This document explains how a company migrates from its current depreciation method to a derogatory depreciation for its fixed assets. This is a legal requirement in France as of 2005.
The process covers the following scenarios:
For a presentation of the derogatory depreciation method and the M3 solution, see section 5 in Methods for Depreciating Fixed Assets.
The affected fixed asset types have two new depreciation types with updated depreciation plans. The derogatory depreciation type displays the derogatory depreciation.
Review the new depreciation plans by selecting option 11='Depreciation plan' for each of the new depreciation types in 'Fixed Asset. Connect Depreciation Types' (FAS002/B).
The derogatory adjustment is posted to a separate account using the accounting rules listed in the Before Starting section. The derogatory adjustment is the difference in the total depreciation amount for a fixed asset between the previous depreciation method and the new linear depreciation as a result of the transfer.
Add Depreciation Types to Fixed Asset Types
For each fixed asset type to include in the migration, add two new depreciation types: one for linear depreciation (fiscal depreciation) and one for the derogatory depreciation (economic depreciation). The linear is defined as the associated of the derogatory.
The derogatory depreciation type, which will be replaced by the configuration of the depreciation type transferred, must have an ID in the range of 90–99.
Where: 'FA Type. Connect Depreciation Types' (FAS077), a program accessed from 'FA Type. Open' (FAS075/B).
You transfer the current depreciation plans to the new depreciation type for derogatory depreciation by creating a proposal. The proposal is based on the following:
The proposal is printed automatically together with a preliminary accounting journal for the posting of the derogatory adjustment.
Where: 'Fixed Asset. Transfer to Derogatory' (FAS700) and subprogram 'Transfer to Derogatory. Select' (FAS701).
The depreciation types that were previously used and that are affected by the proposal receive status 8 (Fully depreciated), whereas the new ones receive status 7 (Budgeted depreciation) in 'Fixed Asset. Connect Depreciation Types' (FAS002/B).
The proposal lists totals for acquisition cost, accumulated depreciation amount, residual value, and the derogatory adjustment. It also lists each fixed asset with its corresponding values.
In the proposal displayed online, you can remove fixed assets that should not be included. If you detect any errors, make the necessary changes in the configuration of depreciation types or selection of fixed asset type for the assets, delete the old proposal, and create a new one.
Where: (FAS700/E) and subprogram 'Transfer to Derogatory. Display FA' (FAS703).
When a depreciation type is selected for the proposal, the status of this depreciation type is changed to 8, meaning that it is excluded when running 'FA Depreciation. Create Account Entries' (FAS100).
When you confirm the proposal in (FAS700/B), the migration is done automatically. The derogatory adjustment is automatically posted to a separate depreciation account. For examples, see Examples of Transfer to Derogatory Depreciation.
After the proposal is confirmed, the status of the new depreciation types is automatically set from 7 to 0. The status of the transferred depreciation type is still 8.
Change Fixed Asset Type for Excluded Fixed Assets
The fixed asset types included in this workflow will always have three or four depreciation types, depending on the scenario, but only the two new ones are valid, as shown by their status. Do not delete the previous depreciation types, since they are required for storing history values in the value types for the previous depreciation.
For any fixed asset that you removed from the proposal, change their fixed asset type to one without the two new depreciation types.
Where: 'Fixed Asset. Open' (FAS001).