How to Set Up User-Defined Depreciation in Dynamics 365 Business Central

Within Dynamics 365 Business Central fixed assets, users can use custom defined depreciation methods that do not fit under the standard depreciation, declining balance by year, or declining balance by period out of the box setups. This depreciation method can be set up by selecting the user-defined depreciation method and setting custom depreciation per period. This blog will explain the steps to follow to set up user-defined depreciation.

Setting Up User-Defined Depreciation

In the Fixed Asset Card, in the Depreciation Method dropdown, select user-defined:

In the Fixed Asset Card, in the Related tab, select Fixed Asset and then select Depreciation Book. Check to ensure the details of the user-defined method are filled out, including the first user-defined depreciation date:

In the Fixed Asset Card, the Depreciation Table Code is used and will be defined by the user:

If the user knows the Depreciation Ending Date, they may also enter it now. The number of depreciation years will be calculated by the system.

Defining Number of Units Depreciation and Period Length

Within the Depreciation Table, the user can go to the dropdown menu and create a new table:

The total number of units for depreciation can be defined, as well as the period length. The number of periods can be defined with a custom depreciation amount for each period. Changing the period depreciation % will automatically change the number of units in the period. This also applies if the number of units in the period is adjusted.

If the total number of units in the header is changed, the number of units in the period as well as period depreciation will not change in the line level. When the calculate depreciation batch job is run, only periods where depreciation was not calculated will be taken into consideration.

For prior periods where depreciation was already run, if the period depreciation % is changed, calculate depreciation will not take this into account.

Calculating Depreciation

For changes for future periods, incremental % depreciation will be shown on additional lines. Given the above example with book value set at $10,000 with February 1, 2021, depreciation start date, when calculate depreciation is run for February 28, 2021, with 1% depreciation for the first period (February):

Given the 1% depreciation of 1,000 units, this correctly led to $100 depreciation, as this is the 1% of gross book value $10,000.

Changing Period Depreciation %

If the user does not post but instead changes the depreciation for period 1 from 1% to 2% and re-runs the calculate depreciation batch job, then the following will happen:

When period % was changed for individual periods not yet posted, the depreciation also changed accordingly.

It is recommended the user does not change the period percentages too frequently for remaining periods. In tandem with the total number of units, this can lead to proportion errors where the system would revert to previous %.

Fixed Asset Ledger Entries

In the Fixed Asset (FA) Ledger Entries, the user-defined depreciation recorded $200. The number of units is a field that is not available in the FA Ledger Entries, so the user does not know how many units were associated with the depreciation.

If the number of units for the period or overall FA is changed, the user would also not know the number of units for the ledger entry. Without a customization, the user should use the description field to add the number of units depreciated. The reason code field may be defined on the fixed asset G/L journal to help distinguish user-defined depreciation:

Contact us if you have any questions about setting up user-defined depreciation in Dynamics 365 Business Central.