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Asset retirement not considering depreciation for the current year

Hi Friends,

We have a case wherein an asset was retired in December 2014 before the December depreciation was posted.

The retirement entry, however, does not consider the depreciation posted for the year in the accumulated depreciation account,i.e. the accumulated depreciation balance at the year beginning only is being considered. As a result, a higher loss figure is getting calculated and the asset is having a negative balance at the year end! Interestingly, the depreciation for December is being calculated inspite of the retirement.

The negative balance is being carried forward to January 2015 and a positive depreciation amount is appearing in the planned values tab, implying that the depreciation would be reversed out in January depreciation run.

I'll give some random figures to illustrate this:

1. Acquisition amount: $100

2. Opening accumulated depreciation: $40

3. Depreciation for the year:$20(including December, so including November(since retirement happens before December depreciation run),let's say it is $18

Accordingly, the entry should be(posted via ABAVN, scrap sale):

Dr. Accumulated Depreciation 58(40+18)

Dr.Loss on sale                        42

Cr. Asset                                   100

But the entry being posted by the system is:

Dr. Accumulated Depreciation  40

Dr. Loss on sale                        60

Cr.Asset                                     100

Further, as I said, the system has calculated Depreciation for December as well, despite the retirement, and the asset balance at year end, is -20!(should have been 0 ideally)

In 2015, the asset is having opening balance of -20 and the planned values tab shows a planned depreciation of +20 for the month.

We feel this is wrong because it is inflating loss in one year and posting a  reverse depreciation in a year in which the asset does not exist at all!

Is there any configuration setting that governs this? The period control in the relevant depreciation key is as follows:11/06/02/02(Acqn/addition/retirement/transfer).02 is Pro rata upto mid-period at period start date.

We are unable to see any other setting that prevents current year depreciation from being considered.

Do you have any suggestions?

Regards,

Varun

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4 Answers

  • Jan 09, 2015 at 11:41 AM

    Hi Varun,

    1. Check depreciation key for the asset. If possible share screen shot.

    2. And also confirm what is the value date maintained at the time of retirement posting.

    Regards,

    Mukthar

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  • Jan 09, 2015 at 12:27 PM

    Dear Varun,

    Please check the Value date given at the time of retirement posting. If the value date is of previous year, you will face this issue.

    Regards,

    Sumti Bhadani

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  • Jan 12, 2015 at 11:06 AM

    Hi Friends,


    The asset value date at the time of retirement is for the month of December 2014,i.e.the month in which the asset was actually retired. There is nothing wrong with that,as such.

    Interestingly, another asset of the same class was retired in August 2014, having the same depreciation key, and there the system took the depreciation for the current year also into account!

    Here I may add that a new depreciation area was configured towards the year end, but I don't think that should have an impact, as I'm able to post the correct entry in the test system for retirement,for another asset of the same asset class and having the same depreciation key!.

    Regards,

    Varun

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  • Jan 21, 2015 at 10:29 AM

    Hi friends,

    Please find the screenshots as below


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    • Hi Varun,

      Check the changed documents for the asset in AS02, there might be depreciation key changed. The system posts this kind of entry, when you change the dep.key as 0000 for the asset. In this case, system will post to accumulated depreciation as on 31.03.2014, because your last closed fiscal year is 31.03.2014 and for current year depreciation which got posted, will reverse in next period. Due to this it is showing in reverse sign for Jan month in planned depreciation.

      Regards,

      Mukthar