I have received a strange requirement from a customer regarding depreciation calculation. Here assets are depreciated using SLM wherein the rate is automatically determined from the life of an asset.
e.g. Asset procured on 01.01.09 for USD 18000 and the expected life is 6 years. Depreciation has been posted upto period 5 with following amounts-
Period 1= USD 250 (18000/6 years = 3000 and 3000/12 periods = 250)
Period 2= USD 250 (18000/6 years = 3000 and 3000/12 periods = 250)
Period 3= USD 250 (18000/6 years = 3000 and 3000/12 periods = 250)
Period 4= USD 250 (18000/6 years = 3000 and 3000/12 periods = 250)
Period 5= USD 250 (18000/6 years = 3000 and 3000/12 periods = 250)
Total accumulated depreciation upto May 2009= 250*5= USD 1250
Before running depreciation for June a need was felt to increase the life of the asset to 8 years.
In such case system would reverse the excess depreciation charged froom Jan through May i.e.
Life 6 Yrs Life 8 Yrs
Annual dep 18000/6 = 3000 18000/8=2250
Monthly dep 3000/12= 250 2250/12=187. 50
Jan to May 250*5=1250 187.5*5= 937.5
Excess Depre to be reversed in depre run for June = 1250-937.5 = 312.5
Depreciation for June would be 187.5 and the net impact on asst would be increase in the value by USD 125 (+312.5-187. 5 = 125)
Here the customer expects that system should not recalculate the depreciation and reverse the excess charged earlier but should only post 187.5 in the month of June.
If the above is not possible to achieve, customer is asking for following option-
WDV of the asset at the end of the 5th period is USD 16750 (i.e. cost 18000- accumulated depreciation already charged 1250)
The new life of the asset is 8 years i.e. 96 months out of which 5 have already expired and the asset is expected to exist for the next 91 months and therefore the customer expects the WDV of 16750 to be depreciated over 91 months by charging USD 184.07 with effect from June i.e. 6th period.
In the above scenario, only increase in life was illustrated. However, it may also happen that the life may be reduced as well.
I am aware that this is against accouonting principals and the expectation is sporatic. If any of yoou guys have a suitable remedy to this, please send me the config/ process steps.
Thanks in advance.