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Below is the changes that will be taking place in the system due to changes in Company’s Act 2013 incorporation:

1.) If life of the asset has decreased:- e.g. there is asset for which original life is 10 years, 3 years already completed as on 31
st March 2014 and now life has decreased to 7 years. In this scenario, WDV as on 31st March 2014 should be depreciation over the period of 4 years instead of 7 years. How to carry out this change

  1. A New Depreciation key would be created which will calculate the depreciation on the remaining useful life of assets as maintained in the Asset Master.
  2. For the New Assets, no changes are required but for Existing Assets, the changes in the Asset Master is required to be done in the Useful Life of Asset as well as in the Depreciation Key of the Asset. This changes will be done by the User’s.


2.)
If life of the asset has increased:- e.g. there is asset for which original life is 10 years, 3 years already completed as on 31st March 2014 and now life has decreased to 12 years. In this scenario, WDV as on 31st March 2014 should be depreciation over the period of 9 years instead of 7 years. How to carry out this change

  1. This will be catered in the same way as is done for the above point (1.)


3.)
If the life of the asset is already over after change in rates:- e.g. there is asset for which original life is 10 years, 7 years already completed as on 31st March 2014 and now life has decreased to 6 years. In this scenario, WDV as on 31st March 2014 should be charged to the opening reserve. How to carry out this change

  1. In this case an entry is to be posted in the system by User, for which the GL’s needs to be provided by the business.

Below shows the detailed example for the above mentioned points.

  1. If the Life of asset has decreased:

Asset No. : 211000112

Depre key – ZS15 – which is depreciating the Asset on Useful Life basis.

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The planned values for depreciation posting is as below for Fiscal year 2015 :

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Now changing the useful life of assets from 4 years to 3 years. So now the Asset will be write off in 3 years as shown below:

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The Comparison tab is as below:

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Depreciation planned values for the year 2015 is as follows:

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From above we can see that depreciation per period has changed from 415.63 to 581.88 due to change in useful life of assets.

2. If the Life of asset has increased:

Asset No. : 211000113

Depre key – ZS15

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The planned values for depreciation posting is as below for Fiscal year 2015 :

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Now changing the useful life of assets from 4 years to 5 years. So now the Asset will get written off in 5 years as shown below:

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The Comparison tab is as below:

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Depreciation planned values for the year 2015 is as follows:

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From above we can see that depreciation per period has changed from 1607.81 to 1250.52 due to change in useful life of assets.

3. If the life of the asset is already over after change in rates:

Asset No. : 211000038

Depre key – ZS15

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The planned values for depreciation posting is as below for Fiscal year 2015 :

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Now changing the useful life of assets from 4 years to 1 years. But here already the expired useful life is of 2 years, whereas according to Company’s Act, 2013 the useful life of Asset should be 1 year only.

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The Comparison tab is as below:

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Depreciation planned values for the year 2015 is as follows:

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From above we can see that depreciation per period has changed from 3750.66 to 0 due to change in useful life of assets. And the remaining NBV of the Asset of 86265.40 will be removed by executing T-Code ABAA for this Asset as shown below:

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Then press enter. After this on next screen enter the NBV of the Asset i.e. 86,265.40

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After this save the Document as below:

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We can check in the Asset Explorer that the above document is posted and the NBV of the Asset is ‘Nil’

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Here the Document is posted in AA only and not in FI. The unplanned Depreciation entry will get posted in FI when Depreciation Run is executed for this period through T-Code – AFAB as below:

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After this Execute the same :

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From above we can see that this entry will be getting posted in the system. The accounting entry for the same is :

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This is the testing GL that we have used in posting key 40, that would be the Reserve GL that would be provided by the Client.

After this the entry will be posted in the FI and by AA and FI will be in synchronization.

Kindly revert if any additions or changes or suggestions for the above document.

Regards,

Malhar.

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36 Comments

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    1. Sreedhar Kalyanaraman

      Very nice one Malhar

      But i have few doubts. please clarify [or i am dumb enough not to be able to follow the lucid illustration above!!!]

      The assets in the FAR will have different variety of assets having different remaining useful life of assets as maintained in the existing Asset Master should we create so many keys depending upon the remaining useful period of life  like 1,2,3,4,5,…. etc 15?


