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# Depreciation Calculation Methods

Depreciation Calculation Methods : The depreciation calculation method is the most important characteristic of the base method. The depreciation calculation method makes it possible to carry out the numerous different types of depreciation calculation in the system. Depending on how the depreciation calculation method is set up, the system determines which further control parameters need to be specified in the depreciation key. For example, when you choose the Stated percentage depreciation calculation method, you have to enter a percentage in the depreciation key. The following depreciation calculation methods are available in the standard system. 01. Percentage from Useful Life / Percentage from Remaining Useful Life There are two variants of this depreciation calculation method: The system determines a depreciation percentage rate from the total useful life; the rate remains the same for each year. The system calculates a new percentage rate for each year based on the remaining useful life. The depreciation percentage rate rises constantly until it reaches 100% in the last year of the useful life. 02. Total Percentage Rate in the Tax Concession Period This method allows you to depreciate a certain percentage rate from the depreciation base within a tax concession period. In order to calculate the current periodic depreciation, the system first determines the accumulated depreciation up to the period under examination. The period depreciation is the difference between the already existing depreciation and the total depreciation allowed. With subsequent acquisitions, the system automatically catches up depreciation from previous years in a lump sum. 03. Stated Percentage Rate In contrast to a total percentage rate, here you specify the percentage rate for each fiscal year. The system uses this percentage rate for calculating depreciation for each period. For example, you can depreciate 3.5% in each of the first 12 years, then 2% a year for 20 years and 1% per year for the remaining 18 years. The total of the percentage rates over the useful life is always 100%, so that complete depreciation is reached by the end of the useful life. 04. Percentage Rate from Remaining Life + Changeover Date - Depreciation Start Date This method is used as a changeover method (in the next phase in the depreciation key) following depreciation within the tax concession period of an investment support measure. The net book value of the asset will be depreciated over the total useful life when the tax concession period ends (that is, the actual duration of depreciation encompasses the tax concession period plus the total useful life that is entered). 05. Mean Value from Several Areas When defining depreciation areas, you can establish dependencies between them by specifying a mathematical formula. This method allows you to calculate depreciation in one area based on the depreciation in another area using this mathematical formula. Using this method you can, for example, calculate the mean value of straight-line depreciation and declining-balance depreciation. 06. Unit-of-Production Depreciation Unit-of-production depreciation is based on the output-related use of the asset. When you specify a total expected output or a total expected number of units, and the exact output per period or exact unit of production output figure per period, the system determines the resulting depreciation for each period. You enter the output or number of units at the level of the depreciation key. 07. Depreciation Over Remaining Units of Production In the same way as with the unit-of-production method of depreciation, the amount of depreciation here is dependent on output. In contrast to the unit-of-production method of depreciation, the system uses the remaining units of production and not the total units of production to determine the periodic depreciation. Depreciating using the remaining units of production ensures that, for post-capitalization, the book value reaches zero when the total output or the total units of production is reached. 08. Sum-of-the-Years-Digits Method An arithmetic sequence is set up based on the total useful life. The depreciation percentage rate is proportional to the remaining useful life. 09. Depreciation According to the Present Value of Lease Installments This depreciation calculation method is designed for leased assets that have been capitalized using the capital lease procedure. The depreciation amounts correspond here to the present value of the periodic lease installments. The interest is determined as the difference between the lease installment and the present value. Leased assets create special accounting requirements for the lessee. During the term of the lease, leased assets remain the property of the lessor or manufacturer. They represent, therefore, a special form of rented asset. Such assets are legally and from a tax perspective the responsibility of the lessor, and are not relevant for assessing the value of the asset portfolio of the lessee. However, in certain countries, you are nonetheless required to capitalize leased assets, depending on the type of financing. The Leased Assets component enables you to capitalize leased assets in the Asset Accounting (FI-AA) component using the capital lease method. The system calculates the acquisition value from the present value of the future lease payments in the leasing agreement. There are different ways of handling the values of leased assets in the system. Depending on legal requirements and the conditions of the lease, there are two different options: You have to capitalize and depreciate certain leased assets (capital lease). You treat others as periodic rent expense, which flows into the profit and loss statement (operating lease). This second type is not relevant to the fixed assets of the lessee. It is therefore sufficient to do one of the following: 1. Manage operating leases as statistical assets in the Asset Accounting component (with no active depreciation areas) 2. Manage them only as cost-accounting values (or for group accounting) in the corresponding depreciation areas There is a special report on rent liability that can be used for all types of leased assets (see below). You can also manage insurance values for purely statistical leased assets (without depreciation areas). You enter a manual insurance value and an index series for the leased assets in the asset master record. You obtain reports on these values using the standard report for insurance values. 10. Capital Lease Method Leased assets can be capitalized in the Asset Accounting component using the capital lease method. The system calculates the acquisition value from the present value of the future lease payments in the leasing agreement. To be able to determine the future burden of payment, you need to maintain the following leasing conditions in the asset master records: Amount of lease payment Number of payments Payment cycle In order to calculate present value, also enter an interest rate. The system requires that you post a leasing partner as a vendor in the asset master record at the time of the acquisition posting (opening posting). At the present time, the capital lease method can only be used for assets that are capitalized in the book depreciation area. An opening posting with simultaneous creation of leasing liability is not possible for assets that have only cost-accounting depreciation areas. 11. Handling of Input Tax for the Capital Lease Method You can only include the net amount (that is, the amount without input tax) of the liabilities for a leased asset when determining the present value. Therefore, you have to enter the net lease payments in the asset master record. In addition, set the input tax indicator V0 (= no input tax) in the respective leasing type (see below). In this way, you can ensure that there is no posting of input tax at the time of capitalization. Instead, you should post the input tax directly in the Financial Accounting (FI) component (debit input tax and credit vendor) at the time of payment. 12. Leasing Type You define leasing types in Customizing for Asset Accounting. The leasing type is a selection criterion in reporting, and the most important control feature for the posting of acquisitions to a leased asset. It determines the following: The transaction type used for the acquisition posting of a leased asset. The transaction type controls the depreciation areas in which the

