For property management companies with large and diverse portfolios, efficient asset management is crucial. Outdated spreadsheets and fragmented systems can become a significant liability.
In 2025, 91% of property managers plan to expand their portfolios, and automation is considered critical to scaling operations without escalating costs. However, many organizations still face challenges with manual asset tracking and delayed financial reporting.
NetSuite asset depreciation provides an effective solution for managing these challenges. This guide will walk you through the process of managing NetSuite asset depreciation efficiently, from selecting the right depreciation method to tracking and reporting depreciation seamlessly.
TL;DR
- Using automated tools like NetSuite for asset depreciation helps scale operations without increasing costs.
- NetSuite supports a range of depreciation methods, including straight-line, declining balance, and units-of-production, allowing businesses to select the best approach for each asset.
- Depreciation entries in NetSuite automatically post to the general ledger, ensuring accurate and streamlined financial reporting.
- NetSuite simplifies tax reporting with methods like MACRS for U.S. businesses, helping ensure compliance with regulations like GAAP and IFRS.
What is Asset Depreciation?
Asset depreciation is the accounting process that spreads the cost of a fixed asset over its useful life. This approach reflects the decline in value due to wear and tear, technological advancements, or other market factors.
By allocating this expense systematically, businesses can match costs with the revenue the asset generates, providing a more accurate view of their financial performance.
Why Accurate Depreciation Tracking is Crucial in Property Management
In property management, assets like buildings, land, and maintenance equipment represent significant investments. Properly tracking and depreciating these assets is essential for:
- Tax Optimization: Accurate depreciation helps reduce taxable income and can lead to lower tax liabilities.
- Financial Health: Depreciation impacts both the balance sheet and the P&L statement, providing a clearer picture of a property's true value.
- Investment Decisions: Knowing how assets depreciate allows property managers to make informed decisions about repairs, replacements, and acquisitions.
Using a strong system like NetSuite to manage asset depreciation ensures that property managers can keep accurate, up-to-date records and maintain compliance with regulatory standards such as ASC 842 for lease accounting.
What is NetSuite Fixed Asset Management (FAM)?
NetSuite Fixed Asset Management (FAM) is a cloud-based solution designed to automate the tracking, management, and depreciation of fixed assets. It enables organizations to manage their entire asset lifecycle, from acquisition and tracking to depreciation and disposal.
This system is integrated with other NetSuite modules, streamlining the process of recording, reporting, and calculating asset depreciation.
NetSuite FAM offers essential features that enhance asset depreciation management:
- Multiple Depreciation Methods: Supports straight-line, declining balance, and units-of-production methods.
- Custom Depreciation Schedules: Customize asset lifespans, salvage values, and depreciation methods.
- Tax & Book Depreciation: Automatically calculates both tax and book depreciation for compliance.
- Asset Transfer & Disposal: Automates adjustments when assets are moved or retired.
- Seamless Integration with GL: Depreciation entries are automatically posted to the general ledger, ensuring accuracy.
Streamline your property management even further with RIOO. Trusted by over 150,000 homes and 400,000 tenants across 52 states, RIOO integrates seamlessly with NetSuite to centralize lease management, maintenance, accounting, and vendor management. Save time, reduce errors, and improve financial tracking.
Book your personalized RIOO demo today and join the over 1,500 communities already optimizing their property management workflow.
After understanding NetSuite FAM, it's time to explore the different depreciation methods available within NetSuite. Here’s a breakdown of the methods you can use.
NetSuite Asset Depreciation Methods
NetSuite provides various depreciation methods, allowing businesses to choose the best method based on their asset types and accounting needs. Each method offers different approaches to allocating the depreciation expense over time.
Below are the primary depreciation methods available in NetSuite.
1. Straight-Line Depreciation
Straight-line depreciation is the most commonly used method, offering a simple and consistent allocation of an asset's cost over its useful life.
