In the business landscape, fixed assets management tends to be complicated, particularly in countries that converge towards international financial information standards and companies that need to report values in different books due to localization. That is why I am often asked how to manage different depreciation methods of fixed assets that fulfill the tax and financial reports.
In my experience, I have found that the most common depreciation categories for companies are:
For this purpose, Microsoft Dynamics 365 Finance and Operations can separately calculate and record several kinds of depreciation in posting layers. They are set up per each fixed asset book to achieve depreciation objectives.
In this article, I will explain step by step how to register transactions in posting layers with fixed assets:
In Microsoft Dynamics 365 Finance and Operations, the value model and depreciation book functionalities have been merged into a single concept known as a book. These Books can be used to post depreciation methods without affecting the general ledger. It’s important to consider that general ledger changes and tracking financial values of fixed assets depend on whether the “post to general ledger” option is enabled or disabled in each book.
To check it, we have to click on: Modules > Fixed assets > Setup > Books.
When a new book is created, we have to associate the posting layer where the fixed asset transactions will be registered. 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 register fixed asset transactions to posting layers, it is common to use derived books in the post transactions set up in different layers simultaneously. When we post the primary book transactions in a journal, Microsoft Dynamics 365 Finance and Operations release 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 often derived because depreciation values are not usually the same for each posting layer.
For example, suppose we must simultaneously register all the fixed asset acquisitions in the Current and Tax layers. In that case, we have to set up the tax layer as a derivative of the Current layer in the assigned book.
To complete the setup, you must assign the books to the required fixed asset groups by clicking on the “fixed asset groups” option.
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 at least one journal name for each posting layer.
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 correct accounting in each posting layer.
It is common to create reversal books to post fixed asset transactions in the posting layers during this process. Reversal books are used as bridges that allow us to manage the information for correct visualization in financial reports (this topic will be detailed in our next blog).
To create a fixed asset, we have to fill in 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 purposes, 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 financial objectives.
The registration layers help in fixed asset management, allowing post-independent transactions with a shared database. In other words, we can configure 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.
I hope this article was helpful. The fixed asset book creation using different posting layers and posting profiles requires a detailed analysis of the companies processes and needs.