Labels: Depreciation Calculation Methods

## onfiguration of Asset Accounting

Step 1 COPY CHART OF DEPECIATION T Code: EC08 IMG-->Financial Accounting ----> Asset Accounting --> FI-AA Implementation Guide (Simplified Version) --> Organizational Structures and Master Data --> Copy reference chart of depreciation/depreciation area Step 2 ASSIGN COMPANY CODE TO CHART OF DEPRECIATION T Code: OAOB IMG --> Financial Accounting --> Asset Accounting --> FI-AA Implementation Guide (Simplified Version) --> Organizational Structures and Master Data --> Assign chart of depreciation to company code Step 3 ASSIGN FINANCIAL STATEMENT VERSION TO EVERY DEPRECIATION AREA T Code: OAYN IMG -->Financial Accounting --> Asset Accounting --> FI-AA Implementation Guide (Simplified Version) --> Organizational Structures and Master Data --> Specify statemement version for asset reports Step 4 IDENTIFY YOUR ASSET CLASSES Step 5 IDENTIFY YOUR ACCOUNT DETERMINATION & SCREEN LAYOUT FOR YOUR ASSET CLASSES SPRO IMG --> Financial Accounting --> Asset Accounting --> FI-AA Implementation Guide (Simplified Version) --> Organizational Structures and Master Data --> Asset Classes --> Specify required entries for asset master data Step 6 IDENTIFY YOUR GL ACCOUNTS FOR YOUR ASSET CLASSES Step 7 - DEFINE YOUR NUMBER RANGE T Code: AS08 IMG --> Financial Accounting --> Asset Accounting --> Organizational Structures --> Asset Classes --> Define number range interval Step 8 - DETERMINE DEPRECIATION AREAS IN ASSET CLASSES AND SCREEN LAYOUT T Code: A021 IMG --> Financial Accounting --> Asset Accounting --> Master Data --> Screen Layout --> Define screen layout for asset depreciation areas T Code: OAYZ IMG --> Financial Accounting --> Asset Accounting --> Valuation --> Determine depreciation areas in the asset class Step 9 GENERATE ASSET CLASSES FROM GL ACCOUNTS T Code: ANKL IMG Financial Accounting --> Asset Accounting --> FI-AA Implementation Guide (Simplified Version) --> Organizational Structures and Master Data --> Asset Classes --> Generate Asset Classes from G/L Accounts Step 10 COMPLETE DATA FOR ASSET CLASSES SETTING REQUIRED ENTRY FIELDS SPRO IMG --> Financial Accounting --> Asset Accounting --> FI-AA Implementation Guide (Simplified Version) --> Organization Structures and Master Data --> Asset Classes --> Specify requires entries for asset master data T Code: OAYZ IMG --> Financial Accounting --> asset Accounting --> FI-AA Implementation Guide (Simplified Version) Organizational Structures and Master Data --> Asset Classes --> Enter default values in asset classes T Code: AO90 IMG --> Financial Accounting --> Asset Accounting --> FI-AA Implementation Guide (Simplified Version) --> Organizational Structures and Master Data --> Assign additional G/L accounts for transactions/depreciation Step 11 SETTING UP SPECIAL ASSET CLASSES T Code: OAYK IMG --> Financial Accounting --> Asset Accounting --> Valuation --> Specify max amount for LVA + asset classes --> Specify amount for low value assets T Code: OAY2 IMG --> Financial Accounting --> Asset Accounting --> Valuation --> Specify max amount for LVA + asset classes --> Specify LVA asset classes Step 12 SPECIFY INTERVALS AND POSTING RULE T Code: OAYR IMG --> Financial Accounting --> Asset Accounting --> FI-AA Implementation Guide (Simplified Version) --> Organizational Structures and Master Data --> Specify intervals and posting rules
Labels: Configuration of Asset Accounting