- How it works: The asset’s cost is divided equally over its estimated useful life.
- Formula:
Annual Depreciation Expense = Asset Cost − Residual ValueUseful Life
- Use case: Ideal for assets that lose value evenly over time, such as buildings, furniture, and equipment.
Advantages:
- Simple and easy to calculate
- Provides a steady and predictable depreciation expense each period.
Disadvantages:
- Not ideal for assets that experience significant changes in value over time.
2. Declining Balance Methods (Accelerated Depreciation)
Declining balance methods allocate more depreciation expense in the early years of an asset’s life. This is useful for assets that lose value quickly, such as vehicles or machinery.
- How it works: A fixed percentage is applied to the asset’s book value, which reduces each year as the asset depreciates.
- Common Methods:
- Double Declining Balance (DDB): Accelerates depreciation by doubling the straight-line rate.
- 150% Declining Balance: Uses 1.5 times the straight-line rate.
Advantages:
- More accurately reflects the decreasing value of assets that have higher usage or wear in the early years.
- Provides larger tax deductions in the earlier years of an asset's life.
Disadvantages:
- Results in higher depreciation expense in the initial years, which may not match the asset’s revenue generation.
- Depreciation expense decreases over time.
3. Sum of the Years’ Digits (SYD) Method
The SYD method also accelerates depreciation but uses a different calculation approach based on the sum of the asset's useful life years.
- How it works: The asset's cost is allocated according to a fraction, where the numerator is the number of years remaining in the asset's life, and the denominator is the sum of the years' digits.
- Formula:
Depreciation Expense for Year=Remaining Life of AssetSum of Year's DigitCost - Resuidial Value
Advantages:
- Accelerates depreciation in the earlier years of the asset’s life.
- Provides more depreciation expense upfront, which helps businesses manage cash flow better.
Disadvantages:
- More complex than the straight-line method.
- Requires additional administrative work to calculate each year’s depreciation.
4. Units of Production Depreciation
This method ties depreciation expense to the asset’s usage, such as the number of units produced, miles driven, or hours used.
- How it works: Depreciation is calculated based on actual usage during a period. This method is ideal for assets like machinery or vehicles that experience wear based on how much they are used.
- Formula:
Depreciation Expense= Asset Cost−Residual ValueTotal Estimated Usage× Units Used During the Period
Advantages:
- Reflects the asset's actual usage, ensuring that depreciation aligns with revenue generation.
Disadvantages:
- Not ideal for assets where usage is difficult to measure.
- It can be administratively complex, especially for assets with fluctuating usage.
5. Tax Depreciation Methods (MACRS)
For tax reporting, NetSuite supports the Modified Accelerated Cost Recovery System (MACRS), a method used by U.S. businesses for tax purposes.
- How it works: MACRS allows businesses to use accelerated depreciation for tax purposes, providing higher deductions in the earlier years of the asset’s life.
- Common Methods:
- 150% Declining Balance
- Straight-Line
Advantages:
- Maximizes early tax benefits, helping businesses reduce taxable income in the short term.
Disadvantages:
- Not always aligned with accounting depreciation, which can complicate reporting and tax filings.
Selecting the Right Depreciation Method
Choosing the appropriate depreciation method depends on several factors:
- Asset Type: For steady, long-lasting assets like buildings, straight-line may be best. For assets that lose value quickly, such as vehicles, declining balance works well.
- Tax Considerations: Certain methods, like the Modified Accelerated Cost Recovery System (MACRS), are designed for tax purposes, and NetSuite FAM can automate these for compliance.
- Accounting Standards: NetSuite FAM ensures that the depreciation methods comply with Generally Accepted Accounting Principles (GAAP) and tax standards (e.g., ASC 842, IFRS).
Once you've selected the right method, NetSuite makes tracking depreciation easy. Let’s look at how to set up asset records and run depreciation calculations using the NetSuite system.
