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Impacts on change of depreciation key in the

asset master
October 27, 2013 | 2,228 Views |

Sudhir Krishna Kumar Singh

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FIN Asset Accounting

FIN (Finance) | SAP ERP | accounting | afab | assetaccounting | assets | depreciation | depreciation calculation | enterprise
resource planning

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If a person changes a deprecia on key in the asset master without

knowing the effects will result in improper deprecia on pos ng or may not
be up to the correct requirements. One must need to know the impact or
effects before changing a deprecia on key. Let me answer your ques on.

If I change a deprecia on key in the middle of the current fiscal year and
deprecia on value for the year only should change.

A Machinery purchased for 1,00,000 Rs on 01.04.2010 and deprecia on

key is set to be S1(Straight line method at 10%), fiscal year is april to
march.

Cost of machinery – 1,00,000

Deprecia on for fiscal year 2010 – 10,000

Deprecia on for fiscal year 2011 – 10,000

Deprecia on for fiscal year 2012 – 10,000

Current book value of an asset is 70000 as on 01.04.2013, now

deprecia on key is changed to S2 which is 15 percent. Only for the current
year, deprecia on should be 15,000. How to do?

First check the Asset year end closing has been done for previous year, in
case, if it is not done, the adjusted deprecia on value will also reflect in
the previous years as planned value and later if you do deprecia on run,

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the values will be posted in the last period for the previous fiscal years.
Hence do the asset year end closing. Now change the deprecia on key.
Once a er changing the deprecia on key, system will recalculate the
deprecia on for the whole fiscal year and adjusted value will be posted in
the current month. Let me guide you with an example.

Let us take the above example; Current book value of an asset is 70000 as
on 01.04.2013.

Deprecia on posted for period 1 – 833.33 (10 % deprecia on on straight

line method)

Deprecia on posted for period 2 – 833.33 (10 % deprecia on on straight

line method)

Deprecia on posted for period 3 – 833.33 (10 % deprecia on on straight

line method)

Now there is change in the deprecia on key (deprecia on is made for 15%
on straight line method). System will recalculate the en re deprecia on for
the fiscal year.

Total deprecia on value for the current fiscal year is 15,000

Already posted value for three periods – 2500

Planned value should be 15000/12 = 1250. 1250 x 3 periods = 3750

During the 4th period = 3750 – 2500 = 1250 is s ll to be posted. 4th month
deprecia on is 1250. So, total deprecia on value to be posted during the
current month is 2500 which you can see in the planned value.

Once a er the deprecia on run is done, 2500 will be posted in the 4th

month. From the 5th month, planned deprecia on will be 1250.

This is how it works, I explained in easy way by using Straight line method.
Always remember that, before changing a deprecia on key, check your
asset fiscal year closing.

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18 Comments
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Lakshmi Sama

November 7, 2013 at 6:26 am

Hello Sudhir,

Really Good doc but please maintain/add the below stated clarity.

What is the effective date of new depreciation rate i.e. 15% ? Is it from 01/04/2013
onwards or 01/07/2013? If the new rate eff. date is from 01/04/2013 onwards mean
now we are in first period of new asset fiscal year ( April- Mar yr) so no need to maintain
the diff. amount of depreciation of these 2 rates.If the effective date of new rate is from
01/07/2013 onwards mean we need to record the diff. depreciation amount of those 2
rates for the past 3 periods of this fiscal year i.e. 01/04/2013-30/06/2013

Thanks alot for sharing this info

Regards,

Lakshmi S

Sudhir Krishna Kumar Singh Post author

December 3, 2013 at 3:28 pm

Thanks Lakshmi,

Please go through the document, your answer is answered.

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Diwa p

December 4, 2013 at 9:52 am

Hi Sudhir

Thanks for sharing usefull document.

Regards

Diwa

Sudhir Krishna Kumar Singh Post author

December 25, 2013 at 5:18 am

Thanks a lot Diwa.

thanks

SKKS

narin kamuni

December 6, 2013 at 5:58 am

Hi Sudhir,

Good document.

However, please address the below to have a complete document.

What if the percentage of Depreciation is reduced from 10% to 5% in the mid year? How
will the system behave?

And I have one more question – let us say we are in 9th period and as per your example
depreciation 7500 (10000/12*9) is posted and later business wants 5% dep for complete
year – then how the excess depreciation already charged by the system will be adjusted.

If you can cover these scenario in the document that will help better.

Regards,
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Narin Kamuni

Sudhir Krishna Kumar Singh Post author

December 6, 2013 at 9:13 am

What if the percentage of Depreciation is reduced from 10% to 5% in the

mid year? How will the system behave?

Let us take an example:

1,20,000 Book value as of fiscal year start,

10 % depreciation on straight line method for 6 months posted – 6,000

Now changing of depreciation key in 7 period as 5%, So actual depreciation

till 7 periods will be 3500 , So during depreciation for 7th period will be 6000
– 3500 = -2500

2500 Rs will be posted as credit in the depreciation account.

same type of result for your one more question

Thanks

Sudhir Krishna Kumar Singh

narin kamuni

December 6, 2013 at 10:37 am

Thanks Sudhir…

Sudhir Krishna Kumar Singh Post author

December 14, 2013 at 6:20 am

You are welcome

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Ram D

July 31, 2014 at 5:47 am

Thanks Sudhir,

It’s really nice explanation.

I have a query: Normally when we change the Dep. key the

difference amount adjusts on pro-rata basis in the coming dep.
runs. I mean the amount will be adjusted in the coming periods
to that year.

My query here is – Do we need to make any extra setting to

post the diff amount in the next Dep. run itself?

Regards,

Ram

Dhruval Vaishnav

December 18, 2013 at 7:26 am

Thanks Sudhir.

Regards,

Dhruval Vaishnav

Sudhir Krishna Kumar Singh Post author

July 9, 2014 at 9:34 am

Thanks Dhruval

Raja S Varma Kalidindi

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December 26, 2013 at 5:27 am

Good one.

Thanks

Sudhir Krishna Kumar Singh Post author

July 9, 2014 at 9:34 am

Thanks Raja

Ganesh Sadula

February 19, 2014 at 9:19 am

Sudhir Krishna Kumar Singh,

Thank you for sharing your knowledge !!!

Very nice Document

With regards,

Ganesh

Sudhir Krishna Kumar Singh Post author

March 11, 2015 at 12:55 pm

Thanks a lot Ganesh

Shaik Md Abubakar Siddiq

February 20, 2014 at 10:40 am

Dear Sudhir,

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Good one Nice Explanation.

Precaution that we need to change Asset Fiscal Year Change was mandate which you
mentioned was very good. Thanks for your Efforts.

Sudhir Krishna Kumar Singh Post author

March 11, 2015 at 12:56 pm

Thanks a lot Shaik

Ashok kumar singh thuljaram

August 13, 2014 at 1:43 pm

Nice Document! Keep it up!

I have got a different scenario. Please share your inputs how to take care of this.

We shall take the same example. The differential depreciation in the initial three years of
Rs.15,000/- should be posted along with the current depreciation of Rs.15,000/-. That
means, Rs.30,000/- should be posted in 2013 and then Rs.15000/- per year from 2014
onward.

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