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In my previous New Ways to Depreciate Fixed Assets in ERP 6.0 (Part 1) I introduced the New Depreciation Calculation (also referred to as New DCP) that is delivered in ERP 6.0 as part of the EA-FIN Enterprise Extension.  This blog will go into more detail and provide some examples of the specific change in how asset planned amounts are now calculated.

 

Overview of “Old” Depreciation Calculation

First, let’s review how the system calculated depreciation in prior releases. 

 

In prior R/3 releases, SAP calculated depreciation on a transaction line item level.  Every time a transaction is posted to the asset — either an acquisition, retirement or transfer — SAP calculated the depreciation amounts associated with that line item.  For example, an asset could receive several dozen transactions over the course of its lifetime and each one would be uniquely valued from a depreciation perspective.

 

If you look at the image below of table ANEP from a R/3 4.7 system, you’ll see an asset with multiple acquisitions and retirements.  In the highlighted column you can see how the system has calculated a corresponding depreciation amount for each unique posting.  You could also view this information at the Asset Explorer as well as an Asset Transaction report such as RABEWG.

 

Table ANEP showing Old Depreciation Calc

 

Overview of “New” Depreciation Calculation 

As of ERP 6.0 this transaction based approach to depreciation calculation is no longer used.  Instead the asset’s depreciation value is determined by evaluating period intervals.  A period interval is created for each asset, depreciation type (i.e. Ordinary Depreciation), depreciation area and fiscal year.  New intervals are created whenever something happens that changes the asset’s value.  Most of the time this is triggered by new transaction postings but it can also be triggered based on other changes.  Two examples are if a time dependent depreciation parameter is changed (ex. useful life) or a multi-level method change occurs within the fiscal year.  If there are no changes to the asset’s value then only a single interval will exist…  but if a posting occurrs, then a new interval is created and the first one adjusted (i.e., shortened). 

 

Example 

As with most things in fixed assets, this is best explained with an example and some simple calculations.  Here are the following assumptions for my example asset:

 

  • Fiscal Year = K4
  • Ordinary, straight line depreciation 
  • Depreciation Base Value = 01 APC
  • Depreciation Method = Percentage from UL
  • Useful Life = 5 years
  • Period control = pro rata for all transactions

 

First Posting:  The asset is acquired on January 2007 with an initial posting of $120,000 USD.  This results in a planned annual depreciation amount of $24,000 based on the asset’s 5 year UL.  Here’s how it looks at the Asset Explorer.

 

Asset Explorer of initial acquisition

 

 

To see the calculation in more detail navigate to the depreciation calculation from the Asset Explorer.  This depreciation trace is another area that has been completely changed in 6.0 to account for the new calculation technique. 

 

As you can see in the image below, the total planned depreciation for area 01 is shown as $24,000.  The bottom half of the image shows the components of the calculation and is the best way to confirm that the calculation is correct…  the base value of $120,000, the percentage rate of 20%, etc.  Pay particular attention to the Period Factor.  At this time the value is 1 because the calculation parameters are in effect for the entire fiscal year (12 out of 12 periods)…  but that will change with our next posting.

 

Detailed Depreciation Calculation

 

 

Second Posting:  On April 18th, a partial retirement of $30,000 USD is recorded.  The image below from the Asset Explorer shows the second transaction and that the new planned annual depreciation amount has been adjusted down to $19,500.

 

Asset Explorer showing the 2nd transaction

 

 

Looking again at the detailed calculation we can see how this annual amount of $19,500 was determined.

 

Detailed depreciation calculation

 

 

The retirement posting has the following effects on the depreciation calculation.  First, it reduces the base value from $120,000 to $90,000.  In past releases with the old depreciation calculation, the 2nd posting would be valuated using the amount of the transaction (minus $30,000 in this case) which would result in a postive adjustment to the initially calculated depreciation amount of $24,000.  The new depreciation calculation instead focuses on the base value of the asset that is in effect for that period interval.  Based on the configuration of the asset, the base value is set to the total APC value so $90,000 is used to calculate the depreciation amount.

