Changeover Method 
Changeover Method
Use
Certain depreciation methods necessitate a changeover to another calculation method for mathematical reasons in order to depreciate the asset completely within the period of use. An example is the declining-balance method of depreciation, which never results in a net book value of zero. Apart from this, there may be legal regulations that allow or necessitate the changeover to another method.
Therefore, when you assign calculation methods to a depreciation key, you can enter a changeover method. The changeover method specifies when the system should change over to a different calculation method (for example, Changeover when net book value percentage is reached). The changeover method also specifies the conditions under which the changeover takes place. You can also enter a net book value percentage for certain changeover methods.
You can divide the duration of depreciation into several phases in the depreciation key. If you enter a changeover method for one of these phases, the system changes over to the next phase as soon as the event defined in the changeover method occurs. Then the system uses the type of depreciation calculation that is specified for that next phase.
Features
Changeover Methods
You can set up the following changeover methods:
The results of the depreciation calculation in one phase in the depreciation key are compared with the results in the following phase. Changeover takes place as soon as depreciation in the following phase is higher than in the prior phase.
With this method, changeover takes place as soon as the net book value falls below a specified percentage of the acquisition value.
With this method, changeover takes place as soon as the net book value is the same as or falls below a specified percentage of the acquisition value.
In the Customizing definition of company code specifications for a depreciation area, you can specify a global changeover amount in the local currency of the depreciation area. When the net book value falls below this changeover amount, changeover to another method takes place.
You maintain the changeover amount in Customizing for Asset Accounting. Choose Valuation ® Amount Specifications (Company Code/Depreciation Area) ® Specify Changeover Amount.
The straight line depreciation rate is calculated from the useful life and serves as a comparison with the net book value. If the net book value falls below this straight line rate, changeover to another method takes place.
You can also change over to another method when the planned useful life has expired. Declining-balance depreciation, in particular, is only defined for use during the useful life. If, for example, you were to post a post-capitalization after expiration of the useful life, you would have to use a different method.
With changeover at the end of the planned useful life, the switch to a specified changeover method takes place at an exact period. With other changeover methods, the changeover takes place according to fiscal years. The changeover criteria are checked with reference to the total depreciation for the year, and the depreciation for the entire fiscal year is either calculated with the original key or with the new changeover key.
Functions the same as Changeover when depreciation amount of changeover method higher, except that the changeover does not take place until the following year.
Using customer enhancement (customer exit) AFAR0003, you can define your own changeover methods. For more information, see the documentation of the customer enhancement (transaction SMOD.)
Timing of the Changeover
Generally, the system determines which phase in the depreciation key is to be used for calculating asset values only at the time of the carryforward of annual values. This means that the time of the carryforward of annual values is the only time the system checks if the changeover method necessitates a change in the calculation of depreciation.
Exceptions to this rule are:
In this case, the system checks at the time of the initial acquisition, as well as at the time of the carry-forward of annual values, whether it should change to the changeover method.
If the end of planned useful life does not fall at the end of a fiscal year, the system determines the method that applies for each activity (either the year-end carryforward or a transaction), based on the asset value date. However, the system does not calculate using two methods for one activity (that is, for the time period before the end of the planned useful life and the time period after the end of the planned useful life). The determining factor for deciding which method is valid is whether the asset value date for the activity (year-end carryforward or transaction) is before or after the end of the planned useful life. This means that a changeover after the end of planned useful life will only take effect, at a year-end carryforward, after the fiscal year is over in which the planned useful life ended. For a transaction, the system determines on an individual basis whether the value date is before or after the end of the planned useful life.
A changeover to a different percentage rate or base value in the levels of a multi-level method is not considered a changeover method in the above sense. The changeover to another level takes place at the exact period for each activity.
