Hello friends,

As we all know Companies Act 2013 has to be implemented from this FY 14-15.

The major change in respect to Asset accounting is, depreciation has to be calculated based on useful life rather than rates of depreciation.

Let’s see examples of possible scenarios


Those who use depreciation rate can calculate useful life by divide 100 by the rate and those who use useful life method already can use the same while seeing the below scenarios.

Asset class

Depreciation rate

Calculated useful life

CO.ACT 2013 Useful life

1

20%

5

5

2

10%

10

5

3

5%

20

30

Scenario 1:

For Asset class 1, useful life is same in old method as well as Companies Act prescribed useful life. So there is no impact in depreciation.

Scenario 2a:

If for some assets in asset class 2 expired useful life is 3, then net book value should be depreciated over remaining useful life of 2 years.

Scenario 2b:

If for some assets in asset class 2 expired useful life is 6 years, then whole net book value should be charged off immediately and has to adjusted in opening retained earnings.

Scenario 3:

For assets in asset class 3, the net book value should be depreciated over remaining useful life.

So we have to do configuration of depreciation keys to meet the requirements as per companies act 2013. Fortunately we are in SAP environment. So making changes in our system is very easy. It calculates automatically the retro calculations also. Let’s see the configuration part.

We need to create only one depreciation key which will suit for all asset classes and all type of scenarios.


SAP has provided one depreciation key LINS for depreciation of assets over remaining useful life. Just clone LINS and create customised dep key say ZLIN. The properties are shown in screenshots.


Depreciation Key ZLIN is created vide T code AFAMA by cloning LINS

Dep key.jpg

Dep key1.jpg


Then we will see the base method vide T code AFAMR


BM.jpg

Then we will see Multi level method vide T code AFAMS

MLM.jpg

Then we will see Period control method vide T code AFAMP

Period control.jpg

These are all the config steps. Kindly make suitable changes to suit your requirements.


Now the next step after creating dep key is to update existing assets with the new dep key say ZLIN and useful life.


Many companies may be having lakhs of asset reocrds. So do you feel it is a  herculean task to update asset with new dep key and new useful life. Thats where SAP comes in for our rescue. We can do all mass updates with little work.


SAP has provided a T code OA02 to mass update of asset records.

Let’s see the steps involved in mass update.

Create substituition vide T code OA02.

OA02.jpg

OA02-1.jpg

Then go to T code AR01 or any other standard reports like S_ALR_87011990 and create worklist

AR01.jpg

Substituition.jpg

Then release the worklist vide T code AR31

AR31.jpg

AR31-1.jpg

The mass changes can be done vide other modes like LSMW or BDC also. You can choose which is suitable for you.

Thats all freinds.

Hope I have explained  the steps clearly.

Kindly provide your valuable feedbacks to update the document so that it will be complete and useful to many.

Awaiting for your comments.

Regards,

G.Sethuraman

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19 Comments

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  1. Diwa p

    Hi Sethuraman Ganesamurthy,

    usefull document.thanks for sharing.

    Here i have doubt about asset class.as you have mentioned asset class 1,asset class 2.can you please explain what is meant by asset class 1,2,etc..whether it is plant machinery,or  buildings or furniture fittings etc…

    Regards,

    Diwakar

    (0) 
    1. Sethuraman Ganesamurthy Post author

      Hi Diwa,

      These are all sample asset classes which I have used only for explanation for easy understanding.

      I didnt intend to mention any Building or P&M.

      You can fit in your asset class in any of the above scenario.

      Regards,

      G.Sethuraman

      (0) 
  2. sateesh p

    Hi Sethuraman,

    Nice article.

    I had a query regarding point 2b in the above article. I understand that I can post the wdv of the asset as unplanned dep and then pass transfer entry to reserves GL. Is there any way I can directly transfer the amount to reserves GL. I tried to assign the Reserves GL in AO90 but it allows me to assign a only a P&L account GL.

    Regards,

    Sateesh

    (0) 
    1. MallikArjuna Chowdary

      Hi Sateesh/Sethuraman

      Have u got any solution about Reserves GL in AO90, Is there any way I can directly transfer the amount to reserves GL,Can please help on this.

      Regards

      MKC

      (0) 
  3. Nirmal-Sagar Shah-Jhala

    Hi Sethuraman Ganesamurthy,

    Very usefull document.thanks for sharing.

    Act 2013 given the useful life but not given the method whether it will be SLM or WDV mehtod of deprecation hence if any change in the existing mehtod from SLM to WDV or WDV to SLM then it is considered as change in accounting policy as per Accounting Standard and required disclosure.

    I would like to know how this work under WDV method and what is deprecation key for WDV mehtod based on useful life and remianing useful life. My understanding is that Whatever you explained that is for SLM Mehtod.

    (0) 
  4. ARPIT ASAWA

    Dear Sethuraman,

    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. 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.

    Regards,

    Arpit Asawa

    (0) 

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