Within the Fixed Assets Management SuiteApp, we have the capability to generate various alternative approaches to asset depreciation specifically tailored for tax reporting purposes. Additionally, we can establish a collective tax depreciation method applicable to a set of assets.
To initiate the creation of a tax depreciation method, follow these steps:
1. Navigate to Fixed Assets > Setup > Alternate Methods > New.
2. On the New FAM Alternate Methods record, input values for the following fields:
- Name: Assign a distinctive name for this alternative method.
- Description: Provide a brief description detailing the purpose of this alternative method.
- Depreciation Method: Choose from available depreciation methods or create a new one if necessary.
- Convention: Opt for the appropriate averaging convention determining depreciation treatment during the initial year of asset depreciation. Note that conventions are only applicable for alternate methods. The default value is None. For monthly depreciation periods, Mid-Month convention is supported. For annual depreciation periods, select between Half Year and Mid-Quarter conventions. If Mid-Quarter is chosen, depreciation commences for half of the first quarter, irrespective of the asset’s activation date within that period.
- Asset Life: Specify the expected lifetime of the asset.
- Financial Year Start: Indicate the starting month of the financial year.
- Subsidiary: Select relevant subsidiaries where this alternative method applies. Use Ctrl key to select multiple subsidiaries.
- Pool Flag: Mark this option if the method is intended for depreciating a group of assets.
- Override Flag: Enable this option to allow editing of Depreciation Method, Convention, Asset Life, Financial Year Start, and Period Convention fields when this tax method is assigned to an asset record.
- Period Convention: Choose the convention defining a year: “12 months of 30 days each” or “Exact number of days in a month, year has 365 days”. The former is typically employed in North America and Europe, ensuring more uniform monthly depreciation, while the latter is common in Australia and New Zealand, resulting in uneven depreciations within the year.
3. Save the record.
Upon completion, the tax method we’ve configured will be accessible for selection in the Alternate Method field on the Depreciation History subtab of an asset record.