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Have the FAr work correctly when changing the useful life of an Asset Class - it does not do so currently. This is based on the following research.....

I have done the following in the Demo company (which has a Year End of the 31st March):

• Posted an asset worth £6,300 on the 1st Jan 22 with a depn rate of 10%, resulting in a Depn charge to the P&L of £52.50 pcm
• Posted an asset worth £1,969.99 on the 1st Apr 22 with a depn rate of 10%, resulting in a Depn charge to the P&L of £16.42 pcm

I ran depn from Jan 22 through to Dec 22, so posting 12 months of Depn on two assets, one posted to the FAR in the prior year and one in the current year.

For Jan 23, I changed the Depn rate on both assets to 16.67% (6 years) and expected the following postings:

• on the asset with an opening cost of £6,300, the monthly charge should change to £87.50 pcm. I expected a charge in Jan 23 of £507.50 made up of: 12 x 87.50-52.50 + 1x 87.50
• on the asset with an opening cost of £1,969.99, the monthly charge should change to £27.36 pcm. I expected a charge in jan 23 of £125.83 made up of: 9 x 27.36 - £10.94 + 1x 27.36

What actually happened was the following:

• for the asset with an opening cost of £6,300 (posted in the prior year) a charge of £402.68 was posted (9 x 87.50 - 52.50 + 1 x 87.50 - roundings in my maths!)
• for the asset with an opening cost of £1,969.99 (posted in the current year) a charge of £125.83 was posted

SO, for the asset posted in the prior year the system ONLY posts correcting depn due to the change in the useful life for the financial year you are in, not for periods in prior year(s). This is wrong! The system does not work as it should and this cannot be fixed by "changing the depn rate to accelerate depn in the financial year and then again for the rest of its useful life", as this would be working out a specific rate per asset to post the update and then changing it again going forward. This is clearly unworkable.

So, that leaves three options:
- do nothing and don't change the useful life
- find a way to post a manual journal to the FAR to account for the issue
- post a manual journal to the P&L/BS outside the FAR and accept that there is a reconciliation issue between the BS and the FAR for the difference, as it is not possible to post the correct adjustment through the FAR.

This issue is a problem - the system incorrectly and this needs to be corrected/fixed.