Support Spotlight: Fixed Assets, Low Value Asset Retirement – All you need to know
In this blog post we will give you some insights on Low Value Asset Retirement in the German localization for SAP Business One. We will first look at the Depreciation Type Setup and then at the two different options, Low Value Asset Retirement and the alternative of Deactivating Low Value Assets After End of Useful Life.
The tax law in Germany suggests different options for handling Low-Value Assets (LVA), depending on their cost. Some LVA need to be depreciated with the Straight Line method (over 5 years) *. What can you do with such assets when it comes to end of useful life and retirement?
*) Range of cost defined for LVA in the tax law may change from year to year.
**) In this post we refer to LVA as an asset that meets conditions detailed in Setup section.
Step 1: define Straight Line Depreciation Type with retirement conversion ‘After End of Useful Life’.
Step 2: define Asset Class with Asset Type ‘Low Value Asset’.
Step 3: define a Fixed Asset with Asset Class and Depreciation Type from steps 1 and 2.
Once you choose these settings in Asset Master Data, a new checkbox will appear: Deactivate After End of Useful Life. Select this checkbox only if you plan to deactivate the asset when it reaches end of life.
Now you are set to handle your low value asset with one of following methods.
Low-Value Asset Retirement
If you choose the option of creating Retirement at the end of LVA life, we recommend that you do not select Deactivate After End of Useful Life in the Asset Master Data. Otherwise, you may find that the asset is already Inactive. We will expand on this later.
Tip: In the Retirement document window you can select the Low-Value Asset Retirement option only for low value assets with retirement conversion After End of Useful Life. Ensure you include only similar assets in one document.
It is important to remember, that unlike regular asset retirement, LVA retirement does not affect the assets Acquisition and Production Costs (APC). For LVA with retirement conversion After End of Useful Life, retirement does not have any effect on depreciation and on APC. This means no value will be posted on retirement, and APC will remain unchanged at the end of the retirement year.
Also, the system does not deactivate LVA when they are fully retired. All asset values will be carried to the next fiscal year upon Fixed Asset Fiscal Year Change.
Deactivating Low Value Assets After End of Useful Life
You may choose to deactivate LVA after end of useful life. If you choose this method of LVA handling, select Deactivate After End of Useful Life in Asset Master Data. At the completion of the Depreciation Run at the end of life, the Asset status will change to Inactive.
Once the asset is deactivated, you cannot include it in a Retirement document. Also, Inactive assets will not be displayed in the Asset History Sheet for periods later than the deactivation period.
Deactivation of LVA with retirement conversion After End of Useful Life does not have any effect on APC. Meaning APC will remain unchanged at the end of the retirement year. Asset values will not be carried to the next fiscal year upon Fixed Asset Fiscal Year Change.
We hope this read has been informative and beneficial. For more blogs and tips from the SAP Business One Support team, please visit our space on the communities: https://blogs.sap.com/tag/b1-support-spotlight/