AM Depreciation

Process Group/Policy Details

• Subject: Asset Management 

• Process Group: Asset Management 

• Title of Policy: AM Depreciation

• Effective Date: 05/2014

• Approved/Revision Date: 05/2014

• Approved by: 

Process Group Definitions

• 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.

Policy Statement:

• 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.

Procedures:

AM.PR.04.01 – Depreciation through the Automated Mass Depreciation

• 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.

AM.PR.04.02 – Adjusting / Revising or Recording Depreciation Manually (FE)

• 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.

AM.PR.04.03 – Changing Depreciation Attributes Throughout the Useful Life

• 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.