Depreciation Method Switch 

Use

In Japan, companies may need to switch the depreciation method used for assets. The localization of the New Depreciation Engine for Japan provides the depreciation key for assets whose depreciation method is switched from the declining-balance method to the straight-line method. The following depreciation key is delivered for this purpose for Japanese companies:

 

Depreciation Key	Description
DS	Straight-line method with reduction of base value and 5% scrap value

 

Features

Annual plan depreciation is calculated using the following formula:

Depreciation = { ( APC * NBV ratio ) – ( APC * Deduction rate ) } * Depreciation rate

Example

APC: 100,000,000

NBV at the time of depreciation method switch: 25,056,652  (NBV ratio: 25.056652%)

New depreciation method: straight-line 4 years  (Depreciation rate: 25%)

 

Depreciation = { ( 100,000,000 * 0.25056652 ) – ( 100,000,000 * 0.1 ) } * 0.25 = 3,764,163

 

Note that the deduction rate 10% is used when NBV ratio is > 10%, while 5% is used when NBV ratio is <= 10%. In addition, the system assumes that the depreciation method is only switched at the beginning of a fiscal year. Additional postings, such as acquisition and investment support to this type of asset, are not supported.

Activities

Master Data

In the SAP Easy Access menu, choose Accounting ® Financial Accounting ® Fixed Assets ® Asset ®Change. On the Depreciation Area tab page, assign the depreciation key DS and useful life year with a new time interval to the area where the depreciation method is switched.

Customizing

In Customizing for Financial Accounting, choose Asset Accounting ® Depreciation ®Valuation Methods ® Further Settings ®Specify Asset-Specific Base Value Percentages. Enter the percentage rate for the asset’s net book value at the time of depreciation method switch.

 

For more general information about depreciation methods, see Depreciation Methods.