      The retained earnings [or reserve a/c] is nothing but the balance in profit and loss a/c for which a gl code would have been assigned for, we need to give this glcode for assiging to cases of unplanned depreciation? kindly clarify with example..

      In your example number 3 you have mentioned and i quote “If the life of the asset is already over after change in rates:- e.g. there is asset for which original life is 10 years, 7 years already completed as on 31st March 2014 and now life has decreased to 6 years.”  how it can get reduced to 6 years if original is 10 and 7 yeras already completed. not clear..


      Kindly clarify


      Thanks & Regards


      K Sreedhar

      (0) 
      1. Malhar Jain Post author

        Hi Sreedhar,

        Regarding the creation of new depreciation keys for different useful life is not correct. You have to create a single depreciation key just like standard depreciation key ‘LINR’ and tickt the depreciation to the day box and active it. Then in your asset master if the old depreciation key is not having the ‘depreciation to the day’ box ticked then you have to assign depreciation key ‘LINR’ else you will assign new created Depreciation key and then you will update the useful life of assets to remaining useful life of assets.

        Option 3 states that if the required useful life is already over then the system should post the unplanned depreciation for the whole NBV of the asset. take an example. Useful life of asset is 10 years and its purchased for 1000 Rs. Now 7 years are passed and NBV of the asset is 300 Rs. Now according to Indian Companies Act, 2013, the useful life of such Asset should be only 6 years. So now already 7 years are passed which is not proper. And as the depreciaiton for last year is posted we cannot make nay changes to the same. So now the remaining 300 Rs will be posted through unplanned depreciation debiting the Reserve GL and crediting the Accumulated Depreciation GL.

        Hope I am clear.

        Regards,

        Malhar.

        (0) 
        1. Ajit Desai

          Good efforts & examples with explanation.

          I have one doubt about Depreciation Reserve account.

          In AO90 where we have to create this GL?

          Other than this in which conditions this GL get posted.

          Thanks,

          Ajit Desai

          (0) 
          1. Malhar Jain Post author

            Hi,

            The Reserve GL needs to be assigned in the Depreciation Tab under the ‘Accumulated dep. account unpl. deprec.’  But if your client is using the Unplanned Depreciation concept then a particular GL would be already assigned then you can do is post to that assigned GL the entry of unplanned depreciation and then pass a manual JV of that Reserve Account debit and the expense GL assinged above credit.

            Regards,

            Malhar.

            (0) 
  1. Jignesh Maniyar

    Well but What to do in case of Low value assets which company has already depreciated @ 100%. The requirement is now removed under revised schedule II.

    (0) 
    1. Ravindra Mahajan

      Hello Jignesh,

      Low value assets which are depreciated 100% before 1st April, 2014 no treatment is required. if any asset is created under low value asset class after 01/04/2014 the same should be transferred to respective asset class and need to depreciated based on useful life and not 100%.

      Thanks,

      Ravindra Mahajan

      (0) 
  2. Shripal Bhavsar

    Hi All

    This is all about SLM of depreciation. What about WDV method of depreciation? e.g. We were have 13.91% WDV rate on P&M till 31.03.2014, so we have to continue with WDV method (cannot shift to SLM as it will be considered as change in accounting policy). How to automatically calculate WDV rate of depreciation for remaining useful life of asset as on 31.03.2014. All assets have different remaining useful life as on 31.03.2014, so each asset will have different depreciation rate, how to handle this?

    Thanks

    Shripal Bhavsar

    (0) 
  3. ACR RUBEN

    Hi Malhar,

    What is the settings you have done for the depreciation key.

    Add the screenshots also, which will be of great help.

    Regards

    ACR.Ruben

    (0) 
  4. v s

    Dear Malhar,

    Nice document, please share about following requirement-

    1. What about Double and Triple Shift requirement?

    2. How we calculate the Depreciation on WDV basis over remaining useful life?

    Regards,

    VS

    (0) 
    1. SREE SREE

      Changed  useful life  from  20  to  30  but  depreciation posted  is  showing  in+  instead  of  –

      and  shown in  aw01n  as +

      (0) 
  5. ravi mehta

    Dear Malhar,

    Is it possible if you can provide us with the testing document,end user testing documentation and all testing related documentation which you would have gathered from the FICO team after this new depreciation calculation cycle.

