Depreciation

Requirement

As commonly required, the value of fixed assets is reduced over time to reflect the fact that the business is consuming their economic value. Depreciation is the accounting method used to reflect this reduction in value. Different businesses in different countries can use different depreciation methods and rules to calculate a periodic depreciation charge.

A fixed asset can have an economic life between 1 and 50 years.

M3 solution

The M3 Fixed Asset module supports different depreciation methods and bases. These rules are then used to create asset-specific depreciation plans over the asset lifetime. Each fixed asset can be depreciated by different rules, for example, book or tax depreciation.

The flexible depreciation plans in M3 meet all normal requirements in this country. The Fixed Assets module is fully integrated to the other M3 financial modules. All the transactions in the Fixed Assets module are synchronous and tightly connected the financial ledgers.

Special rules have been set by Slovak authorities on how fixed assets can be depreciated, especially for tax reasons. Moreover, if additions to existing fixed assets or discards are processed, then related specific rules can be followed in M3. Tax depreciation for Slovakia is always yearly based. Depreciation amounts can be rounded to whole amounts.

If depreciation is processed for an addition or a technical increase, then a configurable limit amount is to be considered and other depreciation rules are involved. The user can choose to run depreciation as an addition or as a technical increase. Technical increases are not allowed in the year of the original acquisition year of the asset.

As allowed by the Slovak law, depreciation can be paused when a fixed asset is not in use. M3 supports this requirement.

When a fixed asset is being discarded, a half-year rule can be applied, resulting in additional depreciation.

These features are commonly used:

• Ordinary depreciation for straight line, over a period of 1 to 50 years, depending on the type of assets
• Linear tax depreciation rules per year, including percentages for the first years, subsequent years, additions, and technical increases
• Digressive tax depreciation rules per year, including coefficients for the first years, subsequent years, additions, and technical increases
• Depreciation stop for one or several time ranges
• Reduced economic lifetime
• Parallel depreciation methods for tax, local closing, IFRS… including different accounting rules and calculation of gains and losses
• Different base values for depreciation
• Depreciation plan and budgeting

Configuration guidelines

Program ID	Program name	Description or comment
FAS030 FAZ011	Tax Asset Group. Open	Define one or several tax asset groups. Select option 11 from the Related menu, then define the tax coefficient rules per year for the tax depreciation.
FAS050	FA Depreciation Type. Open	Connection with Fixed Asset Type.
FAS060	FA Value Type. Open	Connection with Fixed Asset Type.
FAS070	FA Location. Open	Connection with Fixed Asset Type.
FAS080	FA Group. Open	Connection with Fixed Asset Type.
FAS075	FA Type. Open
CRS395	Accounting Rule. Set	Configure for event FA10.
CRS405	FAM Function. Open	Configure function FA10.
FAS920	Settings - Extraordinary Depreciation
FAS040 FAS045	Column Template - Display FA. Open Column Template FA Value. Open	Create templates to allow the display and reporting of assets.
FAS100	FA Depreciation. Create Account Entries	Create a proposal, review, and update it.