Depreciation Key

Path:-Financial Accounting (New)Asset AccountingDepreciationValuation

MethodsDepreciation Key

Depreciation keys contain the calculation methods for depreciation calculation

and parameters that control

 Ordinary depreciation

 Special depreciation

 Scrap value (cutoff value)

 Calculation of interest

You can enter a separate depreciation key for each depreciation area in the asset
master record.

Requirements

You must have already created a chart of depreciation

Sub-Parts

 Calculation Methods
 Default Values
 Maintain Depreciation Key.

Calculation Methods

We will define calculation methods that are assigned to a depreciation key.

Chart-of-depreciation-independent calculation methods:

 Base methods

Chart-of-depreciation-dependent calculation methods:

 Declining-balance methods

 Maximum amount methods

  Multi-level methods

 Period control methods

Note

When you are maintaining chart-of-depreciation-dependent calculation methods,

you get a display of the existing calculation methods in accordance with the chart of
depreciation that has been set.

Maintain Depreciation Key:-

 1. Definition: depreciation key (Asset Accounting (FI-AA))

A key for calculating depreciation amounts.

The depreciation key controls the following for each asset and for each depreciation
area:

 Automatic calculation of planned depreciation

 Automatic calculation of interest

 Maximum percentages for manual depreciation

The depreciation key is defined by specifying:

 Calculation methods for ordinary and special depreciation, for interest and
for the cutoff value

 Various control parameters

2. Depreciation keys contain the calculation methods for depeciation

calculation and parameters that control

 Ordinary depreciation

 Special depreciation

 Scrap value (cutoff value)

 Calculation of interest

You can enter a separate depreciation key for each depreciation area in the asset
master record.

Requirements

You must have already created a chart of depreciation.

Maintain Depreciation Key(AFAMA)

In this step, you maintain depreciation keys by assigning calculation methods to

them. You can divide the duration of depreciation into several phases. When you
enter a changeover method for one of these phases, the system changes over to the
next phase as soon as the event specified in the changeover method has occurred.
The system then uses the depreciation calculation that is specified in the calculation
method for this phase.

Activities

1. Maintain additional depreciation keys and their descriptions in accordance

with your requirements.

2. Assign calculation methods to the depreciation keys. Maintain any other

necessary parameters.

3. Set the status of the depreciation keys to "active".

Procedure:-

We will define a depreciation Key-1597 by new Entries

Maximum Amount:-Only Method

Cutoff Val.Key:-

Cutoff value key

Calculation key for controlling the calculation of the cutoff value for depreciation.

Use

The cutoff percentage rate that is determined on the basis of this cutoff value key is
only used by the system when:

 There is no absolute scrap value entered in the the depreciation areas of the
asset concerned (an absolute scrap value takes precedence over a cutoff
percentage rate)

 Negative book value is not allowed for the asset

No ord. depreciation with special depreciation

Use

Set this indicator, if you want the system to set ordinary depreciation to zero when
special depreciation is not zero.

No interest if there is no depreciation planned

Use

Set this indicator, if you want the system to only calculate imputed interest when
depreciation is also calculated.

Note

The system does not stop interest calculation within a fiscal year. The system
calculates full interest for a fiscal year if there is any planned depreciation amount
in the fiscal year. Only if there is no depreciation planned at all for a given fiscal
year, does the system also omit the calculation of interest for that year.

Period control per fiscal year

Use
When you set this indicator, you can define the period control in this depreciation
key for selected company codes and fiscal years differently from the period control
defined in the internal calculation key.

Depreciation calculation to exact day

Specifies that the system calculates depreciation to the day.

Use

Any period control methods entered in the depreciation key are ignored for the
entire useful life of the asset. This applies to all transactions (acquisitions,
retirements, and transfers). The system always uses the asset value date as the
depreciation start date.

The "depreciation to the day" function becomes active for an asset as soon as the
asset has a corresponding depreciation key and the asset is capitalized (posted to).
Once this takes place, it is no longer possible to switch off this function for the asset,
even if you change the depreciation key. On the other hand, it is not possible to
activate this function for an asset after it has already been capitalized using a
different depreciation key.

