Modifying the depreciation rule

This page allows you to modify the depreciation rules, which are in “Active” status. The depreciation rule cannot be modified if it has been mapped to the depreciation book or category. You can modify the details of the depreciation rules like the textual description pertaining to the rule, the method of depreciation, basis on which the depreciation is calculated, depreciation rate, effective date of the rule, useful life of the asset, the convention followed during depreciation, minimum and the maximum depreciation.

The system saves all the modified details of the depreciation rule. The system updates the login ID of the user to the last modified by and the system date to the last modified date. The system also displays the creation history of the depreciation rule details.

Select the “Edit Rule” link at the bottom of the “Select Rule” page.

The “Edit Depreciation Rule” page appears.

The system displays the following fields:

Status	The status of the depreciation rule.
	Active – The depreciation rule on creation attains the “Active” status.
	Inactive – The depreciation rule on inactivation attains the “Inactive” status. The depreciation rule can be inactivated in the “Activate / Inactivate Depreciation Setup” activity. The depreciation rule once assigned to depreciation category cannot be inactivated.

Note: Only the depreciation rule in “Active” status can be modified.

Asset Class Code	The code identifying the asset class.
Depreciation Rule No.	The number identifying the depreciation rule.

Modify the following fields if required:

Note: The system displays the values defined for the depreciation rule selected by default.

If the depreciation rule has been mapped to the depreciation book or depreciation category, then these details cannot be modified.

Rule Description	The textual description pertaining to the description rule (Alphanumeric, 40). Mandatory.
Depreciation Method	Use the drop-down list box to select the method by which you want the asset to be depreciated. The various methods available are
	Straight Line- A fixed percentage on the original cost of the asset is charged every year as depreciation, so that the asset account may be reduced to zero or scrap value at the end of definite period representing its estimated life.
	Diminishing Balance – The asset is depreciated by a fixed percentage every year on the diminishing balance of the asset account.
	Sum of Years Digits – The assets are depreciated based on the useful life of an asset. This is method where you charge maximum depreciation during the initial period and gradually decrease the depreciable charge at the end. For example, this method will be adopted when an asset is leased or in financial sector.
	Example: The useful life of the asset is 5. The sum of years digit = (5*(5+1)) / 2 = 15. Depreciation for year 1 = 5/15 = 33.333 Depreciation for year 2 = (5-1)/15 = 26.667 and so on.
Basis	Use the drop-down list box to select the basis on which the depreciation has to be calculated. The depreciation can be calculated on the following basis
	Acqn. Cost – The depreciation is calculated on the original amount in which the asset is acquired.
	Acqn. Cost – Salvage – The depreciation is calculated for the asset after deducting the salvage.
Effective From Date	The date from which the depreciation rule is effective (Date Format). Mandatory.

Note: The effective from date must be later than the date on which the Fixed Asset is installed.

Yearly Percent

Use the drop-down list box to select “Yes” to indicate whether you want yearly percent. The options available are “Yes” and “No”.

Note: The “Yearly Percent” cannot be selected as “Yes”, if the depreciation method is “Diminishing Balance”.

Depreciation Rate Id	The code identifying the depreciation ID (Alphanumeric, 18). The depreciation ID must have been defined in the “Create Depreciation Setup” business component.
	Help facility available.

Note: The effective date of the rate ID must be earlier than the “Effective Date From” of the depreciation rule.

