AM Depreciation

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Process Group/Policy Details

Exhaustible Fixed Asset: A fixed asset its’ value diminishes over time.
Depreciation: The process by which an asset’s value decreases over time and the loss in value is recognized as depreciation expense.
Responsibility Center: The Fund that the assets’ accounting is accounted for in.
Straight-Line Depreciation: A method of depreciation where the depreciation is prorated in equal dollar amounts to interim periods throughout the life of an asset. It allocates the cost of a Fixed Asset systematically over the useful life of the asset by applying the following formula: Cost less salvage value divided by estimated useful life in years.

Departments shall use Asset Management to record and manage fixed assets throughout the assets useful life, unless the Office of the State Controller approves an exception. Depreciation of a fixed asset is part of the assets life cycle. All exhaustible fixed assets are depreciated using the straight-line method, estimated salvage value (department’s option), and the estimated useful lives as determined by the agency or obtained from the estimated useful life table. Departments shall use an “in-service” date as the date the asset’s life cycle starts.

CORE will automatically run Mass Depreciation (ME) at the Responsibility Center Fund Level. Mass Depreciation will occur on a monthly basis. Departments will be provided a schedule of Scheduled Mass Depreciation dates.
The Mass Depreciation function is done centrally by the Office of the State Controller and is not done at a Cabinet or Department level.

If depreciation is not run with the Mass Depreciation, then a manual FE transaction is required to record depreciation.
The FE transaction will not calculate an depreciation automatically and will not validate the amount entered.
For FE transactions, departments will have to calculate the depreciation amount and enter it into the FE transaction.
Only assets that have a positive net book value can be depreciated. The FE Transaction also ensures that the component net book value would not be lesser than the salvage value after the depreciation.

Occasionally throughout the useful life of an asset it may be necessary to change attributes such as the useful life of the asset. To make these changes the use of a Fixed Asset Modification Transaction (FM) must be used.
An FM transaction is also used to add an “In-Service” date for an asset. Mass Depreciation will not run if “In-Service” date is not included when acquiring the asset.