depreciation keys

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Created on May 29, 2015

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Table of content

PUBLIC 2014 SAP SE or an SAP affiliate company. All rights reserved.

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Table of content1 Depreciation Keys1.1 Changeover Method1.2 Example: Changeover After the End of Planned Useful Life1.3 Other Features of Depreciation Key


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1 Depreciation Keys

UseThe depreciation key contains the value settings which are necessary for determining depreciation amounts. It represents a combination of calculation rules, whichare used for the automatically calculated depreciation types

Ordinary depreciationSpecial depreciationImputed interest

FeaturesYou assigncalculation methods to each depreciation key for the actual determination of depreciation amounts.You can define depreciation keys and calculation methods in Customizing for Asset Accounting ( Depreciation Valuation Methods Depreciation Keys ).

Components and Control Parameters of Depreciation KeyDepreciation keys are defined at the level of the chart of depreciation. Therefore, they are available in all company codes. With the help of the depreciationkeys defined within a chart of depreciation, you can set up the chart of depreciation with uniform depreciation terms based on the special rules forvaluation in an economic area (country, geographical region and so on).The standard charts of depreciation in the R/3 System contain depreciation keys that are predefined to meet country-specific depreciation needs.You can divide the duration of depreciation into several phases in the depreciation key. If you enter a changeover method for one of these phases, the systemchanges over to the next phase as soon as the event specified in the changeover method occurs. Then the system uses the type of depreciation calculation thatis specified for that next phase.Refer to:For more information on the calculation methods and parameters entered in the depreciation key, see:Changeover MethodsChangeover After the End of Planned Useful LifeOther Features of Depreciation KeyCalculation MethodsCutoff Value

Also refer to the system long texts for the particular control parameters of the depreciation key.

1.1 Changeover Method

UseCertain depreciation methods necessitate a changeover to another calculation method for mathematical reasons in order to depreciate the asset completely withinthe period of use. An example is the declining-balance method of depreciation, which never results in a net book value of zero. Apart from this, there may be legalregulations that allow or necessitate the changeover to another method.Therefore, when you assign calculation methods to a depreciation key, you can enter a changeover method. The changeover method specifies when the systemshould change over to a different calculation method (for example, Changeover when net book value percentage is reached ). The changeover method alsospecifies the conditions under which the changeover takes place. You can also enter a net book value percentage for certain changeover methods.You can divide the duration of depreciation into several phases in the depreciation key. If you enter a changeover method for one of these phases, the systemchanges over to the next phase as soon as the event defined in the changeover method occurs. Then the system uses the type of depreciation calculation that isspecified for that next phase.


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FeaturesChangeover MethodsYou can set up the following changeover methods:

Changeover when depreciation amount of changeover method higherThe results of the depreciation calculation in one phase in the depreciation key are compared with the results in the following phase. Changeover takesplace as soon as depreciation in the following phase is higher than in the prior phase.

Changeover when net book value percentage reachedWith this method, changeover takes place as soon as the net book value falls below a specified percentage of the acquisition value.

Changeover when net book value percent less or same as x%With this method, changeover takes place as soon as the net book value is the same as or falls below a specified percentage of the acquisition value.

Changeover when net book value is less than changeover amountIn the Customizing definition of company code specifications for a depreciation area, you can specify a global changeover amount in the local currency ofthe depreciation area. When the net book value falls below this changeover amount, changeover to another method takes place.You maintain the changeover amount in Customizing for Asset Accounting . Choose Valuation Amount Specifications (Company Code/DepreciationArea ) Specify Changeover Amount .

Changeover when net book value is less than straight-line rateThe straight line depreciation rate is calculated from the useful life and serves as a comparison with the net book value. If the net book value falls belowthis straight line rate, changeover to another method takes place.

Changeover after the end of planned useful lifeYou can also change over to another method when the planned useful life has expired. Declining-balance depreciation, in particular, is only defined for useduring the useful life. If, for example, you were to post a post-capitalization after expiration of the useful life, you would have to use a different method.With changeover at the end of the planned useful life, the switch to a specified changeover method takes place at an exact period. With other changeovermethods, the changeover takes place according to fiscal years. The changeover criteria are checked with reference to the total depreciation for the year,and the depreciation for the entire fiscal year is either calculated with the original key or with the new changeover key.

Changeover in next year as soon as straight-line higher (Poland)Functions the same as Changeover when depreciation amount of changeover method higher , except that the changeover does not take place until thefollowing year.

User-defined changeover using a customer enhancementUsing customer enhancement (customer exit) AFAR0003, you can define your own changeover methods. For more information, see the documentation ofthe customer enhancement (transaction SMOD.)

Timing of the ChangeoverGenerally, the system determines which phase in the depreciation key is to be used for calculating asset values only at the time of the carryforward of annualvalues. This means that the time of the carryforward of annual values is the only time the system checks if the changeover method necessitates a change in thecalculation of depreciation.Exceptions to this rule are:

Changeover method Changeover when depreciation amount of changeover method higherIn this case, the system checks at the time of the initial acquisition, as well as at the time of the carry-forward of annual values, whether it should change tothe changeover method.