Useful Life of Asset	The number of years in which the assets could be of use (Integer). The useful life must be greater than 1. This field must be left blank, if the depreciation rate ID is specified.
	For example, the useful life of an asset could be 2 years or 3 years.
Maximum Depreciation	The maximum depreciation that can be provided for a depreciation calendar year for a set of assets (Decimal).
Minimum Depreciation	The maximum depreciation that can be provided for a depreciation calendar year for a set of assets (Decimal). The value entered here must be less than the value entered in the “Maximum Depreciation” field and greater than zero.
Depreciation Convention	Use the drop-down list box to select the depreciation convention. The various conventions available are
	Prorate – Indicates that the depreciation will be applied from the date when the asset is put to use.
	Mid Year – Indicates that the half-year of depreciation is taken for the first year when the asset is placed in service, regardless of in-service date. If the asset is disposed before the end of its useful life, a half-year of depreciation is taken for the year of disposal regardless of the month in which the asset was disposed. If the asset is kept for the asset's entire useful life, a half-year of depreciation is taken in the year following the last year of its useful life.
	Mid Month - Indicates that the depreciation will be applied on the asset for a full period if the in service date of the asset is on or before 15th of the depreciation processing period. Else, no depreciation will be charged for that period
	Mid Period - Indicates that the half-period of depreciation is taken for the first period when the asset is placed in service, regardless of in service date. If the asset is disposed before the end of its useful life, a half-period of depreciation is taken for the period of disposal regardless of the month in which the asset was disposed. If the asset is kept for the asset's entire useful life, a half-period of depreciation is taken in the period following the last period of its useful life.
	Full Period – Indicates that the full-period of depreciation is taken for the first period when the asset is placed in service, regardless of in service date.
	User Defined – Indicates that the depreciation will be applied on the asset based on the value given in the first year convention %.
First Year Convention %	The percentage based on which the depreciation must be calculated (Decimal). This field is mandatory, if the “Depreciation Convention” selected is “User Defined”.

The system displays the following field in the “Depreciation Rate Details” multiline:

Year

The number of years specified in the “Useful Life of Asset” field. If the useful life of the asset specified is 2, then the system displays 1 and 2 here.

Modify the following field if required:

Yearly Percentage

The percentage on which the depreciation must be calculated every year (Decimal). The value entered here must be greater than zero. This field is mandatory if “Yearly Percent” selected is “Yes”.

Note: The aggregate of the yearly percent must be 100, if the depreciation method is “Straight Line”.

Modifying depreciation rule

The following conditions must be checked before modifying a rule

	Rate ID	Yearly Rates	Useful Life
SLM	Y	Y	Y
WDV	Y	N	Y
SYD	N	N	Y

Note: For an asset class, the combination of depreciation rate ID, useful life, basis, method, yearly percent, depreciation convention, maximum / minimum depreciation must be unique.

Click the “Edit Rule” pushbutton to modify the depreciation rule details.

The system saves the modified details of the depreciation rule in “Active” status.

The system updates the login ID of the user to the last modified by and the system date to the last modified date. The system also displays the creation history of the depreciation rule details.

The system displays the following fields:

Created By	The login ID of the user who created the depreciation rule.
Created Date	The date on which the depreciation rule was created.
Last Modified By	The login ID of the user who last modified the depreciation rule.
Last Modified Date	The date on which the depreciation rule was modified last.

To proceed, carry out the following

Select the “Edit Rate” link at the bottom of the page to modify the depreciation rate.
Select the “Edit Assigned Rule” to modify the depreciation rule assigned to the depreciation book.
Select the “Edit Calendar” link at the bottom of the page to modify the depreciation calendar.
Select the “Function Defaults” link at the bottom of the page to view the function defaults.
Select the “Edit Category” link at the bottom of the page to modify the depreciation category.

What you can do in this page

Charge depreciation based on convention

Process depreciation based on the method

Calculate depreciation on the asset

Charge depreciation based on convention

You can calculate the depreciation based on certain convention.

Set the “Depreciation Convention” field to the “Prorate” to apply depreciation from the date when the asset is put to use.
Set the “Depreciation Convention” field to the “Mid Year” to calculate the depreciation on a half-yearly basis.
Set the “Depreciation Convention” field to the “Yearly” to calculate the depreciation on a yearly basis.
Set the “Depreciation Convention” field to the “User Defined” to apply depreciation on the asset based on the value given in the first year convention %.
Set the “Depreciation Convention” field to the “Mid Month” to calculate depreciation on a mid month basis.

Process depreciation based on the method

You can calculate the depreciation based on the method applied.

Set the “Depreciation Method” field to the “Straight Line” to apply straight-line method in calculating the depreciation.
Set the “Depreciation Method” field to the “Diminishing Balance” to apply diminishing balance method in calculating the depreciation.
Set the “Depreciation Method” field to the “Sum of Years Digits” to apply sum of year’s digits method in calculating the depreciation.

Calculate depreciation on the asset

You can calculate the depreciation on the asset on the basis of acquisition cost or acquisition cost - salvage.

Set the “Basis” field to “Acqn. Cost” to calculate depreciation on the acquisition cost of the asset.
Set the “Basis” field to “Acqn. Cost – Salvage” to calculate the depreciation after deducting the salvage from the acquisition cost.