The third and fourth page looking at the features of asset depreciation in Maximo are both detailed and focused on the actions in the Assets application. This third topic takes a deep dive into the Manage Depreciation Schedules action. The fourth page will focus on the Swap Depreciation Schedule and Split Depreciation Schedule actions and also what happens when you move an asset.
Manage Depreciation Schedules
The Depreciation section of fields is based on object DEPRECIATION:
- Starting Cost (STARTINGCOST) – This is the value used to calculate depreciation, it defaults from the Purchase Price of the asset.
- Salvage Amount (SALVAGEAMT) – This is the expected value of the asset at the end of the depreciation period.
- Depreciation ID (DEPRECIATIONNUM) – This is the unique identifier of a depreciation record (with ORGID), it is autokeyed. While an asset record exists at the site level, depreciation is stored at the organization level.
- Remove Depreciation – A non-persistent checkbox used in removing asset depreciation
- Delete Depreciation – A non-persistent checkbox used in deleting asset depreciation
- Starting Point (STARTINGPOINT) – The starting point for Item Master depreciation with values for RECEIPT, INVOICE. It is hidden in the Assets and Asset Templates applications.
The DEPRECIATION object is shared between the Assets, Asset Templates and Item Master applications and has attributes for the key fields as follows:
- Assets – ASSETID
- Asset Templates – TEMPLATEID, ORGID
- Item Master – ITEMNUM, ITEMSETID
The Schedule Definition table window is based on table DEPSCHED and allows multiple depreciation schedules to be linked to the same asset, asset template or item master record.
- Schedule (DEPSCHEDNUM) – Part of the unique key (with ORGID, DEPRECIATIONNUM), an autokeyed value.
- Method (METHOD) – Depreciation calculation method, synonym domain DEPMETHOD
- SL – Straight Line – Linear depreciation.
- DDB – Double Declining Balance – An accelerated form where the majority of depreciation is recognised in the early periods.
- Period Type (PERIODTYPE) – The period basis of the depreciation, synonym domain DEPPERIODTYPE
- DATE – Date based
- METER – Meter based; depreciation is based on meter usage. For example, the value of a car will depreciate by how many miles it is driven.
- Periods (PERIODS) – The number of periods in the depreciation schedule
- Ratio (RATIO) – The percentage proportion that this schedule uses to calculate the current value of the asset. The ratio for all depreciation schedules for the same depreciation record must add up to 100%.
- Period Units (EXPECTEDLIFEUOM) – The time unit of measure for the depreciation period, synonym domain DEPEXPLIFEUOM
- MONTH – Monthly
- QTR – Quarterly
- SEMIYEAR – Semi-Yearly
- YEAR – Yearly
- Calculation Day (CALCDAY) – The day on which depreciation is calculated, synonym domain DEPCALCDAY
- FIRST – First day of the period
- LAST – Last day of the period
If null, then the depreciation periods will be on the anniversary of the start date
- Start Date (STARTDATE) – The date on which depreciation calculations start. It defaults to today.
- Financial Schedule (FINANCIAL) – A YORN field indicating that the depreciation schedule defines the financial value of the asset. Default of 0, indicates that depreciation is being calculated for other reasons perhaps as a guide for repair or replacement decisions.
- Create GL Transactions (CREATEGLTRANS) – A YORN field indicates that GL transactions will be generated for the depreciation periods in this schedule when their date or meter reading have been reached.
- GL Debit Account (GLDEBITACCT) – The GL account that is debited with the depreciation transaction.
- GL Credit Account (GLCREDITACCT) – The GL account that is credited with the depreciation transaction.
- Adjusted Depreciated Value (ADJUSTEDDEPRECIATEDVALUE) – A non-persistent field used during recalculation of depreciation.
- Meter (METERNAME) – Asset meter that is used to calculate depreciation. This must be a meter associated with the asset.
- Starting Reading (METERSTART) – The starting value of the meter from which depreciation is calculated. It defaults to zero.
- Unit of Measure – Read-only field showing the unit of measure associated with the meter.
- Expected Life (EXPECTEDLIFE) – The expected life of the asset in the meter units.
An asset can have multiple depreciation schedules. For example, a car can depreciate based on how old it is, and how many miles you drive. The asset depreciates 75% of value by DATE period type using SL calculation over 5 years and depreciates 25% of value by METER period type using SL calculation over same period. If there are multiple depreciation schedules, then they do not need to be based on the same method (SL or DDB).
If the period type is DATE the Meter Periods section’s attributes are read-only and empty. If the period type is METER the Date Periods section’s attributes are read-only and empty.
A depreciation schedule can be deleted.
Asset Depreciation – Entity Diagram
There are 6 tables involved in depreciation:
- DEPRECIATION is the main depreciation table which is used by the Asset, Asset Template or Item Master applications. It has the starting value and salvage amount values.
- DEPHISTORY is the table that records the changes made to a depreciation record. It is the table with a history type of CREATION, UPDATE, MOVED, etc, the top table window on the History tab.
