How to set up asset categories and depreciation models

What is it for?

Each asset has a category (which holds the balance sheet and expense accounts) and a depreciation model (the method, the years or the rate). Setting this up once saves you filling in the same values on every asset: when you choose the category on a new asset, the asset inherits the model, the method and the useful life. Under the SNC, tangible assets are depreciated and intangible assets are amortised; the category says which class an asset belongs to.

When to use it?

• When the company starts using fixed assets, or gets a new type of asset.
• When you want to change a category's default method or years.
• Do not use it to register an asset or to depreciate it: see register an asset and process depreciation.

Where to find it?

• Categories: Accounting › Configure › Banks and assets › Asset categories.
• Depreciation models: Accounting › Record › Partners and assets › What is there to do with the assets?, Supporting lists › Depreciation models panel. The same panel has the Asset locations.
• Tax depreciation rates and Low-value limits: reference lists (the product's mapping puts them in Configure › Banks and assets, but the Certified accountant does not see them in that menu in the demonstration; they were opened through the action's address).

Before you start

• Your profile is Certified accountant. The Accountant and the Auditor can view the categories and models, but do not have the New button (confirmed on screen with all three profiles).
• The company has the chart of accounts with the asset accounts (432, 435, 4385, 6425, etc.). The demonstration comes with 4 categories: Buildings and other constructions, Administrative equipment, Transport equipment (tangible, 43x) and Computer programs (intangible, 44x).

How to use it

1. Open Supporting lists › Depreciation models. In a company with no models the list is empty and says “The depreciation models appear here; create one with New, giving the method and the number of years, and then pick it when you register an asset.” Click New.
2. Type the Name (for example “Equipamento, 8 anos linha reta”). In Method you can choose Straight line, Declining balance, then straight line or Declining balance (never switches). In Defined by choose Number of years (fill in the Years) or Annual rate (fill in the Annual Rate (%); the years are calculated). Here: Straight line, Number of years, 8.
3. Save. The Useful Life (years) becomes 8.00.
4. With the two declining balance methods the Declining Factor appears, and the rate can be the basis (12.5% gives 8 years of useful life). The factor must be at least 1 (1 is the same as the straight-line rate): with a lower value the screen refuses and says “The declining factor of "…" is at least 1 (1 = the straight-line rate). Correct it and save again.”
5. Open Asset categories and the Administrative equipment category. In Default DR 25/2009 Rate choose the rate from the table (for example “[I-1565] Mobiliário”) and in Default Depreciation Model choose the model you created. Save. The category also has the Tax Nature, One Asset per Unit, the Assets Journal and, in the Accounts tab, the accounts for the asset, accumulated depreciation and expenses, disposals and casualties, and revaluation and impairment.
6. Open Fixed assets and click New: when you choose the Administrative equipment category, the Accounting board tab shows the Depreciation Model “Equipamento, 8 anos linha reta”, the Accounting Method Straight line and the Accounting Useful Life (years) 8.00, and the accounts come from the category.

Expected result

• The model appears in the list with its method, useful life and rate; the category has the default model and rate; new assets in that category inherit the model, the method and the useful life. This configuration creates no journal entries: entries are created when assets are registered and processed (process depreciation).
• Tax rates and Low-value limits are read-only: the low-value limit is read from the dated legal rule (in the demonstration, €1,000.00 of unit cost, “DR 25/2009 art. 19.º n.º 1”, in force since 01/01/2010). Pending validation by a certified accountant: whether this limit and the rate chosen for each category apply to the company.

Important notes

The asset inherits the category's values when it is created

The model, the method and the useful life appear on the asset when you choose the category or the model, and they are copied to the asset. If you later change the years, the rate or the method of a model, or the category's default model, the existing assets do not change: only new assets use the new values. If you delete a model that is already in use, the assets are left without a model but keep their method and useful life. If an asset needs a different method or different years, change them on the asset itself.

• The category's DR 25/2009 Rate is the rate from the tax table; the model is the accounting method. They are two separate fields. Pending validation by a certified accountant: how to handle the difference between the model's rate and the tax rate (see asset tax maps).
• The category list has the Missing Accounts column, empty for the 4 demonstration categories (not tested).

Common problems

“There is already a depreciation model with this name”

• Symptom: when saving: “The operation cannot be completed: There is already a depreciation model with this name.”
• What to do: change the name or edit the model that already exists.

“needs a number of years greater than zero”

• Symptom: with 0 years: “The model "…" needs a number of years greater than zero. Fill in the years and save again.”

“needs an annual rate above 0 and up to 100”

• Symptom: with 150%: “The model "…" needs an annual rate above 0 and up to 100. Correct the rate and save again.”

I do not see the New button

• Cause: the Certified accountant (and the Administrator) create and change them; the other profiles can only read categories and models.