Concept: Accounting Impact of Asset Lifecycle Events

Assign/Change Asset Accounting or Adjust Asset Cost

For asset lifecycle events where you assign or change accounting or adjust cost, Workday creates accounting entries to move spend booked by the supplier invoice when all of these are true:

Asset cost activity is linked to a supplier invoice.

The accounting treatment on the supplier invoice line or asset isn't Expense
.

The accounting treatment, spend category, worktags, or location on the supplier invoice line are different than on the asset.

Workday applies depreciation over the remaining useful life of the asset when you adjust the acquisition cost and historical depreciation is loaded.

Leased Assets

To generate lease accounting entries when you create supplier contracts, you must:

Use trackable spend categories.

Map ledger accounts to obligation, liability, or expense ledger account types for financial or operating leases.

Set up account posting rules and posting rule conditions for liability, multibook settlement, and spend account posting rule types.

Example: When you create lease contracts using the Financial Lease
or Operating Lease
contract types, Workday posts these accounting entries:

Lease Type	Transaction	Journal Entries
Financial	Supplier Invoice	Debit Accrued Liability (Financial/Capital Lease Obligation) Debit Interest Credit Payables
	Asset Registration	Debit Spend Credit Accrued Liability
	Depreciation Expense	Debit Depreciation Expense Credit Accumulated Depreciation
Operating	Supplier Invoice	Debit Spend Credit Payables
	Supplier Payment	Debit Payables Credit Cash
	Asset Registration	Not applicable

Dispose of Assets

To dispose of capital assets, your accounting varies depending on the disposal method: discard, sale, or donation. These Workday-delivered methods drive accounting for disposing of assets. Map each disposal type you define for tracking purposes, such as theft, loss, or sale, to one of these disposal methods.

These tables list the accounting for each disposal method by accounting treatment.

Depreciable or Nondepreciable Capital

Disposal Method	Posting Rule	Comments
Discard	Credit Spend Debit Accumulated Depreciation Debit Asset Disposal Loss	If a resource is fully depreciated (to zero), there's no disposal loss.
Sale	Credit Spend Debit Accumulated Depreciation Debit Asset Disposal Sale Debit Asset Disposal Loss or Credit Asset Disposal Gain	If sale price is greater than Net Book Value, the result is a gain. If sale price is less than Net Book Value, the result is a loss. If sale price is equal to Net Book Value, the result is no gain or loss.
Donation	Credit Spend Debit Accumulated Depreciation Debit Asset Disposal Donation Debit Asset Disposal Loss or Credit Asset Disposal Gain	If the disposal type uses Fair Market Value: If Fair Market Value is greater than Net Book Value, the result is a gain. If Fair Market Value is less than Net Book Value, the result is a loss. If Fair Market Value is equal to Net Book Value or the disposal type uses Net Book Value, the result is no gain or loss.

Expense

Disposal Method	Posting Rule	Comments
Discard	No accounting
Sale	Debit Asset Disposal Sale Credit Asset Disposal Gain	Accounting entry amount is equal to the sale price.
Donation	Debit Asset Disposal Donation Credit Asset Disposal Gain	Accounting entry amount equals Fair Market Value at disposal. If disposal type uses Net Book Value, there's no accounting.

In addition, asset disposals can have these accounting impacts:

Workday records depreciation first and records depreciation expense and accumulated depreciation up to the disposal date.

If you have multiple books, you can specify the amount of bonus depreciation to recapture in books where Workday records bonus depreciation.

For partial disposals, Workday applies the specified percentage to the total current cost of the asset (which includes adjusted costs) in each asset book. If you specify a cost, Workday calculates the percentage using the current cost in the primary asset book. The remaining cost of the asset continues to depreciate for the remaining life of the asset.

A partial disposal factor adjusts bonus depreciation and the residual value of the asset in all asset books. Workday also uses the factor if the cost of the asset differs across the asset books. Access the

View Business Asset

report and the

Depreciation Summary

to view the effect of the partial disposal on the accumulated depreciation of the asset.

Transfer or Issue Assets

For asset transfer and issue lifecycle events, Workday creates accounting to move spend and accumulated depreciation when all these are true:

The accounting treatment of the asset isn't Expense
.

There's a change to the worktags, location, or company of the asset.

If you move an asset and there's unposted depreciation for the preceding location, Workday automatically posts it so that the ledger reflects the correct accumulated depreciation balance. If depreciation belonging to the new location or worktags has already been posted, Workday creates a depreciation adjustment to move the depreciation expense to the new location/worktags.

Depreciation Adjustments (for Catchup Depreciation)

For all asset accounting lifecycle events, the transfer lifecycle event, and the issue lifecycle event, Workday creates depreciation adjustments when all these are true:

There's a change to the asset's spend category, location, company, worktags, or cost.

The accounting treatment of the asset is Depreciable Capital
.

Depreciation has been processed for the period that is on or after the transaction date.

Workday automatically creates depreciation adjustment accounting for each impacted period. Depreciation adjustments for lifecycle events in a period record the difference between the recorded depreciation and the depreciation that should have been recorded for cost activities. Depreciation adjustments for transfers and issues move the depreciation expense between location and worktags so the net impact to depreciation expense is zero. Access the

View Business Asset

report to view specific depreciation adjustments on the

Depreciation Detail

tab.