Example: German Ordinary Depreciation 

Use

Certain general requirements for depreciation stipulated in the German commercial code and German tax law are reflected in special depreciation keys that SAP provides:

Depreciation always ends when the net book value reaches zero, or when it reaches the memo value specified globally per depreciation area and company code, or when it reaches the scrap value specified in the asset. For German net worth tax purposes, SAP also provides special cutoff keys. However, these special keys are no longer required after 1993.

If you need to take blanket percentage scrap values into account, you can create special scrap value keys. You enter these special keys in the depreciation key as the cutoff value key.

Either the system automatically sets the asset value date to the first day of the capitalization year according to the period control that has been entered; or the user sets the asset value date manually.

Additional acquisitions to existing assets are generally allowed. The system always sets the asset value date to the first day of the fiscal year, so that a full year’s depreciation is calculated in the year in which the acquisition was posted.

The system calculates transfers and retirements using pro rata temporis. Using pro rata temporis, transactions during the first half of a period start depreciation on the first day of the period, and transactions in the second half of the period start depreciation at the end of the period.

Shutdowns are not recognized by the standard keys.

The results of these settings for Germany are shown here using the examples of depreciation keys and processes that are currently common in Germany:

Features

LINR Straight-Line Depreciation

This depreciation key calculates depreciation as follows:

Depreciation = net book value / remaining life

In the year of acquisition, the first year convention of a half year is used, whereby the depreciation start date for acquisitions in the first half of the fiscal year is set to the first day of the fiscal year, so that a full year's depreciation is calculated for the asset. For acquisitions during the second half of the fiscal year, the depreciation start date is set to the middle of the fiscal year, so that half of the annual depreciation is calculated.

The system ensures that when the planned useful life is expired, the net book value reaches one of the following: either book value zero or the specified scrap value or memo value. Depreciation ends at that point. Acquisitions that are posted to the asset after that time are written off completely in the year they are acquired, so that the net book value of the asset remains the same.

DGxy Declining Balance with x.y-times the Straight-Line Rate

Depreciation keys DG20, DG25 and DG30 calculate depreciation from the net book value at x.y-times the straight-line percentage rate, with a maximum of 10 * x.y %. You enter the declining balance multiplication factor in the declining-balance methods. At the time when this documentation was written, the prescribed depreciation key for new assets in Germany is DG30 with 3-times the straight-line rate, but a maximum of 30%. This depreciation key uses the formula:

Depreciation = net book value * 3 / total useful life

For existing assets you can use depreciation keys DG25 and DG20.

In the year of acquisition, the first year convention of a half year is used, whereby the depreciation start date for acquisitions in the first half of the fiscal year is set to the first day of the fiscal year, so that a full year's depreciation is calculated for the asset. For acquisitions during the second half of the fiscal year, the depreciation start date is set to the middle of the fiscal year, so that half of the annual depreciation is calculated.

As soon as the straight-line depreciation over the remaining life is greater than the declining-balance depreciation, the system changes over to this straight-line depreciation. The system ensures that when the planned useful life is expired, the net book value reaches one of the following: zero, or the specified scrap value or memo value. Depreciation ends at that point. Acquisitions that are posted to the asset after that time are written off completely in the year they are acquired, so that the net book value of the asset remains the same.

GL20 / GL25 Buildings Straight-Line

For the depreciation of buildings, you use depreciation keys that depreciate either 2% over a useful life of 50 years or 2.5% over 40 years. The percentage rates are set in the multi-level methods (14 or 15).

In the year of capitalization, pro rata temporis is used, so that depreciation is calculated starting from the period of the first acquisition. Because of rounding, there can sometimes still be a book value when the useful life has expired. When there are subsequent acquisitions to a building, this results in a mandatory extension of the time period for depreciation. If a book value still exists after the planned useful life is expired, depreciation will continue using the same percentage rate.

GDxx Buildings Declining Balance

Depreciation keys GD35, GD50, GD70 and GD10 are provided for declining balance depreciation of buildings according to the different percentage rates permitted by tax laws for particular types of buildings and time periods. These percentage rates are specified in the different multi-level methods of the depreciation key (11, 12, 13, 10).

In the capitalization year a full year's depreciation is always calculated. The percentage rates are specified so that exactly 100% is always depreciated at the end of the planned useful life. However, there still could be a remaining book value after the end of the useful life due to the use of rounding. When there are subsequent acquisitions to a building, this results in a mandatory extension of the time period for depreciation. If a book value still exists after the planned useful life is expired, depreciation will continue using the last percentage rate.

LVA Complete Depreciation in Year of Capitalization

This depreciation key is specifically set up to provide for the complete depreciation of low value assets in the year in which they were acquired. The Complete depreciation depreciation calculation method is entered in the base method of the depreciation key. In conjunction with the recommended useful life of one period for low value assets, this depreciation calculation method results in the immediate complete depreciation of the asset in the period of its acquisition. You cannot post subsequent acquisitions in later fiscal years to asset with this depreciation key. In this way, you can always immediately identify low value assets according to their year of acquisition. Retirements in the acquisition year are always calculated with the complete depreciation.

Net Worth Tax Valuation

The following depreciation keys are provided for calculating net worth tax values using cut-off values:

After 1993 cutoff values are no longer needed for net worth tax considerations, so these depreciation keys are not explained here in detail.