Do not reduce depreciation in shortened fiscal year

Indicator for controlling the calculation of depreciation in a shortened fiscal year.

Use

With this indicator you can specify individually for each depreciation key that
depreciation not be reduced in the shortened fiscal year (despite the specifications
set for the depreciation areas at the company code level).

If this indicator is not set, the specifications at company code level remain valid.

Examples

 According to the specifications in the company code, ordinary depreciation

for Area 01 should be reduced in a shortened fiscal year. In spite of this, you
do not want the depreciation in this calculation key to be reduced. Therefore,
set the indicator.

 According to the specifications in the company code, special depreciation

(Area 02) should not be reduced in a shortened fiscal year. In this instance
 depreciation would not be reduced in any case. Therefore, the indicator does
not affect the calculation of depreciation in this example.

Acquisition in year of capitalization only

Set this indicator, if the system should only allow additional acquisitions in the year
of the initial acquisition or of the capitalization date.

This can be technically necessary, for example, if sum-of-the-years-digits

depreciation is used. In addition, this function can be used for organizational
purposes.

Number of places that the percentage rate is rounded to

You enter a number of places here for rounding the percentage rates the system
determines internally. The value is interpreted so that numbers are rounded to the
number of decimal places that you enter here.

Examples

Example 1 (technical):
Perc. rate: 14.25%
No. of places: 1
14.25% -> 0.1425 -> rounding: 0.1 -> 10.0%

Example 2 (practical):
In Japan, the law requires calculating depreciation using three decimal places.
Percentage rates that do not have three decimal places are rounded accordingly.
Straight line depreciation is assumed.

UL (years) % rounded

5 0.2 0.2

6 0.166666666 0.167

7 0.142857142 0.143

The standard setting for this field is 0. When you enter 0, the the system calculates
as before, with 10 decimal places. For keys that do not have to be rounded, it is only
necessary to maintain them if you previously entered a number of places for
rounding.
Assignment of Calculation:-

Here Phase refers to

The duration of depreciation can be divided into several phases, during each of
which the depreciation key uses different calculation methods for calculating
depreciation. Using the changeover method, you specify what occurrence triggers
the change in depreciation calculation. In other words, the system starts to use the
calculation method of the next phase at this point.

Class:-

Ordinary depreciation classification

Use

Using this indicator you can classify depreciation calculated with this depreciation
key.

You can use this characteristic as a selection criterion in reporting

Change method:-

Changeover method

Specifies when the changeover to a different phase of the depreciation key takes
place.

Use

This changeover is necessary, for example, when you are using a declining-balance
method of depreciation so that a net book value of zero is reached

Change Over% Rate:-

Net book value percentage rate for depreciation changeover

Percentage of the acquisition value, at which the system changes the calculation of
depreciation. That is, the system uses a different phase of the depreciation key for
the depreciation calculation.

The system makes the changeover as soon as the net book value is less than the
acquisition value multiplied by this net book value percentage rate.

Multiple Shift:-

Effects of multiple shifts in depreciation key

You can use the calculation key to control the affects of multiple-shift depreciation
as described below.

 The depreciation and the expired useful life are increased (thereby reducing
the remaining useful life).

 Depreciation is increased, the remaining useful life is not reduced.

 Depreciation is not increased, and remaining useful life is not reduced.

Scrap Value:-

Effect of scrap value on the base value

Specifies one of the following:

  The scrap value reduces the base value.

 The scrap value does not reduce the base value.

 The depreciation key continues to control this.

Use

You should make this setting only if you calculate depreciation using different
calculation methods in different phases with one depreciation key, and the scrap
value is also treated differently.

Normally you control the entire useful life uniformly by means of the depreciation
key.

Shutdown:-

Calculate shutdown

Specifies that depreciation will be reduced or stopped if there are specifications for
shutdown periods in the asset master record.

Use

This applies only to ordinary depreciation, even if depreciation is split into a portion
based on units of production.

Special depreciation is normally not considered during a shutdown, since it is based

on tax specifications only.