AUTO CALC

Use this screen to enable automatic system calculations for the depreciation methodology that you specify. After you select the appropriate depreciation method and select the OK pushbutton, the system will calculate the appropriate percentage for each year and will display the results in the main screen.

Automatic system calculations can be executed for three common depreciation methods: straight-line, declining balance, and sum-of-the-years'-digits. Note that the results of automatic system calculations can be manually edited as desired.

The yearly percentages calculated by the system must sum to the value in the Total % to Depreciate field in the main screen. For most selections, if the calculations do not result in this condition, the system will add or subtract the immaterial decimal difference to/from the last percentage for the last year. An exception is described in the documentation for the Declining Balance radio button and Switch to Straight Line checkbox in this screen.

Because this subtask primarily serves to minimize manual data entry, you can select the Auto Calc pushbutton when you set up depreciation methods as part of the initialization process or when you add additional depreciation methods.

Although you can add to, delete, or change the information produced as a result of the Auto Calc function at any time, use caution in the timing of your edits. Changes to the table in the Depr Methods - Basic Setup screen could alter the calculation of depreciation and produce unexpected results when you post depreciation to the General Ledger.

Depreciation Method Options

In this group box, you can select the appropriate depreciation method and any conditions, as applicable, to enable the system to automatically calculate the percentages for the years of useful life specified.

Straight Line

Select this radio button if you want the system to calculate the depreciation percentages using straight-line methodology. Straight-line methods of depreciation generate equitable periodic charges to expense over the estimated life of the asset.

Convention

If you select the Straight Line radio button, you must also indicate a convention for use with this method. "None" and "Half-Year" are the choices.

Hint:  Make certain that you have entered the correct number of years for a half-year convention in the Years of Useful Life field in the main screen. See the example below.

Straight-Line Method, 5-Year Life, Half-Year Convention

Declining Balance

Select this radio button if you want Costpoint to calculate the depreciation percentages using declining-balance methodology. Declining-balance methods of depreciation generally provide for greater depreciation charges to expense in the earlier years and gradually declining charges thereafter over the estimated life of the asset.

Multiplier

If you select the Declining Balance radio button, you must also indicate a multiplier for use with this method. A multiplier is an accelerated depreciation factor that the system uses to compute the depreciation year percentages for declining-balance methods.

Your choice of factors will depend on the depreciation policies in place at your company. A commonly used multiplier of "2.00," for example, indicates a doubled rate of declining balance depreciation. You can enter a full range of other user-designated multipliers in this field. Note that there is no default multiplier displayed in this field.

Switch to Straight Line

If you select the Declining Balance radio button, you must also indicate whether the system should switch to straight-line percentages beginning with the year in which straight-line percentages will be greater than those calculated using declining-balance methodology.

For a declining-balance depreciation method, the cost of a depreciable asset will never be entirely written off as long as the asset continues to be depreciated. The system provides for two alternative approaches to this situation, depending on whether you select this checkbox.

• If you select this checkbox, full depreciation of the asset can take place because Costpoint "switches" to a straight-line method. The calculation percentages in the table window from the main screen are actually system-corrected, beginning with the year in which the straight-line percentage will be greater than the declining-balance percentage.

• If you do not select this checkbox, calculations can take place, but the asset cannot be depreciated beyond the total percentage summed from the individual percentages from each year of life of the asset. In this circumstance, the system will display this message:

Warning: Total Percent to Depreciate Adjusted to Actual Calculation

If you select the OK pushbutton to continue with the automatic system calculation, the Total % to Depreciate field on the main screen will display a percentage summed from the table window that is less than 100.00%. You can manually edit the percentages for each year, as desired.

See the examples:

Declining Balance Method (2.00 Multiplier), 7-Year Life

Note:  In this example, the percentages that begin in Year 5 reflect a switch to a straight-line method (the first year in which straight-line depreciation will exceed declining-balance).

Declining Balance Method (2.00 Multiplier), 10-Year Life

Note: In this example, there is no switch to a straight-line method in any year, and the asset is not fully depreciated after its 10-year life.

Sum-of-the-Years'-Digits

Select this radio button if you want the system to calculate the depreciation percentages using sum-of-the-years'-digits methodology. Sum-of-the-years'-digits methods, like declining-balance methods, are considered accelerated methods because higher depreciation charges occur in the earlier years and decline over the remaining life of the asset.

For sum-of-the-years'-digits calculations, the denominator of the fraction, which remains the same, is the sum of the digits representing the years of life. The numerator of the fraction, which changes each year, is the number of years of life remaining of the years for which depreciation is being computed. For example, for an asset with an estimated life of five years, the denominator is 5 + 4 + 3 + 2 + 1, or 15. For the first year, the numerator is 5, for the second year 4, and so on. See the example:

Sum-of-the-Years'-Digits Method, 10-Year Life