Impacts on change of depreciation key in the asset master
If a person changes a depreciation key in the asset master without knowing the effects will result in improper depreciation posting or may not be up to the correct requirements. One must need to know the impact or effects before changing a depreciation key. Let me answer your question.
If I change a depreciation key in the middle of the current fiscal year and depreciation value for the year only should change.
A Machinery purchased for 1,00,000 Rs on 01.04.2010 and depreciation key is set to be S1(Straight line method at 10%), fiscal year is april to march.
Cost of machinery – 1,00,000
Depreciation for fiscal year 2010 – 10,000
Depreciation for fiscal year 2011 – 10,000
Depreciation for fiscal year 2012 – 10,000
Current book value of an asset is 70000 as on 01.04.2013, now depreciation key is changed to S2 which is 15 percent. Only for the current year, depreciation should be 15,000. How to do?
First check the Asset year end closing has been done for previous year, in case, if it is not done, the adjusted depreciation value will also reflect in the previous years as planned value and later if you do depreciation run, the values will be posted in the last period for the previous fiscal years. Hence do the asset year end closing. Now change the depreciation key. Once after changing the depreciation key, system will recalculate the depreciation for the whole fiscal year and adjusted value will be posted in the current month. Let me guide you with an example.
Let us take the above example; Current book value of an asset is 70000 as on 01.04.2013.
Depreciation posted for period 1 – 833.33 (10 % depreciation on straight line method)
Depreciation posted for period 2 – 833.33 (10 % depreciation on straight line method)
Depreciation posted for period 3 – 833.33 (10 % depreciation on straight line method)
Now there is change in the depreciation key (depreciation is made for 15% on straight line method). System will recalculate the entire depreciation for the fiscal year.
Total depreciation value for the current fiscal year is 15,000
Already posted value for three periods – 2500
Planned value should be 15000/12 = 1250. 1250 x 3 periods = 3750
During the 4th period = 3750 – 2500 = 1250 is still to be posted. 4th month depreciation is 1250. So, total depreciation value to be posted during the current month is 2500 which you can see in the planned value.
Once after the depreciation run is done, 2500 will be posted in the 4th month. From the 5th month, planned depreciation will be 1250.
This is how it works, I explained in easy way by using Straight line method. Always remember that, before changing a depreciation key, check your asset fiscal year closing.