Change from Straight-Line to Declining-Balance 

Asset no.

Acq. date

APC

Usef. life

Acc. dep

GAAP

Acc. tax limit

Tax Law

1

93.1.1

100,000,000

5 years

55,000,000

54,000,000

2

95.1.1

100,000,000

5 years

20,000,000

20,000,000

The changeover takes place in 1996

Depreciation rates based on Japanese declining-balance method:

Useful life in years

Depreciation rates:

  
 

10% scrap value - old assets

5% scrap value - new assets

2

0,684

0,777

3

0,536

0,632

4

0,438

0,528

5

0,369

0,451

The depreciation amount according to Korean GAAP is calculated as follows:

Asset 1:

deprec.amnt = (APC - accum. deprec.)*perc rate (2 years, 10% scrap value)

deprec.amnt = (100.000.000 - 55.000.000) * 0.684

Asset 2:

deprec.amnt = (APC - accum. deprec.)* perc rate (4 years, 5% scrap value)

deprec.amnt = (100.000.000 - 20.000.000) * 0.528

The depreciation amount according to Korean CLT is calculated as follows:

Asset 1:

deprec.amnt = (APC - accum. deprec.)*perc rate (5 years, 10% scrap value)

deprec.amnt = (100.000.000 - 54.000.000) * 0.369

Asset 2:

deprec.amnt = (APC - accum. deprec.)* perc rate (5 years, 5% scrap value)

deprec.amnt = (100.000.000 - 20.000.000) * 0.451

Implementation:

Korean GAAP:

Since the annual depreciation rate must be calculated on the base of the remaining useful life, you have to update the useful life in the asset master record. Set the depreciation start date to the first day of the current fiscal year and enter the number of years of the remaining useful life as useful life. A depreciation key using the depreciation method ‘J’ must be assigned to these assets.

The depreciation key to choose should be KRD3 to KRDC for old assets and KDyy (where yy is the number of years of the remaining useful life) for new assets. The ‘change-over year’ field of the asset master must be empty.

Korean CTL:

A depreciation key to calculate the correct depreciation based on the correct remaining useful life is already offered by the standard. A depreciation key using the depreciation method ‘ J ’ must be assigned to these assets. Since the annual depreciation rate must be calculated on the base of the original useful life, the original useful life must be kept on.

The depreciation key to choose should be KRD3 to KRDC for old assets and KDyy (where yy is the number of years of the original useful life) for new assets. The ‘change-over year’ field of the asset master must be empty.

Sample depreciation key :

For the assets acquired before Jan.1,1995 ® KRD3,KRD4,KRD5,KRDA,KRDB,KRDC

For the assets acquired after Dec.31,1994 ® KD02,KD03,KD04,…..,KDyy