The changeover takes place in 1996.

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

Asset 1:

deprec.amnt = (APC - accum. deprec. - residual value)/ remaing.useful life

deprec.amnt = (100.000.000 - 50.000.000 -10.000.000) / 7 years

Asset 2:

deprec.amnt = (APC - accum. deprec.)/ remaing.useful life

deprec.amnt = (100.000.000 - 25.800.000) / 9 years

The depreciation amount according to Korean tax law (CTL) is calculated as follows:

1^st alternative

Asset 1:

deprec.amnt = (APC - accum.tax limit - residual value) / remaining useful life

deprec.amnt = (100.000.000 - 49.000.000 -10.000.000) / 10 years

Asset 2:

deprec.amnt = (APC - accum. tax limit) / remaining useful life

deprec.amnt = (100.000.000 - 25.800.000) / 10 years

2^nd alternative

Asset 1:

deprec.amnt = (APC - accum.tax limit - residual value) / rem. usef. life calculated by an official table

deprec.amnt = (100.000.000 - 49.000.000 -10.000.000) / 7 years

Asset 2:

deprec.amnt = (APC - accum. tax limit.)/ remaining useful life

deprec.amnt = (100.000.000 - 25.800.000) / 10 years

Since asset 1 was activated before 1995, the 10% residual value must be subtracted. In the 2^nd alternative for the calculation of the depreciation amount according to the tax law, the remaining useful life is found in an official tax table. In this tax table, the remaining useful life is found depending on original useful life and the portion of the APC that has already been depreciated.

A depreciation key that uses the depreciation method ‘D’ and calculates the annual depreciation percentage rate according to the remaining useful life must be assigned to the depreciation area after the changeover. The base value key is the net book value. The year the change of the depreciation method takes place must be entered in the depreciation area of the asset master record.

The depreciation keys KDX3 to KDXC (old assets) and KDXN (new assets) have been configured correspondingly.

The depreciation keys KRX3 to KRXC (old assets) and KRXN (new assets) have been configured correspondingly.The remaining useful life, for the assets acquired before January 1,1995, is found in an official tax table.

The official tax table displays the total useful life on the x-axis and the expired useful life on the y-axis. The value for each combination of total useful life and expired useful life can be calculated by:

(1-y)^x y = Annual % rate accdg to total useful life, x = Expired Useful Life

The above formula exactly represents the (NBV/APC) ratio of an asset that is depreciated according to the declining-balance method.

NBV: net book value

APC: acquisition and production costs

The net book value in the depreciation area for the calculation of the tax limit is made up of the net book value of the bookkeeping area plus excess depreciation (by customizing of the depreciation area).

Therefore, the expired useful life found in the tax table as combination of the total useful life and the ratio of NBV divided by the APC is always the same as the actual expired life of the asset. The only case in which there can be a difference between the actual expired useful life and the expired useful life found in the tax table is that unplanned depreciation has been posted for the asset (e.g. the machine burnt out partly or the machine is severely damaged).

For old assets, a report has been created to check the accumulated depreciation of the selected assets against the tax table. According to the results of this check, the useful life of the asset master record is updated.

The assets to be updated are selected by the depreciation key. This depreciation key must be entered in the selection screen of the report.

The name of the report is RAIDKRC04. See the report documentation for further details.

For new assets, enter depreciation key KRXN. An update of the useful life is not necessary.