Depreciation Options
Depreciation Options
Flexible configuration options for all fixed assets with a broad range of depreciation methods rates and types.
- How many depreciation schedules do you need to maintain?
- What reporting date pattern applies to each of these schedules?
- Which depreciation methods are to be applied to each of these?
- What properties are to be applied to your standard templates to ensure compliance?
- Are there any special depreciation conditions that need to be considered?
- Do these conditions vary?
This software provides a very flexible specification that allows you to decide from the outset how you want to configure your system and your standard templates.
This gives you the ability to exercise greater control and to maintain it with the minimum of administration input.
This gives you the ability to exercise greater control and to maintain it with the minimum of administration input.
Depreciation conditions vary from industry to industry but in recent times there has been a trend towards the standardisation of depreciation strategies through IFRS. In some areas, this includes the use of common depreciation methodologies for both tax and accounting. Although industrial differences still ensure the need for specialisation in tax methodologies, this trend has enabled a significant rationalisation in the range of methods applied. The depreciation methods discussed below relate to most situations.
By incorporating a broad range of depreciation methods we ensure that all of our users have the tools necessary to meet their statutory and tax obligations and are able to maintain the high standards of governance required.
By incorporating a broad range of depreciation methods we ensure that all of our users have the tools necessary to meet their statutory and tax obligations and are able to maintain the high standards of governance required.
It is not uncommon for some companies to maintain different reporting dates for accounting periods than they do for tax reporting. The reporting date function caters fully for variations in period end dates and is able to apply individual reporting dates to individual companies and even to individual books if necessary.
The common date patterns available are;
The common date patterns available are;
- 52[3] Weekly
- 445 [455] Months
- Calendar month
- Three monthly
- Six monthly
- Annually
- User defined
Companies that need to calculate depreciation charges based on operating days can superimpose a date mask to exclude weekend and other non-operating days. In such cases the annual depreciation charge is then applied for operating days only.
The generic nature of the system design permits any reasonable number of depreciation books to be configured. In most cases this will be just two; accounting and tax. However, we do have clients who have operated three and four books for many years because the nature of their reporting requires it.
The configuration for each depreciation book is defined separately with its own specific depreciation methods and parameters to control the behaviour. Each is independent and maintains its own purchase date, cost, depreciation conditions, transactions and reporting dates. It is these properties that permit depreciation runs to be applied separately or as integrated processes.
The configuration for each depreciation book is defined separately with its own specific depreciation methods and parameters to control the behaviour. Each is independent and maintains its own purchase date, cost, depreciation conditions, transactions and reporting dates. It is these properties that permit depreciation runs to be applied separately or as integrated processes.
This solution incorporates a range of standard methods that are commonly used or required by tax legislation. Some of these may be known by alternate names but the underlying method is identical. Some of them may include residual values, additional deductions or accelerated depreciation in year one and depreciation limits.
- Prime Cost
- Straight-line
- Reducing Balance
- Double Declining Balance
- Sum of Year Digits
- Write-off, Deductible in the year of acquisition
- Non-depreciating
- Units of Production
- Units of Use
- Economic depreciation
In addition to these more common methods the system also includes current and historical legacy or repealed tax methods that relate to items of depreciating plant and equipment and real property such as buildings and civil works. These currently include;
- Prime Cost and Diminishing Value Methods
- Australian Low Value Asset Pooling
- New Zealand IRD Low Value Pooling
- Australian Capital Works Allowance
- Australian Project Pooling
- US IRS MACRS GDS and ADS Methods plus Special Depreciation
Effective life or useful life depreciation is an integral part of IFRS and tax legislation and enforces the relationship between the depreciation method, the rate and the useful life. This ensures that any change to the remaining useful life of an asset will directly affect the depreciation rate and vice versa. Incorporation of effective life into depreciation template parameters promotes consistency and compliance.
Effective life has been an integral function of Activa for 20 years and we have traditionally utilised it in support of a number of other system processes like condition reporting and planned obsolescence. Individual assessments for tax compliant effective life can be found in the relevant tax ruling documents although these may not apply to statutory accounting where the criteria for assessing effective life may be based on local operating conditions and therefore are self-assessed.
Effective life has been an integral function of Activa for 20 years and we have traditionally utilised it in support of a number of other system processes like condition reporting and planned obsolescence. Individual assessments for tax compliant effective life can be found in the relevant tax ruling documents although these may not apply to statutory accounting where the criteria for assessing effective life may be based on local operating conditions and therefore are self-assessed.
| Since we specialise in fixed assets, our depreciation functions are designed to ensure that you have the correct tools to meet all of your compliance needs. If you have any specific questions regarding any of the depreciation methods or options mentioned above please cantact us and we would be happy to respond to your questions. |
Under strictly controlled conditions, a transaction roll-back, roll-forward capability is available for depreciation runs without loss of transaction history. There are numerous situations where the periodic depreciation may need to be reversed, modified and re-run. The prime consideration here is always to preserve historical values without impeding the need to revise specific outcomes.
If the status of the system is reversed to a prior date, and then rolled forward again, the system maintains previously applied transactions without further user intervention.
If the status of the system is reversed to a prior date, and then rolled forward again, the system maintains previously applied transactions without further user intervention.
These notes are intended as a product brief and should not be read as the full specification of Activa software. If you have more specific questions please use the Search options on this site. If you do not find what you are looking for on other pages of this site please complete a Contact Request noting your area of interest and we will respond by return.
The following pages contain information directly related to depreciation methods and rates;
The following pages contain information directly related to depreciation methods and rates;
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| Article last updated : Feb 23 2012 10:02AM |  |