Depreciation Tracing:

1. File Access and Review:

• Obtain and review all relevant files, including:
  • Fixed asset register
  • Depreciation schedules
  • Journal entries
  • Supporting documentation (invoices, purchase orders, etc.)

2. Historical Depreciation Analysis:

• Trace the depreciation history for each asset, noting:
  • Acquisition date
  • Cost basis
  • Useful life
  • Salvage value
  • Depreciation method (straight-line, declining balance, etc.)
  • Depreciation rates
  • Accumulated depreciation
  • Any prior adjustments or impairments

3. Method, Rate, and Period Identification:

• Verify the consistency of depreciation methods, rates, and periods used.
• Identify any changes in methods or estimates over time.

Creating a Roll-Forward Depreciation Schedule:

1. Schedule Development:

• Create a new depreciation schedule with the following columns:
  • Asset description
  • Acquisition date
  • Cost basis
  • Useful life
  • Salvage value
  • Depreciation method
  • Depreciation rate
  • Beginning accumulated depreciation
  • Depreciation expense for the period
  • Ending accumulated depreciation
  • Book value

2. 2020 Starting Point:

• Use January 1, 2020, as the starting point for the schedule.
• Include year-to-date (YTD) depreciation for 2020.

3. Asset Additions, Disposals, and Sales:

• Reflect any additions, disposals, or sales of fixed assets during the period.

4. Activity Exclusion:

• Ensure no activity is reflected in the schedule beyond the review period.

Utilizing Previous Journal Entries:

1. Reference and Guidance:

• Refer to previous journal entries for information on:
  • Depreciation expense recognition
  • Asset additions and disposals
  • Adjustments or impairments

2. Information Incorporation:

• Incorporate relevant information from previous journal entries into the analysis and schedule.

Additional Considerations:

• Compliance with Accounting Standards:
  • Ensure compliance with applicable accounting standards (IFRS, GAAP, etc.).
• Internal Controls:
  • Assess the adequacy of internal controls over fixed assets and depreciation.
• Impairment Testing: