Depreciation Export
The ‘Depreciation Export’ is a helper utility report that generates a valid Transaction Import Template with pre-populated depreciation transaction types based on supplied metrics. Using the ‘Depreciation Export’ will generate a CSV file that conforms with the import requirements of the financial ledger transactions import process within the Metrix Asset Management system, including the following columns:
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Component ID,
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Posting Date,
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Finance Category ID, and
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Column headers and transaction values for the
depreciation-accumulated_depreciationtransaction per Component.
The ‘Depreciation Export’ requires the following information. Each is discussed below.
Merely exporting the report will NOT post the depreciation transactions to the financial transactions ledger. Users can follow the appropriate import steps, with the generated file, to recognise these movements within the system.
Posting Date
This date will be used to set the pre-populated posting_date column of the exported template.
If the generated report is used to import the depreciation transactions, this will be the ‘Posting Date’
for the resulting financial transaction ledger entries.
The ‘Posting Date’ also dictates the Period in which to calculate any required depreciation movements until.
Finance Categories
This is the array of finance categories for which you wish to calculate and export depreciation movements for. Any component linked to one of the included finance categories at the supplied ‘Depreciation Since’ date value, will be included in the export results.
Calculating Depreciation
Given the manner in which component life is managed within the Metrix Asset Management system, as well as the system’s ability to manage ageing events across the fiscal year, it is possible to calculate the required depreciation amount of a component at any given point in time.
Formula for Depreciation (Straight Line)
The formula used to calculate the depreciation charge for any given period (PD) in the Metrix Asset Management system considers Written Down Value (WDV), the Non-Depreciable Value (NDV), and the Remaining Life (RL). It is:
$$ PD_a = \frac {{ (WDV - NDV)_a }}{{ RL_a }} $$Proof:
This is an implementation of straight-line depreciation that has the capacity to react to changing assumptions for component life, as well as adjustments to component value (indexation and/or renewal) over its lifetime. It can be shown (below how to reach this formula from the more commonly known straight-line depreciation formula - The basic accepted formula for depreciation for a period (PD), given Depreciable Gross Value (DGV) and Useful Life (UL), is:
$$ PD = \frac {{ DGV }}{{ UL }} $$The whole of life depreciation schedule (D) for straight line depreciation can be expressed as the sum of this formula across the Useful Life (UL) and Age (a) of the component:
$$ D = \frac {{ DGV }}{{ UL }} + \frac {{ DGV }}{{ UL }} + \frac {{ DGV }}{{ UL }} + ... + \frac {{ DGV }}{{ UL }} = \sum_{a=1}^{UL} \frac {{ DGV }}{{ UL }} $$Essentially, the formula repeats every year – or depreciation period – until age is 1 (depreciation is not charged once the component has zero remaining life). This is an extremely simplified expression of straight-line depreciation. It does NOT consider any modifications to the value or expected life of the component over its lifetime.
Consider a component worth $10K that was expected to last 10 years – each year it would depreciate by $1K under the above formula. At year 4, engineers reassessed the component and determined that it would last a further 8 years (not the 6 years that the depreciation schedule purported). This means that by year 10, the component would reach a $0K carrying value, but still have another 2 years of service life left. The rate of depreciation should have increased once the remaining life was reassessed.
This is why, when working with long-lived assets and components, we must consider the impact of assumption changes over a lifetime. Fortunately, the formula can be expressed in terms of:
$$ D = \sum_{a=1}^{UL} \frac {{ DGV_{a-1} }}{{ (UL - a) }} $$In the above, the ‘a - 1’ notation on the numerator is representing a recursive pattern. That is, in each series, the numerator is equal to the Depreciable Gross Value (DGV) less the effect of previous iterations of the formula’s application. Another way to state this, is the depreciable value of the component, less its previous consumption charges. In other words, it is the Written Down Value (WDV) less the Non-Depreciable Value (NDV) at the time of calculating the depreciation charge (D).
It should also be noted that the denominator, ‘UL - a’, can also be simplified. The Useful Life (UL) minus Age (a) is also known as the Remaining Life (RL) at Age (a). Therefore, the series can be expressed more simply as:
$$ D = \sum_{a=1}^{UL} \frac {{ (WDV - NDV)_a }}{{ RL_a }} $$This means, at any point in the component’s Aae (a), the period depreciation (PD) charge can be expressed simply as:
$$ PD_a = \frac {{ (WDV-NDV)_a }}{{ RL_a }} $$Below is a table showing both formulae in application. On the left-hand side, the Gross Value (GV) and Useful Life (UL) are shown. On the right-hand side, the Remaining Life (RL) and Written Down Value (WDV) is shown. Each row represents one depreciation period (for simplicity, let’s say one (1) year). Taking any of the rows in isolation, each formula equates to the same period depreciation (PD) in the middle column.
| Gross Value (GV) | Non-Depreciable Value (NDV) | Useful Life (UL) | Period Depreication (PD) | Remaining Life (RL) | Written Down Value (WDV) |
|---|---|---|---|---|---|
| $11K | $1K | 10 | $1K | 10 | $10K |
| $11K | $1K | 10 | $1K | 9 | $9K |
| $11K | $1K | 10 | $1K | 8 | $8K |
| $11K | $1K | 10 | $1K | 7 | $7K |
| $11K | $1K | 10 | $1K | 6 | $6K |
| $11K | $1K | 10 | $1K | 5 | $5K |
| $11K | $1K | 10 | $1K | 4 | $4K |
| $11K | $1K | 10 | $1K | 3 | $3K |
| $11K | $1K | 10 | $1K | 2 | $2K |
| $11K | $1K | 10 | $1K | 1 | $1K |
With this in mind, it is important to address instances where a depreciation charge may have been ‘missed’ for a component. This can occur if the system ageing events do not line up with the frequency of depreciation charges. It can also occur if a quarter’s depreciation run was simply missed (nobody is perfect).
To cater for this, the report includes a flag that notifies you, as a user, that a depreciation charge may have been missed. In these cases, it is important that users consider the implications of applying a modified depreciation charge to the subject component.