Asset Registry : Terminology & definitions

What is?

Depreciation: is “the systematic and rational allocation of the acquisition cost of an asset, less its estimated residual value or salvage value, over the assets estimated useful life.”  Simply said, it is a way of allocating a portion of the cost of an asset over the period it can be used.

The following values are input to the Asset registry when setting up an asset:

Asset types: All assets must have an Asset Type as the asset type controls which type of depreciation (%) and which accounts will be used to automate the operations of the asset registry; such as, depreciation, write up, sell or scrap for example. You can add your own asset types and choose which accounts to use. You do this in the main menu under Asset Type. 

Type of depreciation: The type of depreciation that is to be applied to an asset represents the % of the asset that is to be written off. This choice is made on the asset type. If you work with a residual value instead you can choose 100% Depreciable and enter a residual value on the asset instead. The choices available are:

• Depreciable 100%
• Depreciable 50%
• Depreciable25%
• Depreciable 20%
• Not depreciable

Acquisition value: This is the purchase value of the Asset. This value will be entered directly from the supplier invoice (R21.0) or can be input manually when the asset is set up.

Estimated residual value: also known as salvage value, is the estimated amount that an asset's owner would earn by disposing of the asset, less any disposal cost. With residual value, it is assumed that the asset has reached the end of its useful life.
This value is input what the asset is setup.

Useful Life:  life is “an estimate of the average number of years an asset is considered useable before its value is fully depreciated. The useful life of the asset may also be reassessed during the useful life of the asset. This value is input when the asset is set up & can be changed during the life of the asset.
Note: If an asset has been depreciated in another program, enter a written off until date when registering the opening balance of the asset under tools.

Acquisition date: The date when the asset was purchased. This date will be entered directly from the supplier invoice (2021) or can be input manually when the asset is set up.

Depreciation start date: This date is based on the invoice date and calculated according to the option that has been chosen in the settings for the asset registry (21.0). This date can also be input manually. This is the first date in the Assets' depreciation plan and is always the 1st of a month.

The following values are calculated:

Depreciable basis:  is equal to the asset's purchase price or acquisition value plus any write ups, minus any write downs, and minus any percentage of the asset that is sold or scrapped. In most situations, the basis of an asset is its cost to you.

Depreciable value: is the depreciable basis of an asset minus its estimated residual value . It is also affected by any depreciation type that is not a 100%. In other words, it is the amount that will be subject to be depreciated during the assets’ useful life. You can see the depreciable value of the Asset in the right hand side of the depreciation plan under remaining value.

Book value: is the depreciable value of an asset minus opening balances and accumulated depreciation. In other words it is the value of an asset according to its balance sheet account balance.

Current year's depreciation: The amount of depreciation which has been written off from the Asset in the current financial year at today's date.

OB Acc. depreciation: The value shown in this field is any opening balances that have been entered manually as well as the accumulated depreciation of an asset at the start of the financial year.

Depreciated until: Show you the date until when the Asset has been written off.

Fully Depreciated by: Shows you the date at which the asset should be totally written off; that is when it is determined that there is no further use for the asset, or if the asset is sold off or otherwise disposed of. 

The tools of the Asset registry:

To Depreciate: carry out an accounting action that reduces the book value of an asset while simultaneously debiting a liabilities account.

A write-down: is an accounting term for the reduction in the book value of an asset when its fair market value (FMV) has fallen below the carrying book value, and thus becomes an impaired asset.

A write-up: is an increase made to the book value of an asset because it's carrying value is less than fair market value.

Scrap: When an asset is no longer usable, it is scrapped.

Enter opening balances: You can enter opening balances manually if you are setting up an asset that has already been written to to a certain extent in another system. This value needs to be entered with a Depreciated until date.