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 when all of these conditions are true:

The 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 is different than on the asset.

These accounting entries move spend booked by the supplier invoice.

Workday applies depreciation over the remaining useful life of the asset when you adjust the acquisition cost on assets with historical depreciation.

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

The disposal type that you select when you dispose of assets drives the accounting. Each disposal type maps to a disposal method of either:

Discard

Donation

Sale

These tables list the accounting entries for each accounting treatment and disposal method.

Depreciable Capital Asset
or Non-depreciable Capital Asset
accounting treatment:

Disposal Method	Journal Entries	Considerations
Discard	Credit Spend Debit Accumulated Depreciation Debit Asset Disposal Loss	There's no disposal loss for fully depreciated assets.
Donation	Credit Spend Debit Accumulated Depreciation Debit Asset Disposal Donation Debit Asset Disposal Loss or Credit Asset Disposal Gain	For disposal types that use a basis of fair market value: When the fair market value is greater than the net book value, the result is a gain. When the fair market value is less than the net book value, the result is a loss. When the fair market value is equal to the net book value, the result is no gain or loss. For disposal types that use a basis of net book value, the result is no gain or loss
Sale	Credit Spend Debit Accumulated Depreciation Debit Asset Disposal Sale Debit Asset Disposal Loss or Credit Asset Disposal Gain	When the sale price is greater than the net book value, the result is a gain. When the sale price is less than the net book value, the result is a loss. When the sale price is equal to the net book value, the result is no gain or loss.

Expense
accounting treatment:

Disposal Method	Journal Entries	Considerations
Discard	No accounting
Donation	Debit Asset Disposal Donation Credit Asset Disposal Gain	The accounting entry amount is the fair market value of the asset at disposal. There's no accounting for disposal types that use a basis of net book value.
Sale	Debit Asset Disposal Sale Credit Asset Disposal Gain	The accounting entry amount is the sale price.

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.

When 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. To view how partial disposals affect the accumulated depreciation for assets, you can access the

Depreciation Summary

tab on the

View Business Asset

report.

Transfer or Issue Assets

For asset transfer and issue lifecycle events, Workday creates accounting to move spend and accumulated depreciation when all these conditions 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. When you've already posted depreciation belonging to the new location or worktags, Workday creates depreciation adjustments to move depreciation expenses to the new location or worktags.

Depreciation Adjustments for Catchup Depreciation

For all lifecycle events on depreciable capital assets, Workday creates depreciation adjustments for periods on or after the transaction effective date that already have posted depreciation when you change either:

The company, location, spend category, or worktags. These depreciation adjustments move the depreciation expense between location and worktags so the net impact to depreciation expense is zero.

The cost. These depreciation adjustments record the difference between the posted depreciation and the depreciation that should have been posted for cost activities.

You can access the

View Business Asset

report to view specific depreciation adjustments on the

Depreciation Detail

tab.

Accounting Dates

Workday only posts accounting in open ledger periods. When the period for an accounting date is closed, Workday posts in the next open period. Example: You register an asset from a supplier invoice with an invoice date in a closed ledger period. Workday registers the asset with:

A transaction effective date as the asset acquisition date.

An accounting date in the next open period.

For lifecycle events without accounting impact, Workday uses the transaction date as the accounting date, even when the ledger period is closed. Example: You register an asset manually with an acquisition date in a closed ledger period. Workday registers the asset with both a transaction effective date and an accounting date as the asset acquisition date.