    If possible, Can you please mail the above things on my personal email id–mehtravi@yahoo.co.in

    Thanks

    Ravi Mehta

    (0) 
  6. B V Mittal

    Dear Malhar

    Thanks for posting a very nice example .

    We are not able to understand , as how to configure a new Depreciation Key to address the scenario having Depreciation under WDV method  and after the Asset  useful life , the Asset value has to be maintained at 5% of it’s original purchase cost .

    We request you to kindly help us with a sample configuration details please .

    With Regards

    B Mittal

    (0) 
  7. Ravi Sankar Venna

    Good explanation Malhar.

    If you would put the screen shots of your depreciation key configuration (including base method / multi-level method and period control method, which could be handy for consultants working for Indian clients.

    Best Regards,

    Ravi

    (0) 
  8. Pavan Kumar Arvapally

    Hi Malhar jain,

    Good document….please confirm is it the only option to go with different depreciation keys for calculating the depreciation for remaining life of the asset……?

    If yes….If there are many assets which will fall under the category of ” calculating the depreciation for remaining life of the asset” will leads to the maintenance of many depreciation keys…

    Let me clear…Is there any easier approach can be followed to achieve these new changes in the Act.?

    Regards,

    Pavan Kumar Arvapally

    (0) 
          1. Gopal Krishna Maddu

            Sir,

            Our Book Depreciation area is 01 with FY- Jan to Dec. When we made the configurational changes the remaining depreciation is calculating taking the Year opening NBV as Base amount. Is there any solution in which we can put the NBV of 1st April. Please suggest

            (0) 
      1. SREE SREE

        W e  have  two ledgers   IFRS (01)  Depreciation  area  and Local  (20)  Depreciation   area 

        When we change  the useful  life  for Local (ie)  5 to 4 years   in  2014  it is  adjusting in  2013

        And  showing  as ➖ in 12  period  how  to solve  kindly  guide and also  in IFRS  it  is showing for the same

        For  2013. W e  have  two ledgers   IFRS (01)  Depreciation  area  and Local  (20)  Depreciation   area 

        When we change  the useful  life  for Local (ie)  5 to 4 years   in  2014  it is  adjusting in  2013

        (0) 
    1. SREE SREE

      Changed  in the useful life  from 20  to  30  but depreciation instead  of debiting  it  is being credited  and  shown in  aw01n   any  advice.

      Thanks

      (0) 
          1. SREE SREE

            /wp-content/uploads/2014/12/3_615758.pngpls   /wp-content/uploads/2014/12/2_615756.png

            W e  have  two ledgers   IFRS (01)  Depreciation  area  and Local  (20)  Depreciation   area 

            When we change  the useful  life  for Local (ie)  5 to 4 years   in  2014  it is  adjusting in  2013

            And  showing  as ➖ in 12  period  how  to solve  kindly  guide and also  in IFRS  it  is showing for the same  For  2013.

            (0) 
        1. SREE SREE

          /wp-content/uploads/2014/12/2_615814.pngWe We  have Two depreciation area we have two depreciation keys one for each  for IFRS  and  Local

          Depreciation  is  calculated  by  useful life  and not by  rate  that  is what  we are following previously  also

          And we are following straight line method

          Further we have two books of accounts IFRS (0L) and Local(L1)

          Asset depreciation area is 01 for IFRS Period is Jan to Dec .

          Local  Area 20 for Local -April to March

          So  just  tried  to change  the useful life of the asset  

          When we change the useful life for Local (ie) 5 to 4 years in 2014 it is adjusting in 2013
          And showing as in 12 period how to solve kindly guide and also in IFRS it is showing for the same

          (0) 
  9. VAISHALI GHARAT

    Dear Malhar,

    Can you tell us whether you have ticked for Depreciation to the day in ZS15 key created for depreciation as per new companies act 2013?

    Our company calculates the depreciation on SLM with depreciation to the day tick & with residual 5%.