## SAP: Steps/Check List for FI Year End Closing

Check List for FI Year End Closing 1 Execute Report for Inter Company Activity & Journal Entries 2 Open posting period for next yr 3 Run Business Area's Assignment report. 4 Review list of recurring journal entries 5 Execute Recurring Entries for A/R, A/P, G/L 6 Process Parked A/R, A/P, G/L accounting documents 7 Final Cutoff for the Maintenance of Fixed Asset- Add Transfer and Retire 8 Run Depreciation in Test Run and post 9 Verify Display Log for Depreciation Test Run 10 Capitalize AUC Assets if needed 11 Enter Payroll Data to SAP 12 Verify Depreciation Balances with GL balances 13 Post Depreciation 14 Execute Asset History Report, and retire assets if needed

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Adjust specific depreciation areas if necessary Reconcile AM sub ledger with GL Check Bank Data Review AR Open Items Review AP Open Items Execute Pending Invoices Clear Open Item for GRIR, freight Reconciliation of Financial Documents and transactional figures Open new CO Posting Period Compare current (cost estimates) with last current price (Moving Avg) Update current cost price to material master price field. Process Freight charges, Match SD freight to actual Review Internal Order Postings Settle All Orders Verify All Post Goods Issue have been Invoiced (Billing Due List) Review SD Billing Doc from prior month that have not yet been released to accounting Reconciliation of MM movements in Transit Intra-SAP to Non SAP Reconcile PI Inventory with SAP Perform Manual Adjustment if needed Verify balance of the GR/IR account Post Accruals and Deferrals Clearing of Cancelled Documents Check Profitability Segment Adjustment Aging Report-Reconcile GL balances with sub ledger balances AP Check the check run numbers Bank reconciliation Data Enter Tax Journal Entry Reconcile GL balances with sub ledger balances AR/MM/AP Display Balance Sheet Adjustments Post Balance Sheet Adjustments Post Foreign Currency Valuation (foreign exchange) Check generic cost centers for posting with wrong accounts Correct wrong postings on generic cost centers Check Validation dates for Cost Centers, Cost Elements, CO area Check COGI--for both month end and year end Doubtful receivables Verify In-transits Inventory Reconcile PA to G/L Post Cost Centre Assessments and Distributions Run CO-FI Reconciliation to balance Run BW reports P&L and Balance Sheet Maintain CO yr variant Fiscal Yr Balance carry forward AP/AR/AM Fiscal Yr Balance carry forward CO Fiscal Yr balance carry forward FI Fiscal Yr balance carry forward PCA Set Document number ranges - FI - new year Set Document number ranges AP/AR - new year Generate Financial statement Reports Change Fiscal Year For Assets Year end Closing-- Asset Accounting--final for year end Close CO Posting Period Close Prior A/R Posting Period Close Prior A/P Posting Period Close Prior MM Posting Period Reverse accruals and deferrals for the new month Reconciliation of Financial Documents from old fiscal year and new fiscal year Load Balances, Budget Data for Cost centers, sales Update Retained Earning Account , balance carry fwd