Depreciation Adjustment Options
You have three options for handling underdepreciated assets. Each of these options contains at least one exception. The exceptions are explained below.
None: Select this option to take no adjustment. The asset is never fully depreciated, leaving a residual value of the adjustment amount. (This is not the case for the depreciation methods listed below. These methods handle the None option differently, as explained.) Select here for an example.
Immediate: Select this option to take an immediate adjustment. After entering the beginning depreciation amount, the system takes the adjustment amount the next time you calculate depreciation. (This is not the case for depreciation method RV, which handles this adjustment type the same as it does for None and Postrecovery, as explained below.) The system includes the adjustment in the Current-Year-to-Date figures. In reports, the Key column displays an "a" for adjustment. Select here for an example.
Postrecovery: Select this option to take a postrecovery period adjustment. The system takes the adjustment amount in the first period in the next fiscal year after the end of the asset's life. The asset is then fully depreciated. On the Depreciation Expense report for the postrecovery period, the Year-to-Date columns reflect the adjustment amount, and the Key column displays an "a" for adjustment. (This is not the case for the depreciation methods listed below. These methods handle this adjustment type differently, as explained.) Select here for an example.
If you are using the depreciation methods listed below, both the None and Post Recovery adjustment types prorate the adjustment amount over the asset's remaining life. These methods do not make the adjustment as explained above, because the calculations are based on the remaining net book value.
- MACRS (MF, MA, MI, and MR)
- Declining-balance (DB)
- Declining-balance half-year (DH)
- Declining-balance modified half-year (DD)
- Declining balance, no switch to SL (DC)
- Declining-balance, half-year, no switch to SL (DI)
- Declining-balance, modified half-year, no switch to SL (DE)
- Remaining value over remaining life (RV)
There is an exception to how the system applies a Post Recovery adjustment for the MACRS and declining-balance depreciation methods listed above.
When an asset's Beginning Date is during the fiscal year in which the asset's life ends, the system takes the Post Recovery adjustment in the first period of the following fiscal year.
When an asset's Beginning Date is after the fiscal year in which the asset's life ends, the system takes the Post Recovery adjustment in the period following the Beginning Date.
Here are some examples:
An asset's life ends on 6/30/07, at which point it should be fully depreciated. XYZ Manufacturing, a calendar year company, has under-depreciated the asset on another system and now enters it in the application.
