Depreciation is often calculated over time, but some assets are better depreciated based on actual usage. In Sage X3, the Production Plan function supports this approach by allowing fixed assets to depreciate according to units of operation (UO), also known as the UO method.
Key Takeaways
- Production-based depreciation is useful when an asset’s value is consumed through output,
machine usage, production volume, or another measurable operating unit. - In Sage X3, assets that use the UO depreciation method must be linked to a production plan.
- The production plan defines expected units by fiscal year and period, then allows current-period completed units to drive the depreciation calculation.
- Reviewing the depreciation simulation helps confirm that Sage X3 is calculating the depreciation charge based on planned or actual units for the period.
The UO method is especially useful when an assets value is consumed based on production activity, machine usage, output volume, or another measurable operating unit. Instead of spreading depreciation evenly across months or years, Sage X3 calculates depreciation based on the number of units produced, used, or consumed during a specific period.
When to Use the Production Plan and UO Method
The Production Plan function is used when asset depreciation is based on units of operation rather than time. When an asset uses the UO depreciation method, it must be linked to a production plan.
The production plan allows you to:
- Define the total number of units required to fully depreciate the asset.
- Distribute the expected units by fiscal year and period.
- Record the number of units produced, used, or consumed during the current period.
- Use actual activity to calculate depreciation more accurately.
This setup helps organizations align depreciation expense with real asset usage.
Step 1: Define the Depreciation Context
Navigate to:
Setup > Fixed Assets > Depreciation Context (GESCNX)
In the Depreciation Context function, select the checkbox labeled “Retained for the management of OU.”
This setting identifies the context that will be used as the basis for production planning. It allows Sage X3 to manage depreciation according to the UO method.
Only one context can be selected for UO management within a company, so it is important to confirm the correct context before proceeding.
Step 2: Create the Production Plan
Navigate to:
- Fixed Assets > Fixed Assets > Production Plan (GESPLP)
Create a production plan for the asset or assets that will use UO based depreciation.
The main tab displays the production plan table. Each line represents a period from the context retained for UO management.
When the plan is created, Sage X3 automatically loads the first line with the current period of the current fiscal year. The final line is based on the production plan end date. If no end date is entered, the final line is based on the last period defined in the context period table.
For example, the image below shows a production plan with 12,000 total units over 12 months. The monthly planned unit total is set to 1,000, while the actual units entered for the period is 960.
Why does this happen? This happens because during each period, users can enter the actual number of units completed. This actual usage is what drives the depreciation calculation for the asset.
Important Production Plan Rules
When maintaining a production plan, keep the following rules in mind:
- Planned units can only be entered for periods that are not closed.
- Completed units can only be entered for the current period.
- Fiscal year totals and period end totals cannot be manually modified.
- Totals are calculated based on completed units or, when completed units are not available, planned units.
- Residual units are calculated automatically based on the total number of units in the production plan and the units already completed or planned.
The Assets tab displays all assets linked to the production plan.
Step 3: Create or Update the Asset
Navigate to:
Fixed Assets > Fixed Assets > Assets (GESFAS)
Create the asset or update an existing asset as needed.
Within the asset record, confirm that the asset is linked to the appropriate production plan. The asset must also be assigned the UO depreciation method.
Once the UO method is assigned, Sage X3 uses the production plan to calculate depreciation. The depreciable value is allocated based on the number of units produced during the period.
Step 4: Review the Depreciation Simulation
After the production plan and asset setup are complete, review the depreciation simulation for the asset.
The simulation shows how the depreciation charge is calculated based on the planned or actual units for the period. If actual units are entered on the production plan, Sage X3 recalculates the depreciation charge using those actual units.
For example, if the plan originally expected 1,000 units for the period, but the actual units entered are 960, the depreciation charge changes to reflect the 960 actual units. This ensures depreciation is aligned with the asset’s real usage.
Why The UO Method and Production Plans Matter
The UO method provides a more usage-based approach to fixed asset depreciation. For assets tied directly to production output or operational activity, this method can provide a more accurate view of asset consumption and depreciation expense.
By using production plans in Sage X3, organizations can better match depreciation with actual business activity, improve reporting accuracy, and support asset management processes that depend on usage rather than time.