Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients

[Former Member]

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

Then we will see the base method vide T code AFAMR

Then we will see Multi level method vide T code AFAMS

Then we will see Period control method vide T code AFAMP

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.

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

Then release the worklist vide T code AR31

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