How to Track Depreciation in NetSuite
Tracking depreciation in NetSuite is a streamlined process thanks to the Fixed Assets Management (FAM) module, which helps businesses manage the entire lifecycle of their fixed assets, from acquisition to disposal.
With NetSuite, businesses can automatically calculate depreciation for all assets using a variety of methods and easily track depreciation history over time.
1. Setting Up Asset Records
Before tracking depreciation, you must first create and set up asset records within NetSuite. Asset records contain all relevant information about the asset, such as:
- Asset Name and Description: A clear identifier for the asset.
- Acquisition Cost: The purchase cost of the asset.
- Depreciation Method: The method used for calculating depreciation (e.g., straight-line, declining balance).
- Asset Type: Defines the category of the asset (e.g., building, vehicle, machinery).
- Useful Life: The number of years over which the asset will be depreciated.
Once the asset record is created, the depreciation calculation process can begin based on the method specified.
2. Running Depreciation
After asset records are set up, depreciation can be run periodically, such as monthly or annually, depending on the chosen depreciation method. NetSuite’s FAM module automates this process and ensures that the depreciation calculations are accurate and timely.
To run depreciation in NetSuite:
- Navigate to Fixed Assets > Transactions > Asset Depreciation.
- Select the Asset Types and Subsidiaries for which depreciation should be run.
- Enter the Depreciation Period and Depreciation Reference to track the journal entries.
- Click Depreciate Assets to initiate the depreciation process.
NetSuite then calculates the depreciation for each asset based on the selected method and period, creating corresponding journal entries in the general ledger.
3. Monitoring Depreciation Status
NetSuite provides a Process Status page, where you can monitor the progress of the depreciation run. The process includes several stages:
- Generating Depreciation Schedule Values: NetSuite creates depreciation history records for all assets without an existing depreciation schedule.
- Creating Journal Entries: The system generates journal entries that post depreciation and expense entries to the correct accounts.
- Updating Asset Records: Depreciation amounts are updated on the asset records, and the current net book value is adjusted accordingly.
4. Handling Adjustments and Corrections
In some cases, you may need to adjust the depreciation due to errors in the asset records, such as an incorrect acquisition cost or an updated depreciation method. NetSuite allows you to reverse and correct depreciation entries, ensuring that the correct depreciation is applied.
To correct depreciation, you can:
- Reverse depreciation journal entries.
- Edit asset records to adjust details like acquisition cost or useful life.
- Rerun depreciation with the updated information.
This flexibility ensures that asset records are always accurate and up-to-date.
5. Reporting Depreciation
NetSuite also offers detailed reporting capabilities, allowing businesses to generate depreciation reports for analysis and compliance purposes. The Fixed Assets Reports can be customized to track:
- Cumulative Depreciation: The total amount of depreciation accumulated over the life of the asset.
- Current Net Book Value: The asset’s value after accounting for depreciation.
- Depreciation by Asset Type: Allows businesses to analyze depreciation at a high level, by asset class or category.
Reports can be segmented by various criteria such as subsidiary, location, and department to provide in-depth insights.
6. Automating Depreciation with NetSuite
NetSuite’s automation capabilities help businesses eliminate manual calculations and ensure that depreciation is handled consistently and in compliance with accounting standards. For instance:
- Scheduled Depreciation Runs: NetSuite allows businesses to set up recurring depreciation runs, ensuring that depreciation is automatically calculated and posted at regular intervals without manual intervention.
- Depreciation Adjustments: If changes occur, such as a revaluation of an asset, NetSuite allows for adjustments to be automatically reflected in the depreciation schedule.
- Multi-Book Accounting: For businesses that need to handle both book depreciation and tax depreciation, NetSuite supports multi-book accounting, ensuring that depreciation is tracked in both contexts.
To make sure everything runs smoothly, let’s cover some best practices for managing asset depreciation within NetSuite.
