Setting depreciation

An asset loses its monetary value due to wear and tear or use over a period. Deprecation is the measurement of this decrease in monetary value. By depreciating your assets, you can take tax deductions for the loss in value.

In the Mid Tier interface, you can configure the depreciation rules by using Configuration Management. When you set up a depreciation schedule, and then need to adjust the cost and do a recalculation, the recalculation only takes affect from the current month forward. The system will not go back and recalculate from the beginning. For example, if a depreciation schedule starts on April 1, 2022, and you change the actual cost on August 11, 2022, and recalculate, the recalculation only takes effect from August 1, 2022. This result is because the previous months are considered already depreciated.

Methods of depreciation

BMC Helix ITSM: Asset Management includes the following methods of depreciation:

The following table describes the depreciation methods:

Depreciation method	Description
Straight-line depreciation	Assets depreciate at a constant value per year. The total depreciation equals the purchase price minus the salvage value. To calculate the annual depreciation, the total depreciation is divided by the estimated useful life of the asset.
Declining balance (150%)	Assets depreciate at a constant rate per year, accelerated by a factor of 150%. In this method of accelerated depreciation, 150% of the straight-line depreciation amount is taken the first year. That same percentage is applied to the undepreciated amount in subsequent years.
Double-declining balance (200%)	Assets depreciate at a constant rate per year, accelerated by a factor of 200%. In this method of accelerated depreciation, twice the straight-line depreciation amount is taken the first year. That same percentage is applied to the undepreciated amount in subsequent years.
Sum-of-the-years digits	Assets lose more of their value early in their lifetime. This method of calculating depreciation of an asset assumes higher depreciation charges and greater tax benefits in the early years of an asset's life. In this method of accelerated depreciation, each year of useful life is assigned a value from the total down to 1. The sum of the years of the useful life of an asset is calculated. For example, for 3 useful years, this sum is 6 (3 + 2 + 1). For each year, the asset is depreciated by the year's value divided by the sum. For example, in the first year, it is depreciated by 3 / 6, which is 50%.

Information needed to set depreciation

To understand depreciation of an asset, you must know the following information:

Initial cost of the asset
Useful life of an asset — How many years you expect the asset to retain value for your business.
Book value of an asset — The purchase cost minus the accumulated depreciation.
Depreciation — An expense that reduces the value of a long-term tangible asset.
Accelerated depreciation — A method of depreciation that enables greater deductions in the earlier years of the life of an asset.
Salvage value — The estimated value that an asset will realize at the end of its useful life.

Important

For more information about depreciation, consult your tax professional.

You can track the initial cost and the subsequent depreciation of your assets by using the Financials tab on the CI Information form.

The following figure shows the Financials tab to configure depreciation:

To set the depreciation schedule

In Mid Tier, open a CI, as described in Searching for tickets, assets, resources, and people in BMC Helix ITSM.
Click the Financials tab.
Specify a Unit Price.
In the Accounting Information area, click Create.
If depreciation has not yet been calculated, the Accounting Information area includes a Create button. After depreciation has been calculated, this area includes a View button.

In the Create CI Depreciation dialog box, for Method, select the depreciation method that you want to use for this CI.

Depreciation method	CI valuation
Straight Line Depreciation	Depreciates at a constant value per year.
Declining Balance (150%)	Depreciates at a constant rate per year, accelerated by a factor of 1.5 (150%).
Double-Declining Balance (200%)	Depreciates at a constant rate per year, accelerated by a factor of 2.0 (200%).
Sum of-the-years Digits	Loses more of its value early in its lifetime.

For Useful Life (months), specify the number of months that you expect this CI to be in service.
For Depreciation Starts, select the date when you want to start calculating depreciation for this CI.
BMC Helix ITSM: Asset Management calculates the depreciation on the last day of the month prior to the month you select, even if you select a specific date.
(Optional)If this CI has a salvage value, specify it in the Salvage Value field and select a currency type from the list.
The salvage value is the estimated value that an asset will realize at the end of its useful life. BMC Helix ITSM: Asset Management uses the salvage value in calculating the monthly depreciation figures. For example, if a laptop costs $4,000.00 and has a useful life of 12 months and a salvage value of $1,000.00, BMC Helix ITSM: Asset Management uses $3,000.00 as the fully depreciated amount. The default amount for this field is $0.
Click Compute Depreciation.
Click OK in any confirmation messages that appear.
The Depreciated field is now set to Yes, and the Create button is changed to View.
In the CI record, click Save.

To view and modify depreciation

In Mid Tier, open a CI, as described in Searching for tickets, assets, resources, and people in BMC Helix ITSM.
Click the Financials tab.
In the Accounting Information area, click View.
If you see a Create button instead of a View button, depreciation has not yet been specified for this CI.
Select one the following options:
- To view depreciation
- To modify depreciation
To view the details of the depreciation history, select an item in the table, and click View.
After you finish viewing the information, in the Depreciation Details for CI dialog box, click Close.
To view the depreciation schedule for this CI, click the Depreciation Schedule tab.
The tab shows the following information:
Effective Date — Date that the listed depreciation takes effect.
Status — Status of the CI's depreciation.
Current Depreciation — Amount of the listed depreciation.
LTD Depreciation — Life-to-date depreciation.
Useful Life of Asset — Estimated number of months that the depreciable asset is expected to be in use.
Remaining Life — Number of months remaining in the useful life of the asset.
Modify any of the following fields:
Method
Useful Life (months)
Depreciation Starts
Salvage Value
To recalculate the depreciation for this CI record, click Recalculate.
In any confirmation messages that appear, click Yes or OK.
In the CI record, click Save.
Important
For chargeback entries for depreciation to work correctly, the same price must appear in the following fields: Unit Price field on the CI record form, Related Cost field on the Cost form, and the Total Purchase Cost field on the Depreciation form.
If you modify the Total Purchase Cost field on the Depreciation Details for CI dialog box and click Recalculate, a message indicates that you must manually update the Total Purchase Cost field on the Financials tab on the CI Information form.

To specify tax-related values other than depreciation

In Mid Tier, open a CI, as described in Searching for tickets, assets, resources, and people in BMC Helix ITSM.
Click the Financials tab.

In the Accounting Information area, complete the following optional fields:

Field name	Description
Tax Credit	If you have donated this asset, specify the tax credit amount.
Market Value	Specify the fair market value for this asset. This value is the price at which an item can be sold by a willing seller to a willing buyer, neither of whom are under any pressure to buy or sell.
Book Value	Specify the book value (subtracted from the accumulated depreciation from the purchase cost) for this asset.

In the CI record, click Save.