After the first Calculating Bonus Depreciation for 2008 Fixed Assets (Part 1) on how to implement the special depreciation requirements in a system not using the New DCP, this blog will focus on implementing it in a system that does.
The focus on this blog is the configuration aspects of the depreciation key. Keep in mind that there are other processing steps related to substituting the depreciation keys and identifying the correct asset records.
What makes this different?
The reason why the solution in note 505069 does not work for a system utilizing the New DCP is because of the period interval based approach that SAP used when defining it. As an example, an asset that is retired in its original acquisition year is not subject to any US tax depreciation. But with the New DCP, a period interval is defined for the full 12 fiscal periods when the asset is first acquired. Once it is retired in a subsequent period (let’s say, period 8), a second interval is created to account for a new calculation for periods 8-12. But the first interval is still in place and calculating a value for periods 1-7.
What are the steps?
The initial configuration for the system to allow special depreciation is the same as shown in the first blog. The only differences at this point concern how the depreciation key is configured and the processing related to handling the asset records.
First a custom base method is going to be required since there is no standard base method delivered by SAP to account for immediate special depreciation.
The second prepatory task is to create a custom multi-level key. This is required in order to calculate the 50% rate for the bonus depreciation. Be sure to create one that references the special depreciation start date and not the ordinary start date.
This is where you’ll notice a difference from the previous approach. The system will first reduce the base value before calculating the immediate depreciation configured earlier. In this case it will only evaluate 50% of the asset’s total APC Value (base value 01).
Now that these two are done, you can create (copy) a new depreciation key that is similar to the ones normally used for US tax depreciation. For these new keys a new depreciation phase must be created that is configured for special depreciation.
After posting a $100,000 USD acquisition to a new asset assigned to these new depreciation keys, the Asset Explorer displays the following values for the two applicable US tax depreciation areas.
Note that the $50,000 USD amount of calculated special depreciation represents the bonus depreciation allowed under the Stimulus Act. It also brings visibility to it’s uniqueness as opposed to the recurring calculation of ordinary depreciation. This is true for both MACRS and AMT calculations.
Looking at the depreciation trace we can see how the values are being calculated. Periods 1-6 do not result in a calculated amount since it’s based on a half-year convention. For the special depreciation amount type, a single period interval is created that calculates the bonus depreciation in full which is different from the approach in a system that uses the technique described in note 505069.
For more information on this process, please look at note 1148489. As with the past laws in 2002 and 2003, there were subsequent changes to note 505069 as more specific processing issues and interpretations were uncovered. It would be a good idea to regularly check this note for updates if you have questions in the future.