In the business landscape fixed assets management tends to be a complex task, particularly in countries that are converging towards international financial information standards as well as companies that need to report different values in their accounting because they are established in countries with different financial or accounting standards.
That is why I am often asked how to manage different depreciation methods of fixed assets that allow the fulfillment of tax and financial reports. In my experience I have found that the most common depreciation categories for companies are:
- Depreciation for tax purposes: this is calculated by using current tax rules to achieve the highest possible depreciation before taxes.
- Depreciation for reporting purposes: this is calculated according to accounting laws and standards.
For this purpose, Microsoft Dynamics 365 Finance and Operations has the capability to separately calculate and record several kinds of depreciation in posting layers. They are set up per each fixed asset book to achieve depreciation objective.
In this article I will explain, step by step, how to set up fixed assets transactions to posting layers in Microsoft Dynamics 365 Finance and Operations:
1.Configure fixed asset books
In Microsoft Dynamics 365 Finance and Operations the value model and depreciation book functionalities have been merged into a single concept that is known as a book. These Books can be used to post depreciation methods without affecting general ledger. It’s important to considerer that general ledger changes and tracking financial values of fixed assets, depends if “post to general ledger” option is enable or disable in each book.
To check it we have to click on: Modules > Fixed assets > Setup > Books.
Then we can create fixed asset books. When a new book is created, we have to associate a posting layer to define where will be registered their fixed asset transactions.
We can find ten available posting layers in Microsoft Dynamics 365 Finance and Operations: Current, Operations, Tax, and seven Custom layers. However, just Current, Operations and Tax layers can be used in the management reporter tool.
When we are registering fixed asset transactions to posting layers is common to use derived books in the post transactions set up in different layers at the same time. When we post the primary book transactions in a journal, Microsoft Dynamics 365 Finance and Operations releases the derived book transactions at the same time to the appropriate posting layers.
The most common transactions to set up derived books are: acquisitions, acquisition adjustments, and disposals. Depreciation transactions are no often set up as derived because depreciation values are not usually the same for each posting layer.
For example, if we require to register all the fixed asset acquisitions in the Current layer and Tax layer at the same time, we have to set up the tax layer as a derivative of the Current layer in the assigned book.
- We can assign the books to the required fixed asset groups if we click on “fixed asset groups” option.
2. Configure journal names
To create journal names, we have to click on General ledger > Journal setup > Journal names.
Fixed asset journals can be created and posted in different layers using journal names set up for each one. We have to create one journal name at least for each posting layer.
3. Configure fixed asset posting profiles
To create fixed asset posting profiles, we have to click on Fixed assets > Setup > Fixed asset posting profiles.
We have to set up ledger accounts for fixed asset transactions in the Posting profile record for each book and each transaction type. This process guarantees the right accounting in each posting layer.
In this process is common to create reversal books for posting fixed asset transactions in posting layers. Reversal books are used as bridges that allow us to manage the information for its correct visualization in financial reports (this topic will be detailed in our next blog).
Posting profiles define the account that will be used for one or a group of fixed assets, this depends on the book where each transaction type has been assigned.
This is an example of depreciation:
4.Fixed asset creation
To create a fixed asset, we have to follow this route: Fixed assets > Fixed assets > Fixed assets. Then, we have to fill the technical information and click on Books. There we can assign the books according to the requirements.
By default, the fixed asset will inherit the books assigned to the fixed asset group. However we can delete the books or edit their information. For example, if a specific fixed asset will be created just for fiscal proposes, the attached book should be created for the tax layer.
Finally, we can edit information such as acquisition date, price, service life, depreciation periods, place in service date, expected scrap value, or financial dimensions according to fiscal and financials objectives.
Microsoft Dynamics 365 registration layers facilitate fixed asset management. This capability allows us to register different and independent transactions with a shared database. In other words, we can configurate different behaviors in each book for the same fixed asset during transactions. These behaviors are reflected in reports that show fiscal information, financial information and differences between layers.
Hope this article was useful. The fixed asset books creation using different posting layers and posting profiles requires a detailed analysis of the processes and needs of your company. If you require specialized advice for fixed asset or more details about all Microsoft Dynamics 365 solutions, please contact us