Depreciation Tracing

1. Gather Information:
   • Obtain all relevant files, including:
     • Fixed asset registers
     • Depreciation schedules
     • Accounting policies
     • Financial statements
     • Supporting documentation (e.g., invoices, purchase orders)
2. Review Records:
   • Examine the fixed asset register for each asset:
     • Description
     • Acquisition date
     • Cost
     • Estimated useful life
     • Residual value
   • Analyze depreciation schedules:
     • Methods used (e.g., straight-line, declining balance)
     • Depreciation rates
     • Depreciation periods
   • Compare historical depreciation with accounting policies for consistency.
3. Identify Discrepancies:
   • Check for inconsistencies, errors, or omissions in depreciation calculations.
   • Investigate any unusual patterns or deviations.
4. Document Findings:
   • Create a detailed report outlining the depreciation tracing process and findings.
   • Highlight any identified issues or concerns.

Creating a Roll-Forward Depreciation Schedule

1. Determine Starting Point:
   • Set the beginning date as January 1, 2020.
   • Use the ending balances from the previous depreciation schedule as starting values.
2. List Assets:
   • Include all relevant fixed assets in the schedule.
   • Provide a separate line for each asset.
3. Calculate Depreciation:
   • Apply the appropriate depreciation method, rate, and period to each asset.
   • Calculate depreciation expense for each period (e.g., monthly, quarterly, annually).
4. Record Additions and Disposals:
   • Add new assets acquired since January 1, 2020, with their acquisition date and cost.
   • Remove assets that have been disposed of or sold, along with their disposal date and proceeds.
5. Calculate Year-to-Date (YTD) Depreciation:
   • Aggregate depreciation expense for each asset from January 1, 2020, to the current date.
6. Update Book Values:
   • Deduct YTD depreciation from the beginning book value to arrive at the ending book value for each asset.
7. Review and Finalize:
   • Carefully review the roll-forward schedule for accuracy and completeness.
   • Make any necessary adjustments or corrections.
8. Prepare Documentation:
   • Provide clear explanations of the calculations and assumptions used.
   • Include supporting documentation for any adjustments.

Additional Considerations:

• GAAP Compliance: Ensure compliance with applicable accounting standards (e.g., GAAP).
• Tax Implications: Consider tax regulations for depreciation deductions.
• Internal Controls: Evaluate internal controls over fixed assets and depreciation.
• Technology: Use specialized software or tools to streamline the process.