Must read: How Payable Dashboards Enhance Financial Decision-Making for Property Managers
Best Practices for Managing Asset Depreciation in NetSuite
Efficient management of asset depreciation ensures accurate financial records, compliance, and optimal asset usage. By using NetSuite's Fixed Asset Management (FAM) module, businesses can easily track, calculate, and manage depreciation.
Below are some key practices.
1. Choose the Right Depreciation Method
Choose the appropriate method based on asset type:
- Straight-Line for assets with uniform value reduction.
- Declining Balance for assets that lose value faster in the early years.
- Usage-based for assets like vehicles or machinery tied to activity.
The correct method should align with the asset’s actual use and expected lifespan.
2. Automate Depreciation Scheduling
Automating depreciation schedules in NetSuite ensures timely, consistent calculations. By setting up automated schedules, businesses can ensure that depreciation is calculated accurately at regular intervals.
Retrieve bills, item receipts, and vendor contracts directly from NetSuite integration with RIOO.
3. Regularly Review and Update Asset Records
Periodically update asset details, including:
- Useful Life and Residual Value.
- Reevaluate Depreciation Methods as needed based on changes in asset usage or market conditions.
4. Track and Manage Asset Disposals
When assets are disposed of, it's important to:
- Track disposals accurately and adjust asset records to reflect their removal.
- For assets sold or written off, make sure to process partial disposals or revaluations in NetSuite to maintain accurate financial records.
5. Utilize Reporting and Analytics
NetSuite provides in-depth reporting capabilities that allow businesses to track key metrics like net book value, cumulative depreciation, and remaining useful life across all assets. Custom reports can be generated quickly for decision-making.
With NetSuite RIOO integration, you will have real-time access to key accounts payable information, including AP aging, check registers, invoices awaiting approval, and payments in transit.
6. Ensure Compliance with Accounting and Tax Regulations
Compliance with GAAP and IFRS is essential for businesses to meet financial reporting standards. NetSuite’s FAM module helps apply these depreciation rules automatically.
By following these best practices, businesses can streamline their asset depreciation management, reduce errors, and ensure compliance with accounting and tax regulations through NetSuite's powerful Fixed Assets Management capabilities.
Conclusion
NetSuite’s asset depreciation features simplify and automate the process of managing asset lifecycles, ensuring businesses maintain accurate financial records. It helps businesses easily track and calculate depreciation for their assets, saving both time and effort.
Manual debit and credit entry take time; it takes away from the real PMC work. That’s why RIOO partnered with NetSuite, a leader in procure-to-pay process automation.
With NetSuite accounts payable (AP), you can automate reviews, approvals, and payments of supplier invoices, giving you greater control over the full process.
RIOO’s powerful integration with NetSuite ensures that all your vendor management tasks are handled seamlessly, making your business operations smoother and more efficient.
Book your personalized RIOO demo now →
Also Read: The Hidden Costs of Skipping the Details in Property Setup
FAQs
- What is NetSuite Asset Depreciation?
NetSuite asset depreciation refers to the automated process of calculating and tracking the reduction in the value of assets over time. Using various methods like straight-line or declining balance, NetSuite helps businesses manage the entire asset lifecycle, from acquisition to disposal, ensuring compliance.
- Can NetSuite automatically calculate depreciation for tax purposes?
Yes, NetSuite automates tax depreciation calculations, including support for the Modified Accelerated Cost Recovery System (MACRS), a method used by U.S. businesses for tax reporting.
- How do I track asset depreciation in NetSuite?
To track asset depreciation in NetSuite, you first create asset records that include the asset's acquisition cost, depreciation method, and useful life. After setting up these records, NetSuite can automatically calculate and post depreciation entries at regular intervals.
- Can I adjust depreciation entries in NetSuite?
Yes, NetSuite allows for depreciation adjustments if there are errors in asset records, such as incorrect acquisition cost or depreciation method. You can reverse or modify depreciation entries and rerun calculations.
