Entering content frame

Process documentation Calculation of Capital Allowance Locate the document in its SAP Library structure

Purpose

This process tells you:

·        How to post assets under construction so that you can calculate capital allowance on them

·        What to do with assets partway through their useful life (known in Singapore as the tax life) when you capitalize an investment measure

·        How to denote additional acquisitions posted in different fiscal years for the same project, you use asset sub-numbers

This ensures depreciation is staggered during the correct useful life. The reason for using sub-numbers is because in the system, depreciation parameters are stored at asset master level at the lowest.

Prerequisites

When you capitalize an asset under construction, you have to ensure that the depreciation start date is transferred to the receiver asset along with all the other data. To do so, in Customizing for Financial Accounting, choose Asset Accounting ® Transactions ® Capitalization of Assets Under Construction ® Define Transaction Types. For each transaction type used for the settlement of assets under construction (in the standard system, transaction types 340, 341, 345, and 346), select Transfer adopting dep. start date (Transfer adopting depreciation start date).

Process Flow

The process flow is illustrated by means of the following example, a project that qualifies for capital allowance, and for which two acquisitions are made, one in 2001 and one in 2002. In order to be able to calculate staggered tax depreciation, you use an investment order for the overall project, and assets under construction for the acquisitions.

Capital Allowance Process Flow

This graphic is explained in the accompanying text

The process is as follows:

...

       1.      You create an investment measure, internal order 603560, and create an asset under construction 40006-0 directly from the order master. The asset's useful life is three years, and it is depreciated using the straight-line method is assigned to the asset master.

You also create a receiver asset, 30001-0, directly from the internal order, assigning it a three-year useful life and the straight-line depreciation method, the same as the asset under construction. This asset will be used to continue depreciation once the asset under construction has been settled, and will be effectively an extension of the asset under construction. Until then, however, it is not required.

       2.      You post the first acquisition, worth SGD 7,200, to the internal order using Financial Accounting (FI) in January 2001.

       3.      In July, you settle the costs from the order to asset under construction.

       4.      At year-end, you calculate a full year's depreciation for the asset under construction.

       5.      You repeat steps 1 through 4 for the second acquisition, in 2002, creating a second asset under construction and a corresponding receiver asset, 40006-1 and 30001-1 respectively. There is a second acquisition, this time worth SGD 2,400.

After the depreciation run at the end of 2002, the first asset under construction still has one year's useful life left, and the second asset under construction has two.

       6.      At the start of the next year, 2003, the project is commissioned. To this end, you run a full settlement to transfer both assets under construction to the receiver assets.

Because the project is commissioned before tax depreciation is finished, you settle the assets under costs to the two receiver assets. This allows you to in order to continue the staggered depreciation after the asset under construction stage.

       7.      In table ANLC, check the receiver assets in the Expired useful life, Depreciation st. date, and Proportional ordinary depreciation due to transfer to settlement fields. Given these values you can continue depreciation for the targeted assets till the end of the useful life.

Leaving content frame