- DEPSCHED is the table that defines a depreciation schedule. It is the table that has the method (SL, DDB) and period type (DATE, METER) attributes.
- DEPSCHEDPERIODS is the table that defines the depreciation schedule periods. The records are displayed in the Current Schedule tab.
- DEPSCHEDHISTORY is the table that shows the depreciation schedules at a point when the depreciation record was created, updated, moved, etc. It is the bottom table window on the History tab.
- DEPTRANS is the table that stores the GL financial transaction records when depreciation occurs, the records are viewed on the GL Transactions tab.
Asset Depreciation – Other Points
- Depreciation is not available on operating locations. You would need to create an asset record linked to the operating location and use this.
- Depreciation is not available on the Tools application, although a tool can also be marked as rotating and have associated tool assets. You can use an Asset Template to apply the depreciation to the tool asset or enter it manually.
- The History Tab shows a history of changes to the Depreciation record (object DEPHISTORY) and its Schedules (object DEPSCHEDHISTORY). The two table windows are linked so that highlighting a row on the top table window shows the depreciation schedules as of the change date.
- Manage Depreciation Schedules and View Depreciation Schedules are in Library.XML
- Split Depreciation Schedules is in Assets.XML.
- The Cron Task DepreciationFinTransCronTask is set to run every 15 seconds, in a production environment it can be set less frequently than this.
Starting, Removing and Deleting asset depreciation
In the Assets application when you use the Manage Depreciation Schedules action on an asset and change the start date then on the History Tab you get a second CREATION record. This is for a new asset = 2122 generated from our Asset Template DUMPTRUCK. You can see I changed the start date only one minute after generating the asset at 18:05. The two records that you see in the bottom table window called “Schedule” are actually tied to the history record by the Change Date. In this case they are reflecting the top highlighted row with a change date of 01/04/20 18:04.
If I move to the second record in the table window you can see that the Start Date on Schedule 1018 is 01/01/17.
There are two check boxes for Remove Depreciation and Delete Depreciation. I have selected Removed Depreciation and pressed the OK button and you get the information message “BMXAA92211 – Are you sure you want to remove this depreciation schedule from the asset?”.
After pressing the Yes button to the warning and then on returning to the Manage Depreciation Schedules dialog you can see that both depreciation schedules have been removed, the salvage amount has been blanked and a new depreciation ID is referenced. On the History tab there is still a record of what has occurred over time. There is now a REMOVED history record and if I selected it you would see the two depreciation schedule records that were active immediately before the point when they were removed.
For the same asset at 18:33 I created a new schedule based on 12 months with a method of DDB – Double Declining Balance. I had pressed OK which saved the depreciation schedule and then re-entered the Manage Depreciation Schedules dialog. Now I have changed the number of periods from 12 to 18-months. You will receive the warning message “BMXAA9226W – The existing depreciation schedule for this asset will be replaced. Do you want to continue?”
On answering Yes, the dialog closes, but on re-entering there is now an UPDATE on the history tab, this is an update to the depreciation record with an ID of 1023.
The Delete Depreciation checkbox will also give you an information message “BMXAA4125I – Are you sure you want to delete this record?”.
On answering Yes, the dialog closes, and on returning to the Manage Depreciation Schedules dialog the depreciation schedule has been deleted, same as for the Remove Depreciation checkbox, however, this time it has also erased all reference to Depreciation ID = 1023. The history tab just shows the first three records made when the Depreciation ID = 1020. Delete Deprecation does not delete GL Transactions in table DEPTRANS.
- Remove Depreciation checkbox deletes the depreciation schedule and adds a REMOVED transaction to the history. I have removed the depreciation schedule because I want to recalculate on a different basis.
- Delete Depreciation checkbox deletes the depreciation schedule and all references to the depreciation ID. I have deleted the depreciation schedule, perhaps because in trying to get the depreciation right I created a few issues and now I want to erase these.
Both Remove Depreciation and Delete Depreciation sets the current value on the Asset main tab to null. Using the trash can icon to delete the last Schedule Definition record changes the current value to zero. The Current Schedule may be removed and recalculated, for example, if you change the Periods, Period Units, or Calculation Day, but a warning message is provided.
Date and Meter Based Depreciation
The Ratio field determines the schedule’s contribution to the asset’s overall current value. The sum of all schedules’ ratios must equal 100%.
For date-based depreciation schedules you can either enter:
- A Calculation Day (FIRST or LAST) and all periods after the first will use this as the day to calculate the depreciation. The first period has a prorated depreciation amount based on the the Start Date relevant to the next periods depreciation date.
- If you leave the Calculation Day empty, then the depreciation dates will be on the anniversary of the Start Date. If the start date is 02-Apr-20 and you set the Period Units = QTR then depreciation dates will be 02-Apr-20, 02-Jul-20, 02-Oct-20, etc.
