In many countries, you are allowed to use tax depreciation rates for book depreciation. However, the person reading the balance sheet should still be able to recognize that a different approach was used. For this purpose, book depreciation is carried out according to the appropriate requirements, and the depreciation allowed by tax law, which exceeds book depreciation, is shown as special reserves on the liabilities side of the balance sheet.

The "special reserves" component allows you to show the difference between book depreciation and tax depreciation in a derived depreciation area. You can use the values from this derived depreciation area to create special depreciation reserves for the balance sheet.

This kind of special reserve is common in Germany.

The explanation below relates to the standard chart of depreciation for Germany. Other countries that need these functions also require similar depreciation areas. These are either provided in your standard chart of depreciation, or you have to define them.

You post the APC and depreciation from depreciation area 01 to the general ledger. You thereby make sure that the APC is posted to the correct APC accounts, and the book depreciation is posted to the correct expense or value adjustment accounts.

You use the depreciation posting program to post the allocation or writing-off of the special depreciation reserves from depreciation area 03 to the corresponding liabilities accounts in the same way. Therefore, you should also post depreciation from area 03 to the general ledger.