Depreciation (SAP Library - BW Business Planning and Simulation)

Depreciation

Use

The depreciation function enables the calculation of depreciation rates for specified assets in accordance with the requirements of double-entry accounting.

Features

When creating a planning function for the calculation of depreciation, roles are allocated to selected fields of the planning area. The following roles are defined here:

Plan item: A field is selected that adopts the role of a balance sheet item or an account in the planning area (the SAP Business Content contains the characteristic 0SEM_POSIT for this).

Key figure for the amount to be depreciated: The values of assets to be depreciated are read from this key figure. An examination of sales revenues at the end of the useful life is not supported. Therefore, the entire amount to be depreciated is always depreciated over the duration of depreciation.

Key figure for depreciation rate: This key figure contains the calculated depreciation rates for the selected period type as the result of the function.

Characteristic for time reference: This characteristic defines the period type used as a basis. A calculation on the basis of fiscal years or a periodic examination can be selected here.

The last block of characteristics (period and year, as well as acquisition and replacement when depreciation has been completed) determines the details for the storage of time frame related data. The duration of depreciation is calculated from these fields.

For the depreciation function, you can decide whether to only generate posting records for the income statement:

If the indicator is selected, then only the income statement entry is posted to the expense item. This procedure can be useful for the analysis of investment plans, in which only the generated expense should be examined, without aiming for an integration into the balance sheet.
If this indicator is not selected, for every data record which describes an asset, in accordance with the entry
‘Depreciation Expense (debit)
with Accumulated Depreciation (credit)’
one record is generated for the depreciation expense entry, and a second record for adjustment to the asset balance. Debit entries are posted with positive signs, and credit entries with negative signs.

When creating parameter groups, you enter in addition to the particular accounts which are to be included in the posting records to be generated, also the depreciation method to be used. The depreciation method determines the procedure according to which the wear and tear of depreciable assets are calculated in the calculation period. The following methods are offered:

Straight-line depreciation: The depreciation amount (as difference from acquisition or production or replacement costs and the residual value of the asset) is distributed in constant depreciation rates over the specified estimated useful life (duration of depreciation) of the asset.
Declining-balance method of depreciation: The depreciation amount is distributed in decreasing rates over the specified, expected useful life.

Sum-of-the-years-digits method of depreciation: Say, A is the depreciation amount, n the number of fiscal years in the duration of depreciation and Sn := (1/2) * n * (n+1) the sum of these years. Then the depreciation rate i is calculated as that part of the depreciation amount, which is allotted to the fiscal year i in the duration of depreciation (0 < i < n+1) in accordance with the formula: A * (1/Sn) * (n-i+1). This variant of depreciation is only supported on the basis of fiscal years. A calculation on the basis of posting periods is not intended.
Declining-balance method of depreciation: The depreciation rate for every year of the duration of depreciation is calculated as a constant percentage of the residual value of the asset. Since this form of depreciation generally does not lead to a full depreciation of the depreciation amount in the duration of depreciation, the system changes from this method into the straight-line depreciation, as soon as the depreciation rate of a straight-line depreciation of the remaining residual value turns out to be higher than the rate of the declining-balance method of depreciation.