WTF(heck) is a Depreciation Proposal (And Why We Test Just One Asset!)

If you've ever sat through a Conference Room Pilot (CRP) for the Fixed Assets module in D365 Finance and Operations, you’ve probably stared at a screen that looks a bit like a confusing tax form.

Today, we are talking about the Depreciation Proposal.

Whenever D365 uses the word "proposal," I want you to imagine the system handing you a draft and saying, "Hey, I did the math for you. Do you want to review this before we make it official?" It’s the ultimate safety net for accountants.

Let's break down a classic setup you might see during a testing session and what each of these toggles actually does.

The Anatomy of a Depreciation Proposal

When you open the Depreciation Proposal screen, you are basically telling the system how far to look back, where to put the math, and what to include. Here is the breakdown of a typical CRP setup:

1. Name of journal (e.g., FA): This is the destination. You are telling D365 to create a brand new, unposted journal in your Fixed Assets (FA) batch. It's like building the house, but not moving the furniture in just yet.

   
   

2. To date (e.g., 07/31/2026): This is your cutoff line in the sand. The system will look at the asset's schedule and calculate all unposted depreciation up to this specific date.

   
   

3. Summarize depreciation (No): Keep this toggled to "No"! If you flip this to "Yes," D365 will lump a bunch of asset depreciations into one giant summary line. Your auditors will hate that, and as a DynamicsDad, I want you to stay on your auditor's good side. Keep the detail.

   
   

4. Post journals (No): This is your seatbelt. By keeping this set to "No," the system merely drafts the journal. It won't actually post it to the General Ledger. A human gets to open the "FA" journal, double-check the math, and hit the post button themselves.

The DynamicsDad Pro-Tip: Filtering for One Asset

If you look at the "Records to include" section during a test session, you might see a filter applied for just a single asset... kinda like Fixed asset number: FA3000.

Why would you run a month-end depreciation process for just one piece of equipment?

Because we are testing! Running a proposal for a single asset is the smartest way to validate your setup during UAT or a CRP. You are checking to make sure that specific asset's depreciation profile calculates the monthly expense accurately. Once you prove the math works for one, you can trust the system when you run it wide open for thousands of assets at month-end.

A quick word of warning before I let you go: When you go to actually post that drafted journal, keep a close eye on the GL impact.

The most common headache during month-end testing is finding out your Posting Profiles aren't mapped correctly. If the system doesn't know which Depreciation Expense or Accumulated Depreciation accounts to hit, it’s going to throw an error right back at you.

Why the Heck Isn't There an Appreciation Journal?

That is one of the best questions I get from folks new to Fixed Assets, and the answer has less to do with D365 and everything to do with the fundamental rules of accounting.

In short:

Accountants are natural pessimists.

This comes down to a core accounting principle called Conservatism. Under standard Generally Accepted Accounting Principles (GAAP), you aren't allowed to count your chickens before they hatch.

Imagine your company buys a vintage Mustang for $20,000. Five years later, you look at the market and realize it’s now worth $40,000. That’s awesome! But until you actually sell that car and deposit the $40,000 into your bank account, that extra twenty grand is just theoretical money. Your auditors (and the IRS) do not want you padding your company's balance sheet with theoretical "maybe" money. Because of this, standard accounting rules don't let you just slowly tick up the value of an asset every month. So, no automated "Appreciation Proposals."

On the flip side, if you buy a delivery truck, you know it's losing value every time someone drives it. Accountants want you to record that loss of value—that expense—immediately and consistently. That’s why we have Depreciation Proposals.

How D365 Actually Handles "Appreciation"

Now, there are times when an asset's book value legitimately needs to go up. Maybe you built a massive new addition onto a warehouse, or maybe your company operates internationally and uses IFRS (International Financial Reporting Standards), which actually does allow you to adjust assets to fair market value.

But D365 doesn't call it "Appreciation." If you need to increase an asset's value, you handle it through specific, manual journal entries rather than an automated proposal:

• Write-up Adjustments: You use these transaction types when you make a major capital improvement to an existing asset that adds value or extends its useful life (like putting a brand new roof on a building).

• Revaluation Journals: These are used when you are legally required (usually outside the US) to restate the value of an asset to match its current fair market value.

So, D365 can increase an asset's value. But because it's an exception to the rule rather than a monthly guarantee, it doesn't get a fancy, automated "proposal" engine like depreciation does!

Until next time,

DynamicsDad