Japanese tax laws allow companies to depreciate property with a different percentage rate in the first half of the fiscal year than in the second half. The following explains how you set up your system for handling this type of depreciation.

The procedure described here is allowed only for fiscal years that have 12 periods. At the present time we cannot offer a solution for fiscal years that have lengths other than 12 periods.

In Customizing for Asset Accounting, create a depreciation key and assign a base method to it that contains the Explicit percentage rate, Japanese half-year depreciation depreciation method. The declining-balance method and multi-level method of the depreciation key do not contain a percentage rate, since this is determined automatically from table T097JP.

The depreciation percentage rate for the planned useful life of an asset is fixed in table T097JP. During the first half of the year, the system calculates using twice the planned useful life; in the second half of the year it uses the normal useful life.

An asset is to be depreciated over 5 years

Calculation of the values

It is possible to calculate and post depreciation to the month. The system uses the following formulas for this:

D = Depreciation percentage rate
P = Annual percentage rate (from table T097JP)
a = Period, in which depreciation begins (in the acquisition year, a can be a number other than one, depending on the period control. In the following years, a = 1, because depreciation is calculated from the first period of the year.)
n = Period, in which depreciation ends (usually this is the current depreciation posting period)

The expression in parentheses is the difference between depreciation for the full year and depreciation for the half year. In the second half of the year, this difference is posted at the rate of 1/6 per period. The summand on the right represents depreciation of the first half-year.

This procedure ensures that the same amount is posted in all periods of the first and second half of the year respectively. There is no adjustment in period seven, as there normally is when using a catch-up method.

An asset is to be depreciated over 5 years. Depreciation start is in period 2 (a), depreciation end in period 10 (n). As described in the first example, P1=0.206, P2=0.369. If you use these values, you get a percentage rate D_1,2 of 28.27%.

The system determines planned depreciation up to and including period 10 by multiplying the percentage rate with the net book value at the start of the year. The system rounds this value to the nearest whole number. The value to be posted in period 10 is the difference between this value and the value posted in period 9.

You can see the percentage rates that the system uses for the first and second half of the year in the Asset Explorer (transaction AW01N, Planned Values tab, choose Display dep. calculation). The percentages you see there have already been multiplied by the multiple-shift factor.

When you use various multiple-shift factors in the time-dependent data, then the percentages are multiplied by the respective multiple-shift factors. For the second half of the year, the system only takes time intervals into account that fall in the second half of the year.

The multiple-shift factor is 1.2 in the first half of the year, and 1.5 in the second half of the year.
In the first half of the year, the system calculates using a depreciation percentage rate of 24.7% (20.6*1.2), and in the second half of the year with 55.4% (36.9*1.5).