Remaining useful life
The remaining useful life is an estimate of the time remaining before an asset must be replaced, based on its present condition.
Normally, depreciation is calculated based on the expected life that was specified when an asset valuation was created. As the actual condition of an asset changes over time, the original expected life can become more and more inaccurate, leading to inaccurate depreciations and financial reports.
When you adjust the RUL of an asset, the adjusted RUL becomes the basis for future depreciation, rather than mathematical calculations based on the expected life. Past depreciation is not recalculated, and the expected life and residual value are not affected.
Configuration
Enabling the Remaining Useful Life Adjustments feature toggle adds these elements to the UI:
- In Add Asset Valuation Book, the Allow Adjustments for Remaining Useful Life check box is added.
- When you revalue a single asset valuation from the InfoViewer, the Adjust for Remaining Useful Life check box and the Remaining Useful Life field are added to the Revaluation dialog box.
- In the Asset Valuation InfoViewer, a Remaining Useful Life column is added to the grids on the Revaluations and History tabs.
To adjust the remaining useful life, you must first configure one or more asset valuation books to allow RUL adjustments. In Add Asset Valuation Book, select the Allow Adjustments for Remaining Useful Life check box. Only asset valuations that belong to books allow it can have their RUL adjusted.
Adjusting the remaining useful life
The remaining useful life is adjusted when you revalue asset valuations. Either Net or Gross can be used as the revaluation method when you adjust the remaining useful life, but the way they are applied differs:
- Net method: The system does not force accumulated depreciation to zero. It uses the supplied revaluation values as the new basis.
- Gross method: The system does not recalculate historical depreciation. It uses the calculated revaluation values as the new basis.
Single assets
If you are revaluing a single asset from the Asset Valuation InfoViewer, select the Adjust for Remaining Useful Life check box and specify the RUL in the Remaining Useful Life field.
If Adjust for Remaining Useful Life is selected, these fields become required, since they will be used to calculate depreciation:
- Replacement Cost
- Revalued Amount
- Accumulated Depreciation
To calculate depreciation correctly, the accumulated depreciation must equal the replacement cost minus the revalued amount. If it doesn't, the revaluation will return a validation error.
Multiple assets
If you are revaluing asset valuation groups, or importing valuation data from an external source, you cannot set the remaining useful life yourself. Use the revaluation formula to specify how the RUL is calculated.
The formula must specify the replacement cost, the revalued amount, and the accumulated depreciation, and the accumulated depreciation must equal the replacement cost minus the revalued amount.
In the Formula Editor, these properties are available on the Revaluation business object:
IsRULAdjustment: Use this property to indicate that the remaining useful life is to be calculated.RemainingUsefulLife: Stores the calculated RUL so it can be used in depreciations.
For example, adding these lines to the revaluation formula will set the remaining useful life to 10 years. The accumulated depreciation and the replacement cost are also specified, as required.
oRevaluation.IsRULAdjustment = true
oRevaluation.RemainingUsefulLife = 10
oRevaluation.AccumulatedDepreciation = 1000
oRevaluation.ReplacementCost = 12000
oRevaluation.MarketValue = 11000