 

The second thing to note is the changes to the Period Factor.  Since the date of the retirement transaction is in April and the period control is pro rata, the effect of the change is in period 4.  This shortens the first interval so that it is now only in effect for periods 1-3.  This second posting has created a new depreciation period interval that lasts for the remaining periods 4-12.  The period factor (which is essentially the period duration) for the first interval is now .25 (period length of 3 / total of 12 periods) and the 2nd interval is for the remaining .75 (9 / 12).

 

What’s next?


In the next blog I’ll go into more detail about the time-dependent depreciation parameters that are now maintainable on the fixed asset record.

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14 Comments

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  1. Former Member
    Dear Nathan,
    If the transaction happens in different fiscal year, would SAP calculates the same? Example Asset was acquired on 01.10.2008 = USD100,000. Fiscal year = 31.12.2008. Asset was disposed on 01.04.2009 = USD40,000.

    Thanks

    Regards
    Fauzi

    (0) 
    1. Nathan Genez Post author
      No it would not calculate the same.  The date of the posting is very important in determining how much depreciation is associated for that interval.  Also keep in mind that the fiscal year is part of the interval ‘key’.
      (0) 
  2. Former Member
    This is nice and useful topic who wants to activate EA-FIN for FI-AA. I saw the example regarding the useful life change from 5 to 10 years and depreciation calculated for $ 750.00 (90000 / 10 /12) Is system calculate correct value? It is not suppose to calculate for 90000-15000 ( net book value) / 111 (remaining life 120-9).

    Really appreciate on your answer.

    Thanks

    (0) 
    1. Nathan Genez Post author
      Nope.  The base value of the key (see the assumptions section in the middle) is 01 APC, not 24 NBV.  So the base value is 90k for that time interval and not 75k (90-15k).
      (0) 
  3. Former Member

    Hi Nathan,

    In our case currently the Period Factor for 1 month out of 12 months is saved as 0.08300 (i.e.1/12). Since the value of assets are very high, we want nearest approximation so as to get the nearest value of depreciation. For example, in this case ronding like 0.0833333 instead of 0.08300.

    Similar rounding extension is also required for Percentage.

    How can this be achived? Please help.

    Thanks,

    Bijay

    (0) 
  4. Srikanth Dasari

    Dear Nathan ,

     

    Request your kind help on the below issue we are facing ..

     

    We are having an old asset , which had only one depreciation area IFRS . However , later all the new assets have 3 depreciation areas including GAAP and TAX ledgers . We did the transfer from the old asset to the new asset using ABUMN , where by all the values of the IFRS depreciation area got copied to the IFRS depreciation area in the new asset . When this transfer was done , there is also a value adjustment posted to the new asset ( This is the total value of the depreciation that was posted on the old asset so far ) .

    As the Business wanted to have all the 3 depreciation areas in the new asset to have same APC values and depreciation , we did transfer the APC postings to the GAAP and TAX ledgers only , using transaction ABZON ( This APC value is the same as that of IFRS depreciation area ) . However , there is no value adjustment that can be posted to these two depreciation areas . In order to post this value adjustment ( which was only posted to the IFRS depreciation area ) in the new Asset , Business posted an unplanned depreciation amount only to the LOCAL and TAX ledgers so that the APC values and depreciation remain equal in all the three areas .

    However , now the depreciation amounts calculated in IFRS and LOCAL,TAX ledgers are different . For the LOCAL and TAX ledgers, the system is calculating the depreciation based only on the APC value , whereas for the IFRS depreciation area , the depreciation is calculated based on the ( APC value – Value Adjustment ) even though we are using the same depreciation key in all the 3 areas ( which is straight line depreciation ) .

    We are using new asset accounting .

     

     

    Thanks ,

    Srikanth

     

     

     

    (0) 

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