Depreciation calculation stopped before end of useful life

We have a few assets that did not fully depreciate.  I know I can fix that using the RV over estimated life instructions, but I'd like to know what causes this to see if we can prevent it in the future.

Here are two scenarios:

1) Asset was set up two months after put into service and catch up depreciation was calculated, but it stopped depreciating with three months of useful life left.  Interestingly, it stopped depreciating once the new fiscal year started.

2) Asset was set up in 2011, but value was increased 12 months later.  Asset has a remaining value equal to the increase in value / total useful life x 12 months, almost as if catch up depreciation was not calculated.  The reports we have saved only go back to 2013 and the difference existed then.  Every time I try to run a report for dates in 2012 the asset does not display so I'm not sure what I'm doing wrong.  I would like to verify whether or not catch up depreciation did occur.

  • Hello Awesome1,

    Just for clarity, I cannot answer your question in detail because there is no detail information to answer it with in the question. I can only answer in general terms. For a more detailed answer the all Book Information for the asset is question is required.

    In general terms: Assets that stop depreciation prior to the EOL leaving a NBV on the assets are under-depreciated. This is caused by a number of factors, principally, the Depreciation Method and the Beginning information in the asset.

    A typical example of this is a SL asset after an edit to the asset where the questions were answered Yes-Current Thru Date which populates the Beginning information. Beginning Information by definition is a manual override of the depreciation. See KB ID:17488 What is the Beginning Date? for more information on that.

    SL (GAAP methods in general) calculate depreciation by taking the value over the life. Estimated life is always calculated from the PIS date. So that you edit the value to be higher than it was, the time from the PIS date to the Beginning Date with its associated Beginning Accum was calculated at a lower rate than the new Value/Life calculation therefore the asset reaches its EOL leaving the depreciation not taken by the current Value/Life calculation during the PIS date to the Beginning Date period as the NBV.

    You said, "catch up depreciation was calculated" which is not what the program does. What the History says is that the "Adjustment" was calculated which, as it just so happens, leads me to the next point - The Depreciation Adjustment report. That Report will show the Adjustment amount that was calculated for these assets. For future reference, you will want to look at the Under-Depreciated assets (it is sorted by over and under depreciated assets) on that report to determine which assets need the RV method applied to them.

    There is a way to apply that Adjustment amount to the assets but I would need to examine your data before recommending or even describing it. Playing around with adjustments can be dangerous to you ever tying to an old report again which is why using the RV method is generally recommended as being the safest way of dealing under-depreciated asset.

    ~Delray