Specifying the default depreciation calculation

Depreciation is calculated and recorded on the profit and loss statement as a non-cash expense. It is also recorded on the balance sheet as accumulated depreciation. The purpose of depreciation is to allow an organization to recognize the expense of acquiring an asset over the useful life of the asset. There are multiple ways assets can be depreciated but you must select one method and record depreciation associated with all of its assets in the same manner. Acceptable methods of calculating depreciation are outlined by Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). GAAP standards can vary by country or region, but IFRS standards are international. Both GAAP and IFRS support an accrual method of accounting which includes matching principal. Matching principal means that expenses should be recognized in the same period in which they contribute to revenue. For example, depreciation recognizing the expense of acquiring an asset over its life.

These are the depreciation calculations:

Double declining balance
Straight line
Sum of the years' digits

Click the Home icon.
Select Applications > Sub Plan > Capital Planning > Configuration > Capital Planning Configuration Set Configuration.
Select a depreciation method.
Specify a default percentage for the weighted average cost of capital. This value represents the average rate an entity pays for funds it raises. This value is usually calculated and provided by an entity's Treasury department. The value specified here is used as the default value in the workbooks. The formula is:
```
Weighted average cost of capital = (Proportion of total funding that is equity funding) x (Cost of equity) + (Proportion of total funding that is debt funding) x (Cost of dept_ x (1- corporate tax rate)
```