Adjustment of Unplanned Depreciation in future periods

[former_member650819]

Hi,

I had posted a thread on how to charge depreciation in advance and what will be the treatment of depreciation for the coming periods. I got the answer in below thread.

As per the suggestions given in the above thread, we need to shut down the asset after posting unplanned depreciation is not serving the purpose in my scenario.

We are charging depreciation on straight line basis. Which is 10% on acquisition price. Now, against the advance depreciation charged, we want the monthly depreciation to be reduced by the advance depreciation divided by 12 months for the year 2014-2015.

For example-

Particular Asset value as on date 5 crores.

Advance depreciation only for that asset 2.5 crores charged on 31.03.2014 to books.

Actual depreciation before charging the advance depreciation for that asset was Rs 260000.

Monthly depreciation after charging advance depreciation for that that asset from April month- 260000 - 113000=147000

Similarly from April 2014 till march 2014, the monthly depreciation for that asset would be Rs 147000.

Hence, this means, we are adjusting the advance depreciation down the 12 months of the coming fiscal year.

Please suggest, how do we apply this in sap.

Your suggestion will be highly appreciated.

[former_member650819 · Accepted solution]

Hi Ajay,

Thanks for your valuable suggestion. This concept might be right, however, the client is looking to post an accelerated depreciation with entry as Dep Dr and Accumulated Dep Cr.

This entry is an adjustment entry which has a nullifying effect to an Income received from the parent company.

And, it is suppose to show minimum income for the company. Hence, they want to show this expense as part of running depreciation in SAP for FY 2013-2014 and adjust it in coming year 2014-2015.

Can you suggest, if in case the client is posting a reverse entry manually through JV, after running depreciation for the month. Is that fine ? Will the JV impact the Asset Value or we have to follow some more steps.

[ajaycwa1981 · Accepted solution]

Hi Nabin

You are thoroughly confusing me...

One time, you said you want to adjust the monthly depreciation with the dep you posted in advance

Now you are saying you want to accelerate... Both are contradictory...

Going by the examples you gave, in few cases you have +ve dep to be posted after adjusting the previous posting and in some cases you have -ve dep to be posted..

My suggestion is to post the depreciation in Asset registers normally, with 16.2% or whatever..(Dep Dr and Accum Dep Cr)

The previous posting of 250000 was anyways a manual posting outside Asset registers.. So. post a reversal of it the way you want A(ccum Dep Dr and Dep Cr)

With this approach, you can follow a single process instead of ABMA for few and ABZU for few

Br. Ajay M

[former_member650819 · Accepted solution]

Sorry for the confusion and I appreciate your patience. Infact, the client is confused and later they are giving this approach by giving new definitions. However, the process remains the same. Now, I am not aware of what is the difference between Accelerated Depreciation and Advance Depreciation.

But the end result is the same, that they want to charge

Dep Dr 2500000

Accumulated Dep Cr 2500000  as Accelerated Depreciation

and they want to adjust the depreciation in monthly depreciation (april-march 2014-2015) run for one asset.

However, by your suggestion there is no problem to reverse the monthly depreciation by posting manual journal entry.

For example:

After the Accelerated Depreciation is posted on 31.3.2014, the depreciation run for next period they will follow:

1. Depreciation Run AFAB- April month 2014

Depreciation a/c                Dr     13508

Accumulated Depreciation Cr      13508

2. Journal Entry- F-02 (posting on 30th April 2014)

Accumulated Depreciation a/c   Dr 16667

Depreciation A/c                       Cr 16667

Hence, no need to go for ABMA or ABZU for the adjustment.

Please correct me if I am wrong.

[ajaycwa1981 · Accepted solution]

Yes Buddy, you got it right this time !!

Quite a brain teaser you posted this time

Br. Ajay M

[former_member650819 · Accepted solution]

Thanx.

[Former Member]

Hi Nabin,

Please confirm if my understanding is correct.

You want following postings in FI:

1. Lumpsum depreciation:

Depreciation Exp.                  Dr.        2,50,000,000

  To Advance Depreciation                  2,50,000,000

2. Monthly depreciation run:

Advance Depreciation            Dr.        1,13,000

Depreciation Expense            Dr.        1,47,000

  To Accumulated Depreciation           2,60,000

3. Net book value of asset at the end of year

= 5000-2500-(147*12)

Regards

Sheli

[former_member650819]

Hi,

The depreciation is charged by Straight Line Method @ Rs 250000 every month.

We want the following posting:

1. 31.3.2014- P/L and Balance Sheet for Advance Depreciation

Depreciation A/C Dr                  25,00,000

Accumulated Depreciation Cr    25,00,000

2. April 2014- Depreciation Run

Depreciation A/C                  Dr             2,50,000 - 25,00,000/12=41,666

Accumulated Depreciation    Cr              41,666

May 2014- Depreciation Run

Depreciation A/C                  Dr             2,50,000 - 25,00,000/12=41,666

Accumulated Depreciation    Cr              41,666

June 2014- Depreciation Run

Depreciation A/C                  Dr             2,50,000 - 25,00,000/12=41,666

Accumulated Depreciation    Cr              41,666

Till March 2015.

3. Asset Retirement end of the year

As per accounting standards, we cannot reduce the depreciation percentage rate on Acquisition price. Nor can we shut down the asset. The advance depreciation has to be adjusted every month as shown above.

