Overview

When additional costs are incurred in improving an existing asset, there are implications for depreciation purposes.

This process is handled in AssetManager Pro via a Second Element Cost transaction. You can refer to ourAssetManager Pro - Second Element Cost Support Note for more information.

Impacts on YTD Depreciation

As you will see from that support note processing a Second Element Cost transaction results in either:

1. The assets Acq/Purchase cost being adjusted (for assets acquired in the financial year of the transaction)

2. The assets Opening Written Down Value for the start of financial year being adjusted (for assets acquired in years prior to the current financial year and the year the second element cost transaction is being entered)

What this does is impact on the depreciation calculation for the entire YTD.

Therefore if you have entered Accounting entries for a period of the year - adjustments will need to be made in the accounting to account for changes in depreciation (an increase) for that period you have already reported on and captured in our Accounting system.

This does need to be processed manually as AssetManager Pro DOES NOT currently create an adjusting entry to cater for this.

Example

In the following example the Financial Year is 1st of July 2014 to 30th June 2015.

The following assets is an historical asset (acquired in the 2014 FY) on the 1st of Jan 2014 with an Acq Cost of $11,000 inc GST and an OWDV for the 2015 FY of $8760.27.

In this case the Monthly Depreciation Journal report has been used to record entries for depreciation up to and included March 2015 - with April 2015 to be still recorded.

Running the Asset Depreciation by Asset Group (or the Depreciation Journals) prior to the entry of a Second Element Cost transaction for July to March 2015  shows a YTD Depreciation of $2,822.78

On the 17th of April a Second Element Cost transaction is entered in this case adding $2,000 to the OWDV for the asset.

Running the Asset Depreciation by Asset Group AFTER the the entry of a Second Element Cost transactionfor the entire year shows a YTD Depreciation of $3,505.22 reflecting the increase OWDV of the asset as at the 1/7/2014 (Start of Financial Year).

To ensure the YTD depreciation in AssetManager Pro matches the Accounting - it therefore requires an adjustment to the Accounting to pick up the additional depreciation of $682.44. In this case it would be:

Debit to Depreciation Expense for the applicable Asset Group of $682.44

Credit to Accum Depreciation for applicable Asset Group of $682.44