Fixed Assets

This document covers the basics of the Fixed Asset module: tracking an asset value and depreciation from acquisition to disposal. We will review the newly added V7.14 features including “Mass Asset” functionality and recording Gain/Loss costs on disposals. Also, a brief overview of how the Fixed Assets module interfaces with Purchase Orders, Accounts Payable and the Work Order module.

 

CATEGORIZING ASSETS

To get the most out of the Fixed Assets system, the design or categorization of the assets allows the user to report in the most effective way possible. Prior to setting up the system, think about the type of output that is needed to accomplish the organization’s goals.

The different reportable and filtering tools available for grouping or categorizing assets are Location, Class, Department, Account Number and eight miscellaneous fields.

· Location - Organizes fixed assets and usually represents a physical location

· Class - Groups assets together with similar characteristics such as the same useful life, general ledger accounts and depreciation type

· Department - Set up in SS > Utilities > Maintain Departments and used to group assets that belong to the same budget group or department

· Account Number - Used for GL Distribution and financial reporting

· Miscellaneous Fields - Anything you want it to be

Life Units

Life units can be either months or years. Life units selected must correspond to the method of depreciation selected. If depreciation is calculated once per year, life units can be either months or years. If depreciation is calculated once per month, life units must be months. If half year convention is used, life unit must be years and depreciation can only be calculated once per year.

 

GENERAL LEDGER ACCOUNT TYPES

Assets need six account types for the system to run correctly. Account types equal an account number. These account types are:

· Asset Account

· Accumulated Depreciation

· Depreciation Expense

· Disposal Account

· Gain/Loss Account

· Investment Account

 

The Life of a fixed asset

Acquisition

Assets can be entered into the system three ways:

· Manually

· Quick Asset Entry

· The interface from the AP module

 

Installing an asset

When an asset is first entered into the system it is in “New” status. The installation process moves the asset from the status of “New” to “Active”. Only Active assets can be depreciated.

The most important date in the system is the INSTALL DATE. Depreciation is calculated from the installation date and this date cannot be changed.

 

Maintenance of an Asset

Calculating Depreciation – THE MAGIC FORMULA

Springbrook uses straight line depreciation with the option of half year convention for calculating depreciation.

Half year convention is used for annual depreciation calculations and calculates six months of depreciation the first and last year of the asset’s useful life regardless of the date it was purchased within that year. All other years will have one year’s depreciation.

The Magic Formula the system uses to calculate depreciation is:

Base Amount / Life * Time = Depreciation Amount

Definitions:

Base Amount = Original Cost - Salvage Value

Life = Useful Life

Time = Installation date - Life Used

Adjustments – THE MAGIC FORMULA

There are four types of adjustments that can be processed in the Fixed Assets module:

· Value Adjustment (Original Cost)

· Salvage Value

· Life

· Accumulated Depreciation

 

Each of these adjustments will change the amount of depreciation previously calculated on the asset.  For example, if you change the Value of an asset from $10,000 to $12,000, all previous depreciation will be adjusted to reflect the new Value. The system will use the Magic Formula, discussed in the previous section, to recalculate depreciation up to the date of the adjustment.

The general ledger transaction created will vary based on the type of adjustment.

Value adjustments will create an entry to the Accumulated Depreciation and Depreciation Expense account types for the amount of the recalculated depreciation using the Magic Formula.

Salvage Value and Life Adjustments will only create one entry to Accumulated Depreciation and Depreciation Expense account types for the recalculated depreciation using the Magic Formula.

Depreciation adjustments will create an entry to the Accumulated Depreciation and Depreciation Expense account types based on the amount the user selects.  When this adjustment is processed the Life Used will be modified to reflect the change.  The next time the calculate depreciation process is run on this asset, the system will sync up the depreciation and life to the Magic Formula again.

 

Disposals

The disposal process changes the status of the asset from “Active” to “Disposed.”  The journal entry created for this process is to credit the Asset account type, debit the Accumulated Depreciation account type and debit the Disposal account type.

 

QUERY MANAGER & OTHER REPORTS

Two standard reports are available in the FA > Reports menu.  They are the Asset Listing and Assets by Fund.

• The Asset Listing report is sorted by asset number and reports the depreciation for the period selected in the filter as well as the total depreciation.
• The Assets by Fund report sorts by fund with an option to sort by account number.  The columns show the account types of Asset, Investment in FA, Depreciation Expense and Accumulated Depreciation.  This report can be used to verify the account balances in the FA module to the general ledger.

Query Manager Report builder (build the query in Reporting Tools and run the report in the Reports menu):

• The Query Manager is the most powerful and flexible reporting tool and therefore the most complex.  Users can write reports to their specifications within the design parameters discussed above.  
• The user can select the desired sorts, columns and filters.

The secret to writing a meaningful report is a good design and understanding the sorts, columns and filters (the basic architecture of the module).  First identify what is to be reported.  Next, identify where the information is stored in the system.

For example, if a user wants to report the amount recorded to the Asset general ledger account type, they need to find the columns that represent the distribution or journal entry, not a field from the Asset Master.  The Debit Amount, Credit Amount and Balance Amount will represent the distribution (journal entry).  The column selections of Original Cost, Salvage Value, Accumulated Depreciation and Net Book Value represent a field in the asset master.  If split distributions (% to one asset account and % to another asset account) are used, the value of the asset will be picked up twice in some cases unless the correct combination of sorts and columns are used.

The filters tabs allow the user to select specific locations, a class of assets, a status, etc.  The Transaction Filters tab section is asking for the type of transaction.  If the user is looking for the distribution in the general ledger to the Asset account type, the types of transactions that hit the Asset account are Install (install process) and Value Adjustments.  So these two transaction types would be selected.  The Account Filters section allows the user to only report on a certain transaction type(s), these are either Asset, Investment in Fixed Assets, Accumulated Depreciation, Depreciation Expense and/or Disposal.

These account types equal general ledger account numbers.  General Ledger account numbers can also be selected.

It is not necessary to use all types of filters.  Only select the filters that relate to the information that is being reported on.    For example, if the report is not going to include distribution information, do not select anything in the Account Filters section.

 

NEW TO V7.14 AND ABOVE

Gain/Loss account type  the Gain/Loss account type has been added to record Gain/Loss costs on disposals.  This is a report only function and has no general ledger affect.

Mass Asset  a new toggle on the Asset master allows the user to create a Mass Asset with a quantity.  

The mass asset functionality is used to create groups of assets.  This group of assets will be treated as a single asset, sharing dates, values and depreciation rates.  

If the quantity changes for the mass asset an adjustment can be made in an Adjustments batch.

Each individual asset can be tracked on the Log tab where a unique code and description can be added for each piece.  Unique attachments can be added to each asset on this tab.

 

Account Type  GL Account Type

Asset Account  Asset

Accum Depr Account  Asset

Depr Expense  Expenditure

Disposal Account  Expenditure

Gain/Loss Account  Expenditure (for recording transaction  no GL affect)

Invest Account        Asset or Fund Balance Account