[ajaycwa1981]

Hi Nabin

Accounting standard has nothinig to do with the depreciation %. It is only bothered about the end result

To make it simple, in your case, total annual dep for 2014 should be 30 Lakhs (250000 * 12).. Out of which, 25 Lakhs is already charged.. So, you want to charge 5 Lakhs in 2014, which comes to 41666.67

Simply adjust your dep % accordingly and this will fly.. Accounting standard cant come in the way

Br. Ajay M

[former_member650819]

Thanks. However, I felt the Manual Depreciation was more convincing. But if we change Depreciation to Manual Depreciation by Asset Class, then all assets having the same asset class will have to be manually depreciated.

But I want this for only one asset. Can you suggest the best work around?

Also, there are chances that the monthly depreciation can be less than advance depreciation on monthly basis.

Example:

My asset Acquisition price is Rs 1,000,000.

Now I have annual depreciation @16.21%. Hence, Annual depreciation charges are Rs 162100. Monthly depreciation will be Rs 13508.

On 31.03.2014, Depreciation- Rs 162100.

NBV- 1,000,000 - 1,62,100 = Rs 837900

Advance Depreciation= Rs 200000. Monthly depreciation adjustment will be Rs 200000/12= Rs 16667.

Now, Actual Depreciation is Rs 13508, and advance depreciation per month is Rs 16667.

How, do we workout this process in SAP. Please advice.

[ajaycwa1981]

Hi Nabin

You can assign MANU Dep Key in the asset, You need not change the dep key in Asset Class

Incase your asset does not allow to change Dep Key, check your screen layout in AO21 (The screen layout you use for Dep Area)... Here, allow Asset Main No as the Maintenance level

Br. Ajay M

[former_member650819]

Thanks.

Also, there are chances that the monthly depreciation can be less than advance depreciation on monthly basis.

Example:

My asset Acquisition price is Rs 1,000,000.

Now I have annual depreciation @16.21%. Hence, Annual depreciation charges are Rs 162100. Monthly depreciation will be Rs 13508.

On 31.03.2014, Depreciation- Rs 162100.

NBV- 1,000,000 - 1,62,100 = Rs 837900

Advance Depreciation= Rs 200000. Monthly depreciation adjustment will be Rs 200000/12= Rs 16667.

Now, Actual Depreciation is Rs 13508, and advance depreciation per month is Rs 16667.

How, do we workout this process in SAP. Please advice.

[ajaycwa1981]

Hi Nabin

Check with your client if they are willing to post -ve depreciation every month..

If yes, you need to allow that for your dep Area in OADB

If No, then do asset shut down in this case and dont post any dep in 2014.. This will adjust 162100 in 2014.. Balance you need to adjust in 2015

Br. Ajay M

[former_member650819]

Can you suggest the process for posting negative depreciation in asset accounting in my scenario?

Example:

My asset Acquisition price is Rs 1,000,000.

Now I have annual depreciation @16.21%. Hence, Annual depreciation charges are Rs 162100. Monthly depreciation will be Rs 13508.

On 31.03.2014, Depreciation- Rs 162100.

NBV- 1,000,000 - 1,62,100 = Rs 837900

Advance Depreciation= Rs 200000. Monthly depreciation adjustment will be Rs 200000/12= Rs 16667.

Now, Actual Depreciation is Rs 13508, and advance depreciation per month is Rs 16667.

Also, how we need to retire the asset end of the year?

Incase I convince the client for reducing the depreciation rate every month from April to adjust the depreciation and the net figure is negative every month, what configuration has to be done in sap. This should be only for that particular asset and not all assets.

[ajaycwa1981]

Hi Bro

Allow -ve depreciation in OADB for your dep area

After that, assign MANU dep key to the asset.. Update -ve depreciation from ABMA and do AFAB

Another option is you can use asset writeup ABZU as well

Br. Ajay M

[former_member650819]

Kindly correct me, if I am wrong.

In ABZU, in transaction type do I use Write Up, unplanned book depreciation-731?

Next screen, what has to be entered in Unplnd.dep.Prev.year field.

What should be the document type?- AA or AF?

Since this a GL entry, how to show the Fixed Asset number in the posting?

[ajaycwa1981]

Hi Nabin

If I can suggest you a better solution -

Post the depreciation as usual using your 16.2% or whatever...

The entry that you posted earlier manually in GL Account, could be set up as a Prepaid entry (Accrual / deferral) where a fixed amount will get reversed/posted every month

That ways, you will be able to satisfy your auditors with correct rate of dep, and at the same you dont need to tamper your AA module with ABZU, ABMA,, etc

You will have a straight forward process of posting depreciation as usual and One Accrual/Deferral entry

What say??

Br. Ajay M

[ajaycwa1981]

Hi Nabin

In your earlier thread, i was under the impression that you wanna stop the depreciation in future after charging the advanced depreciation.. Hence, I recommended SHUT DOWN

If thats not the case, you need to calculate the % rate to achieve the 147000 of depreciation.. Maintain that % in your Multi Level Method of Dep Key (AFAMS)

Another option is you can use Dep Key that allows manual depreciation.. MANU is the Dep Key in the Standard SAP system that allows that... You can then post manual dep from ABMA, followed by AFAB

Br. Ajay M

[former_member650819]

Hi,

As you suggested to post manual depreciation. Instead can we post a reversal entry (manual Journal Entry) for the advance depreciation/12.

What will be the impact. Kindly suggest.