Splitting of Assets: General Information

You can split an asset into parts to divide a single fixed asset consisting of a group of items into two or more separate assets. You can also use splitting in advance of disposal and transfer of a part of the asset.

Learning Objectives

In this chapter, you will learn how to do the following:

  • Split a fixed asset
  • Release the split transaction

Applicable Scenarios

You split a fixed asset in the following cases:

  • You need to divide a fixed asset consisting of a group of items into two or more separate assets. For example, you may need to sell a portion of the asset and still use the rest of the asset.
  • You need to divide an asset by only cost and depreciation, that is, divide it into multiple assets with different costs and depreciation.
  • You need to partially dispose of or transfer an asset in preparation of getting rid of a portion of the asset. This can occur when, for example, you determine that a portion of the asset has become useless or you simply decide that selling part of the asset would be profitable.

Fixed Asset Splits

When splitting assets, you define the cost and the quantity of units for the asset components being removed from the fixed asset. A new asset record is created that contains the appropriate percentage of the original asset cost, the specified quantity, and the depreciation adjustments. The salvage amount of the original asset will also be split by using the ratio you specify.

Note:
An asset can contain one unit or multiple units. You can split an asset regardless of the quantity of units, even if the original quantity was 1.

Due to the split, the original asset that you divide retains the original asset ID, but its cost, depreciation, and salvage amount are reduced by the cost, depreciation, and salvage amount of the asset that you created by splitting the original one. The new asset is a separate asset with a new unique identifier. As the asset's description, the system automatically adds Split from and the number of the original asset.

After you split an asset, you must release the associated transactions that signify the asset and asset depreciation split. After you release a split transaction, you cannot reverse the corresponding split.

Note:
The system prevents splits of disposed assets after their disposal date. You can split an asset only before its disposal date.

You can view the history of the splits of an asset on the Asset Splits (FA405000) form.

Release of Transactions

When you split an asset, the system generates the following transactions:

  • For the original asset:
    • Purchasing – with the total removed cost
    • Depreciation Adjusting – with the total removed amount of the accumulated depreciation
  • For each new asset:
    • Purchasing + with the cost of the new asset
    • Depreciation Adjusting + with the appropriate percentage of the accumulated depreciation
  • For reconciled assets:
    • Reconciliation– for the original asset, which decreases the net book value of this asset by making a deduction
    • Reconciliation+ for each new asset, which increases the net book value by making an addition

The transactions are nominal transactions signifying the split; they are not posted to the general ledger. For more information on transaction types, see Types of Fixed Asset Transactions.

Example

Suppose that you purchase 100 units of office chairs for $3,000 total, and that you set up one fixed asset with an original quantity of 100 units and a useful life of three years. Further suppose that you use the straight-line method, with a depreciation cost of $83.30 monthly as a whole. Then on the third month after the asset's purchase, you want to sell part of the asset: 20 of the 100 chairs. The accumulated depreciation of the original asset is $250 and the net value is $2,750.

For this operation, you split the asset into two assets:

  • The original asset, the quantity of which is reduced from 100 units to 80, with the ratio equal to 80%. The asset ID is not changed. The accumulated depreciation is reduced to $200 and the net value is reduced to $2,200.
  • The new asset, which has a quantity of 20 items and a ratio of 20%. This asset has a unique asset ID generated by the system if auto-numbering is in use. Otherwise, the ID has to be specified in the Asset ID column of the Split Assets (FA506000) form. The asset gets the accumulated depreciation of $50, and the net value is $550. This is the asset that you sell.