For meter-based depreciation schedules:
- You can only select a Meter name that has been associated with the asset.
- The Start Reading is the meter reading for the first period and all subsequent periods are calculated from this value.
- The Expected Life is the meter reading that will end the depreciation calculations. It may be the meter reading at which you would think about retiring or refurbishing the asset and it is the meter reading on which you think the salvage amount is based.
What happens when there are multiple depreciation schedules for the same asset?
To illustrate this, I have created two depreciation schedules both starting on 1-Jan-20 with an equal percentage split 50-50 between both schedules, the Ratio field. Both schedules are based on Straight Line in order to keep the math easy.
- Schedule 1025 if based on 8 quarters, and so on 02-Apr-20, one quarter has passed. We would expect this schedule to have caused a depreciation of ($12,000-$2,000) / 8 = $1,250 * 50% = $625.
- Schedule 1026 is based on depreciation being lost at the end of the first month, ($12,000-$2,000) / 1 = $10,000 * 50% = $5,000
Consequently on 02-Apr-20 we would expect a total depreciation of $5,625, and a current value of $12,000 – $5,625 = $6,375.
The Current Value will be found on the Assets application main tab, it is indeed $6,375.
While there is an action View Depreciation Schedules this only shows each schedule individually. There isn’t a consolidated view which takes each schedules depreciation, applies the ratio and shows by depreciation date how depreciation is expected to reduce over time. The reason for this is because if one of the schedules is meter based then you do not have a time element, you cannot create a consolidated view. For meter-based depreciation schedules, depreciation of the current value will only occur when the actual meter reading has exceeded one of the Meter Life To Date points.
The Current Value field is important as it is the only field which helps you to understand the current effect of depreciation.
There are a few additional points to illustrate with METER based depreciation. The asset is a dump truck that was purchased with 10,000 miles on the clock. The depreciation schedule is based on a meter of ODOM-M (Odometer in miles) with a Starting Reading of 10,000 miles and an Expected Life of 100,000. The depreciation schedule is based over 8 periods of 12,500 miles and each attracts a depreciation of $1,375.
The first period is 0, there are 9 period records. The Meter Life to Date is 10,000 taken from the Starting Reading and the last Meter Life to Date is 110,000 which is the Expected Life value added to the Starting Reading.
The first actual meter reading I entered was at 9,000 miles which is below the 10,000 meter life to date for Period 0, the current value of the asset was $0.
The second actual meter reading I entered was at 10,000 miles which is equal to the first meter life to date of 10,000 for Period 0, the current value of the asset is now $12,000. Notice that a GL Transaction has now been created.
The third actual meter reading I entered was at 25,000 miles which is above the first depreciation point of 22,500. The second GL Transaction record was created.
On the GL Transactions tab, you can see the two GL transactions records created in the DEPTRANS table.
On the Asset main tab and Purchase Information section you can see that the current value reflects the Depreciated Value.
The Current Value is a non-persistent field, it is not held in the database and so cannot be output on a BIRT report. If you are not collecting GL Transactions the method for calculating the current value of an asset for a report could be complex. There is also no ability to see how much depreciation has occurred because the column Transactions Created is only set when “Create GL Transactions” has been set.
Recalculating depreciation after it has begun
The final part of this page will examine the recalculation of depreciation after it has started. For example, you may wish to adjust depreciation from a particular period because end of life may be longer or shorter, scrappage value may need to be adjusted, the value of the asset increased because a major component was replaced, etc.
In the Manage Depreciation Schedules dialog I have scrolled over to the right and am showing the current schedule of the first depreciation schedule based on 8 quarters starting on 1-Jan-20. What would happen if we wanted to change the depreciation basis at a point after it had begun?
On the Current Schedule tab there is a Recalculation Point check box. Only one period can be marked as a recalculation point. In the illustration I have chosen 01-Jan-21 at which point the depreciated value is $8,250. This value is copied to the field Adjusted Depreciated Value on the depreciation schedule, but you can modify this figure. The number of periods has also been changed to 4, being the number of periods remaining.
You can adjust the current value for this schedule, the number of periods, salvage amount, and expected life.
I have decided to spread depreciation over 8 more periods, an extra year, at which point the salvage amount is only going to be $250. I have kept the Adjusted Depreciation Value the same. When you look at the Preview tab you can see that there are now 12 periods and that depreciation after 01-Jan-21 is $1,000 instead of $1,250. The maths is ($8,250 – $250)/8 = $1,000 depreciation per quarter. Of course, the real depreciation is only $500 per quarter because the ratio of this schedule is 50%. When you press OK the depreciation change is saved and the details of the change will be found as an UPDATE on the depreciation history.
While the Adjusted Depreciation Value can be changed, if you reduce it by $1,000 then the total depreciation over all periods will be $1,000 less.
The recalculation function requires testing before being used, as in the illustration above period 4 shows a depreciation holiday of $0 rather than $1,250 and I couldn’t see a way of avoiding this.