Last Updated on November 19, 2022 by maximosecrets
This is the second page on asset depreciation where we look at some more features of asset depreciation with a focus on how you would set up asset depreciation schedules.
Asset Templates Application – Manage Depreciation Schedules
You may have many assets that are similar, and the Asset Templates application can be used to model the preventive maintenance, meter, spare parts and depreciation schedules and then apply this to multiple assets.
On the Asset Templates application there is a submenu for Depreciation Schedule in the More Actions menu. You may not have noticed it but asset 2117 had been created from this asset template. The Asset Template hasn’t currently got a depreciation schedule.
The DUMPTRUCK asset template has two continuous meters. ODOM-M records the mileage in actual value, FUEL-G records the fuel consumption in gallons, a delta value.
When we launch the Manage Depreciation Schedules action it is similar to that which we saw in the Assets application with the main difference being that there is only the ability to Preview the Schedule, there are not the four tabs for Current Schedule, Preview, GL Transactions and History. The Starting Cost was populated from the Purchase Price and I entered the Salvage Amount of $2,000.
We will enter two depreciation schedules this time, the first is date based but over an 8-year period using a straight-line depreciation, with a depreciation of $1,250 per year. On the right-hand side I entered the Start Date of 1-Jan-20 and used the Refresh button to get a preview of the depreciation schedule.
We have now entered a second depreciation schedule of period type METER based on the expected life of the dump truck of 100,000 miles with a calculation based on 8 periods. In order to see the Preview Schedule, you need to change the ratio on the first depreciation schedule 1003 so that the ratios on the two depreciation schedules add up to 100%. I split the depreciation between date and mileage based on a 50-50 split. You may get this error message “BMXAA9208E – The sum of the values in the ratio field for the schedule definitions must equal 100.”
The other action in the submenu is View Depreciation Schedules – this shows the left-hand side of the Manage Depreciation Schedules dialog, it is read-only and would be used by those who do not have authority to change the depreciation schedules. The observant of you would notice that the Schedule numbers have changed, that’s because I went to get a coffee before pressing the OK button which actually saves the records, and Maximo timed-out, so I had to re-enter.
The other depreciation method is DDB – Double Declining Balance and I wanted to show what this depreciation schedule looks like and have temporarily applied it to the date-based schedule 1005. When the method is DDB the Depreciation Value will be reduced by three quarters in each period with the remaining amount reducing to the salvage amount in the last period of the term. 12,000 x 0.75 = 9,000 * 0.75 = 6,750 etc.
But I am not going to save this and will use the Cancel button from the dialog.
On the Asset Templates application, you use the action Apply to Existing Assets to apply the depreciation schedule or other changes you have made to the asset template, to a set of assets that you select with the Select Assets or New Row button. If you are going to set depreciation from a particular date set the Depreciation Start Date in the Default Asset Table Data section before you select the assets. When you press OK it will apply the asset template to your selected asset(s).
Back in the Assets application we can see that asset 2117 has been updated with the two schedules over a period of 8 years. The depreciation schedule was updated from the asset templates depreciation schedule. In my tests I had to reset the depreciation start date on asset 2117.
Item Master Application – Manage Depreciation Schedules
The actions to Manage Depreciation Schedules and View Depreciation Schedules are also found on the Item Master application and will be available if the item is a rotating item, an item from which assets are created.
These two actions are not available in the Tools application, which is a pity as you can also have rotating tools. You can get around this because you can apply an Asset Template to tool assets, this is what I have done in the example above, asset 2117 is of Item Type = Tool.
For the next illustration I am looking at a different item PUMP100 a centrifugal pump.
The Manage Depreciation Schedules dialog layout is very similar to what we saw in the Asset Templates application, with the exception of one field called Starting Point which has a choice between INVOICE and RECEIPT. Here I have set a single straight-line depreciation schedule from a starting cost of $6,400 with a salvage amount of $400 over 6 years, a depreciation of $1,250 each year. However, this time I have changed the number of periods to 24 and the period units to QTR (quarters) with a calculation on the first day of the quarter. As it happens, it is 1st April 2020 today and in the preview 25 depreciation records would be created, although this data isn’t stored on the item, it is calculated when you use the Refresh button.
Let’s see what happens if we create a PO for a quantity of this item and proceed through receiving and invoicing steps.
In the Purchase Orders application, I created a PO for item PUMP100, quantity 1 on the CENTRAL storeroom, I then approved the PO = 1122. In the Receiving application, the item was received and after going through the inspection and serialisation process asset 2121 was created using the Autonumber button and this increased the balance in the CENTRAL storeroom by one.
Using the View Depreciation Schedules action on asset 2121 in the Assets application you can see that the depreciation schedule was copied through from the asset’s rotating item PUMP100.
When the invoice was approved a second depreciation history record was created, this time of type UPDATE.
This time I will show what happens with a Receipt Starting Point. Everything else is the same as it was before with depreciation over 24 quarters.
In the Purchase Orders application, I created a PO for item PUMP100, quantity 1 on the CENTRAL storeroom, I then approved the PO = 1147. In the Receiving application, the item was received and after going through the inspection and serialisation process asset 2161 was created using the Autonumber button and this increased the balance in the CENTRAL storeroom by one.
Using the View Depreciation Schedules action on asset 2161 in the Assets application you can see that the depreciation schedule was copied through from the assets rotating item PUMP100.
On the invoice I have changed the invoice cost on the invoice line to $6,600. On approval of the invoice you get the message “BMXAA9229E – The invoice cost differs from the received cost for this invoice line. Do you want to recalculate the depreciation for the rotating assets created from this invoice line?”. On answering Yes, the invoice is approved.
On the Assets application for asset 2161 we see that the current value is $6,600.
The depreciation schedule has been updated based on the invoice cost of $6,600. If the Invoice Cost is different to Receipt Cost, then you will have a choice as to whether to change the depreciation based on the new cost, or not.
It is worth noting that when you have set up a depreciation schedule on an Item Master or Asset Template record that might have been based on the purchase price at the time. Each year you should consider reviewing the starting costs on these records.
In the tests I performed if the depreciation cost on the Item Master was $6,400, the PO cost was $6,500 and the Invoice cost was $6,700, then if you answered “Yes” to the informational message then the current value of the asset would use the Invoice cost of $6,700, however if you answered “No” it did not use the PO/receipt cost ($6,500), but the depreciation cost on the Item Master record, the current value was set to $6,400.
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