    As per new act, we are trying to create depreciation key based on useful life

    with Dep.to the day tick,

           Base method with % from useful life,

           Multilevel method with base val 24  & remaining life tick

    We have applied above key for newly created asset whose acquisition cost is 125000 useful life is 15 years but in Asset explorer in comparison it shows depreciation 7916.67 for 2014,2015,2016,2017,2018,2019

    7928.59 from 2020 till 2023

    7968.00 from 2024 till 2025

    7967.99 for 2026

    7968.00 for 2027

    7662.37 for 2028

    Vaishali Gharat

    (0) 
  10. Balasubramanyan Ramaiah

    Dear All,

    From the above scenario is it necessary to change the Dep key and useful life for 3rd Procedure Ie “If the life of the asset is already over after change in rates ?

    what is the nature of Depriciation Resrve GL I mean Bal sheet or P&L, Client is asking for a balance sheet A/C but to ma knowledge we can assign only P&L Account in Depriciation folder setting of AO90.

    My Client requires entry to be passed like this


    Depreciation Reserve                     debit

    Accumulated depn                          credit


    to Arrive the above Entry how I need to Maintain the AO90 Settings ?

    Bala.



    (0) 
    1. Ravi Sankar Venna

      If the client is asking for balance sheet account to be assigned, you need change the message control in OBMSG or OBA5, then you do your configuration in AO90, which would allow you to do the configuration.

      (0) 
  11. yogesh jayanarasimaiah

    Hi  Malhar Jain ,

    Very good documentation..

    I have typical scenario:

    1. Balance useful life is exist but Net Book value is less than 5% (Residual value) of Gross Block Value in this scenario i am unable to update the balance useful life, however, my client is not agreeing to appreciate the asset value to meet the 5% of GBV.

         Work around solution: currently i update Expired UL as same as Useful life.

    2. Is same as Point No.1 but there is an addition to it in 2014 (July’14) since i am unable to update the balance useful life depreciation for the addition is not computing.

    Is there any way out for above issues.

    regards,

    Yogesh. J

    (0) 
  12. Thilak Chagantipati

    Dear All,

    As per new com act depreciation will be cal on useful life basis SLM is ok but in the WDV method calculation like this (in Excel).As per Our requirement is like this

    Opb Balance Dep           Rate-27.700% APC-12,654,425
    2013 12,383,503 668,154 11,715,349 5%
    2014 11,715,349 3,245,152 8,470,197 28%
    2015 8,470,197 2,346,245 6,123,953 28%
    2016 6,123,953 1,696,335 4,427,618 28%
    2017 4,427,618 1,226,450 3,201,168 28%
    2018 3,201,168 886,723 2,314,444 28%
    2019 2,314,444 641,101 1,673,343 28%
    2020 1,673,343 463,516 1,209,827 28%
    2021 1,209,827 335,122 874,705 28%
    2022 874,705 242,293 632,412 28%
    Res 5% 632,721
    diff-310

    But in sap the calculation is different and every year the rate of dep is changed like this

    As per Sap
    Op Bal Dep Net Book Val
    APC 12,654,425 ROD
    2013 12,383,503 668,154 11,715,349 5%
    2014 11,715,349 2,310,199 9,405,150 20%
    2015 9,405,150 2,046,341 7,358,809 22%
    2016 7,358,809 1,771,300 5,587,509 24%
    2017 5,587,509 1,502,698 4,084,811 27%
    2018 4,084,811 1,234,097 2,850,714 30%
    2019 2,850,714 967,563 1,883,151 34%
    2020 1,883,151 695,742 1,187,409 37%
    2021 1,187,409 427,584 759,825 36%
    2022 759,825 127,103 632,721 17%
    Res Val 632,721
    0

    we need dep rate is uniform for entire useful life of asset

    (0) 
    1. ARPIT ASAWA

      Dear Thilak,

      As per not 2052506 – India Companies Act solution effective from 01.04.2014 – New Depreciation engine we have done the changes.

      However when we are using the WDV method based on useful life we are facing issues. The depreciation is not getting posted till the end of useful life of the asset and also the rates are not uniform year on year basis. Suppose asset life is say 60 years, the NBV will reach to its scrap value before completion of 60 years.

      Due to this we are not able to post depreciation for 2014-15 and closure of our books of account is held up.

      Request your inputs. How you resolved for your company?

      Regards,

      Arpit Asawa

      (0) 

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