Changeover method Changeover after end of the useful lifeIf the end of planned useful life does not fall at the end of a fiscal year, the system determines the method that applies for each activity (either the year-endcarryforward or a transaction), based on the asset value date. However, the system does not calculate using two methods for one activity (that is, for thetime period before the end of the planned useful life and the time period after the end of the planned useful life). The determining factor for deciding whichmethod is valid is whether the asset value date for the activity (year-end carryforward or transaction) is before or after the end of the planned useful life. Thismeans that a changeover after the end of planned useful life will only take effect, at a year-end carryforward, after the fiscal year is over in which theplanned useful life ended. For a transaction, the system determines on an individual basis whether the value date is before or after the end of the planneduseful life.

A changeover to a different percentage rate or base value in the levels of a multi-level method is not considered a changeover method in the abovesense. The changeover to another level takes place at the exact period for each activity.

Changeover After the End of Planned Useful Life

1.2 Example: Changeover After the End of Planned UsefulLife The following conditions apply for this example for changeover after end of the planned useful life:

Depreciation start: July 01, 1999Useful life: 5 yearsEnd of planned useful life: June 30, 2004Acquisition and production costs: 100Depreciation method: straight-line, percentage rate based on useful life, base value 100% of acquisition and production costs


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Changeover after the end of planned useful life: percentage rate based on useful life, base value 50% of acquisition and production costsThis results in the following course of depreciation:1999: 10 (100/60*6)2000: 20 (100/60*12)2001: 20 (100/60*12)2002: 20 (100/60*12)2003: 20 (100/60*12)2004: 18 (100/66*12) or 2000: 10 (100/60*6)2005: 10 (50 /60*12)There is no changeover in the year 2004. Instead, the planned useful life is internally increased by 6 months, and the old method is still used. The system acts inthis fashion, since the system determined that this method allowed for depreciation below zero and after the end of the useful life. If you want the other option, youhave to change the base method so that calculation of depreciation is only allowed to the end of the useful life and depreciation below zero is not allowed.A transaction with an asset value date up to June 30, 2004 will be subject to the calculation method of the old phase. A transaction with an asset value date afterJuly 1, 2004 will be subject to the calculation method of the next phase, as a result of the changeover method.

1.3 Other Features of Depreciation Key

UseThe depreciation key offers further settings for depreciation calculation, in addition to the settings already discussed.

FeaturesNo Ordinary Depreciation with Special DepreciationYou can specify that the system does not calculate ordinary depreciation if there is special tax depreciation. This means ordinary depreciation is set to zero.No Interest If No Depreciation is PlannedYou can specify that the system does not calculate imputed interest unless depreciation is also calculated.Period Control According to Fiscal YearsYou can specify that a given depreciation key, for selected company codes and fiscal years, uses period controls that are different from those in the period controlmethod.This may be necessary, for example, when depreciating according to US law, if you only apply the mid-quarter convention to acquisitions in specific companycodes or fiscal years.Depreciation to the DayYou can specify that the system performs the depreciation calculation to the day. The period control rules in the calculation method are thereby deactivated for theentire life of the asset.

The system takes the 29th of February into account only if there were transactions for the asset during this leap year. If there were no transactionsduring a leap year, the annual depreciation for the year is the same as in a normal year.This special handling meets legal requirements in France.

Depreciation Calculation in Shortened Fiscal YearsYou can specify that depreciation is not reduced in shortened fiscal years, even if settings were made to that effect in the depreciation area at company codelevel.Acquisitions Allowed Only in Capitalization YearYou can specify that the system only allows acquisitions in the year in which depreciation started for the asset. This may be necessary for technical reasonswhen you use sum-of-the-years-digits depreciation, for example. You may also want to use this function for your own internal, organizational reasons.Number of Places for RoundingYou can specify the number places to which the system should round the percentage rate for depreciation calculation.Depreciation ClassYou can classify the depreciation key. This characteristic can be used as a selection criterion in reporting.Multiple Shift UseYou can specify that the system calculates increased depreciation due to increased wear and tear on assets during multiple shift use.Affect of Scrap Value on Base Value for DepreciationYou can specify how the scrap value influences the base value for depreciation (for example, by reducing the base value).You need this setting only in the following case: You have a depreciation key with different phases, each with different calculation methods, and you want thetreatment of the scrap value to also be different in each phase. Normally the treatment of the scrap value is the same in the depreciation key throughout the usefullife.

According to Federal Income Tax law (350) in the USA, scrap value has to be handled differently in the declining-balance phase of depreciationthan after the changeover to straight-line depreciation.

Calculate Shutdown


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By specifying shutdown periods in the master record, you can have the system suspend depreciation during shutdown periods.

Refer also to the online long texts for these functions in the system.


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depreciation keys

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