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Depreciation calculation after a change in the APC value in the middle of useful life

Former Member
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Hi Gurus,

I have a scenario here:

An asset was purchased on 2008 with APC value '14392.72' and with a useful life of 5 years with a straight line 20% depreciation. Thus 20% of 14392.72 equals to 2878.54 every year. But in the year 2010 client added the APC value of the asset by '1352.00' thus making the APC value '15744.72'. 

Now from the year 2011 system started calculating depreciation for the asset as shown below:

20% of New APC value (15744.72) = 3148.94

for the year 2012 also system calculated the same amount for depreciation of the asset 3148.94.

And thus even though by 2012 the asset should have depreciated fully..there was a NBV of 811.22 after the 2012 year end.

And when the client did the depreciation run for the year 2013 there was a depreciation posted for the amount 811.22 against the asset which was meant to have zero NBV or should have depreciated completely.

Please find below the details:

Year 2008

APC: 14,392.72

Ordinary deprec.: 2,878.54-

NBV:11514.18

Year 2009

APC: 14,392.72

Ordinary deprec.: 2,878.54-

NBV:8635.64

Year 2010

APC Fiscal Year start: 14,392.72

Ordinary deprec.: 2,878.54-

Acquisitin value change: 1352.00

APC Year end: (14,392.72 + 1352.00) = 15,744.72

NBV: (15,744.72 - (2878.54*3) = 7109.10

Year 2011

APC: (14,392.72 + 1352.00) = 15,744.72

Ordinary deprec.: (20% of 15,744.72) = 3148.94

NBV: (7109.10 - 3148.94) = 3960.16

Year 2012

APC: (14,392.72 + 1352.00) = 15,744.72

Ordinary deprec.: (20% of 15,744.72) = 3148.94

NBV:(3960.16 - 3148.94) = 811.22

Year 2013

APC: (14,392.72 + 1352.00) = 15,744.72

Ordinary deprec.: 811.22-

NBV:(811.22 - 811.22) = 0

Clients auditor wants to reverse the entry made in the year 2013 and depreciate the asset completely by 2012 itself.

Please help me to know what all are the adjusting entries to be made and what steps should I take to reverse the effect.

Thanks and regards,

Ashish Kumar

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Answers (1)

Answers (1)

Former Member
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Hi Ashish,

It is funny that auditors asked to change the signed Financial statements. No accounting standards requires this kind of change. What you could have done in 2013 is to show the balance depreciation as prior period items. But you need not open the books of 2012 & 2013 now. But you need to modify certain depreciation key configurations so that depreciation expires within the usful life.

In T code AFAMS give the Multi level method used in Depreciation key (T code AFAMA) and change the base value as "24-Net book value" and tick the remaining useful life. This settings ensures depreciation expiry and useful life end coincides and no depreciation will be missed out.

Hope it is clear.

Regards,

GSR

Former Member
0 Kudos

Hi Sethuraman,

Thanks for your prompt reply. But the client needs to reverse the depreciation posted for the asset in the fiscal year 2013(811.22).

For that I can use the transaction ABZU to write up the depreciation posted in the year 2013 and create a manual entry for the amount 811.22 in the year 2012. Am I correct. Do I have to make any changes in the retained earnings?

Thanks and regards,

Ashish Kumar

Former Member
0 Kudos

Hi Ashish,

I dont know why your client wanted to change the signed financial statements (Can you intimate the reason if it is not confidential?)

It is not advisable to change the audited figures. It is violation of Accounting standards also.

But if your client is very much needed you can proceed with what you have mentioned and you need not make change to retained earnings.

Hope it is clear.

Regards,

GSR

Former Member
0 Kudos

if can try AB08