Asset Impairment 

Use

In Japan, it is legally required that companies calculate depreciation after asset impairment. To do this, you have to use specific depreciation rates and base values that are contained in a special formula. The localization of the New Depreciation Engine for Japan implements this formula and enables you to calculate asset depreciation after impairment postings have been made, in accordance with Japanese requirements. The following depreciation keys are delivered for this purpose:

 

Depreciation Key	Description
IDB	Declining balance method for impairment with 5% scrap value
IDM	Declining balance method for impairment with 0% scrap value
ILI	Straight-line method for impairment with 0% scrap value
ILT	Straight-line method for impairment with 5% scrap value

 

Features

Each depreciation key calculates depreciation using a specific formula, as follows:

 

●     Depreciation key IDB

Depreciation = Book value after impairment * Rate     

where Rate is calculated as: 1 - (( Remaining Value / Book value after impairment )^{1/Remining useful life}).

Depreciation is calculated in the following years based on the net book value of an asset.

 

●     Depreciation key IDM

Depreciation in the year of impairment = Book value after impairment * Rate * 10/9  

where Rate is calculated as: 1 – 0.1^{1/Remining useful life}.

Depreciation in the following years = Remaining depreciable value * Rate * 10/9 

where Remaining depreciable value is calculated as: book value after impairment * ( 1 – Rate ) ^{past years}.

 

●     Depreciation key ILI

Depreciation = Book value after impairment * 1 / n     

where n is remaining useful life.

 

●     Depreciation key ILT

Depreciation = ( Book value after impairment – remaining value ) * 1 / n     

where n is remaining useful life.

 

Note that the additional postings, such as acquisition and investment support to impaired assets, are not supported.

Activities

In the SAP Easy Access menu, choose Accounting ® Financial Accounting ® Fixed Assets ® Asset ® Change. On the Impairment Japan tab page, enter the data for the asset impairment postings and, on the Depreciation Area tab page, assign a new depreciation key with a new time interval to the area where the impairment is posted (as defined in Depreciation Keys). In addition, you also have to post the impairment document by choosing Accounting ® Financial Accounting ® Fixed Assets ® Posting ® Manual Value Correction ® Bal.Sheet Revaluation. The system calculates the new depreciation rates and base values according to your entries, using the formula for Japanese asset impairment. You can then check the new depreciation values in the Asset Explorer by choosing Accounting ® Financial Accounting ® Fixed Assets ® Asset ® Asset Explorer in the SAP Easy Access menu.