year convention)

With the first depreciation calculation following the update of an asset's useful life, PENTA will make a year to date correction. The result is a revised year to date depreciation expense that reflects what the year to date depreciation would have been if the updated asset life was in affect as of the first day in the fiscal year. Depending on the significance in change of life and the number of periods already calculated in the current fiscal year, the current period depreciation expense may be a negative amount.

PENTA option 248 controls whether depreciation calculations for straight line methods uses the asset's original book value or if it uses the asset's "net asset value" as of the beginning of the current fiscal year. Basing straight line calculations on the net asset value as of the start of the fiscal year will accurately account for prior year adjustments and ensures there is no remaining book value left when an asset is fully depreciated. Penta Technologies recommends setting option 248 = "Y" - depreciation for straight line methods is based on the net asset value.