Cost Settings for Financial Accounting Model

You can configure Server Hardware cost driver and resource utilization parameters to calculate the accurate cost and improve the efficiency of your environment.

Cost Drivers analyze the resources and the performance of your virtual environment. Based on the values you define, Cost Drivers can identify reclamation opportunities and can provide recommendations to reduce wastage of resources and cost.

How to Set Your Depreciation Model and Years for vCenter

You can set your depreciation model and years using the following steps.

From the left menu, click Configure and then, click Cost Settings.
Click Settings.
Select vCenter as Infrastructure Type from the drop-down menu.
In Cost Settings - Financial Accounting Model page, select the Depreciation Years between two and five.
Select the Depreciation Model as per your requirement and click Save.

Editing Cost Ratio for VMware Cloud Infrastructure

You can set or modify the cost ratio for public cloud account using the following steps.

From the left menu, click Configure and then, click Cost Settings.
Click Settings.
Select the public cloud account of your choice from the Infrastructure Type drop-down menu.
Select the required organization from the Organization drop-down menu.
Enter the cost ratio for CPU, Memory, and Storage.
Enter the Discount percentage.
Note: Discount is applied only when billing is disabled on VMC on AWS/Azure VMware Solutions adapter and it is applied on the reference cost (list price) per hour applicable for that region.
Select the Region and click Save.
Note: This value is considered when VMware Cloud Foundation vCenters are configured to vRealize Operations using vCenter adapters only.

The default discount % value is zero. You can set or edit the discount % for all the organizations in your VMC on AWS environment or you can set or edit the discount % for specific organization in your VMC on AWS environment. You can run cost calculation and check whether the discount % is reflected in the Monthly CPU Base Rate, Monthly Memory Base Rate, and Monthly Storage Base Rate metrics.

Configuring Depreciation Preferences

To compute the amortized cost of the Server Hardware cost driver, you can configure the depreciation method and the depreciation period. Cost Drivers supports two yearly depreciation methods and you can set the depreciation period from two to five years.

Note: Cost Drivers calculates the yearly depreciation values and then divides the value by 12 to arrive at the monthly depreciation.

Method Calculation

Straight line Yearly straight line depreciation = [(original cost - accumulated depreciation) / number of remaining depreciation years]

Max of Double or Straight

Method	Calculation
Straight line	`Yearly straight line depreciation = [(original cost - accumulated depreciation) / number of remaining depreciation years]`
Max of Double or Straight	`Yearly max of Double or Straight = Maximum (yearly depreciation of double declining balance method, yearly depreciation of straight line method)` `Yearly depreciation of double declining method= [(original cost - accumulated depreciation) * depreciation rate].` `Depreciation rate = 2 / number of depreciation years.` Note: `Double declining depreciation for the last year = original cost - accumulated depreciation`

Yearly max of Double or Straight = Maximum (yearly depreciation of double declining balance method, yearly depreciation of straight line method)

Yearly depreciation of double declining method= [(original cost - accumulated depreciation) * depreciation rate].

Depreciation rate = 2 / number of depreciation years.

Note: Double declining depreciation for the last year = original cost - accumulated depreciation

Example for Straight Line Depreciation Method

Year	Original Cost	Accumulated Depreciation	Straight Line Depreciation Cost
Year 1	10000	0	[(10000-0)/5] = `2000`
Year 2	10000	2000	[(10000-2000)/4] = `2000`
Year 3	10000	4000	[(10000-2000)/3] = `2000`
Year 4	10000	6000	[(10000-2000)/2] = `2000`
Year 5	10000	8000	[(10000-2000)/1] = `2000`

Example for Max of Double and Straight Line Depreciation Method

Year	Original Cost	Depreciation Rate	Accumulated Depreciation	Straight Line Depreciation Cost
Year 1	10000	0.4	0	Maximum([(10000-0)*0.4],[(10000-0)/5]) = Maximum(4000, 2000) = `4000` which is 333.33 per month.
Year 2	10000	0.4	4000	Maximum([(10000-4000)*0.4],[(10000-4000)/4]) = Maximum (2400, 1500) = `2400` which is 200 per month.
Year 3	10000	0.4	6400	Maximum([(10000-6400)*0.4],[(10000-6400)/3]) = Maximum (1440, 1200) = `1440` which is 120 per month.
Year 4	10000	0.4	7840	Maximum([(10000-7840)*0.4],[(10000-7840)/2]) = Maximum (864, 1080) = `1080` which is 90 per month.
Year 5	10000	0.4	8920	Maximum([(10000-8920)*0.4],[(10000-8920)/1]) = Maximum (432, 1080) = `1080` which is 90 per month.