Scrap Value and Cutoff Value
Use
It may sometimes be necessary to depreciate assets not to net book value zero, but only up to a scrap value or cutoff value. Therefore, the system enables you to set up a time-dependent scrap value for assets per depreciation area. There are two ways of specifying the scrap value:
By assigning a scrap value key to the depreciation key used in the depreciation area
By entering an absolute scrap value in the asset master data for the depreciation area
Features
Scrap Value Key
You can define scrap value keys with any cutoff percentage rate in Customizing for
Asset Accounting
. To do so, choose
Financial Accounting (New)
Asset Accounting
Depreciation
Valuation Methods
Further Settings
Define Cutoff Value Key.
You can specify these cutoff percentage rates for each year of acquisition and with a validity period that you define. For each scrap value key, you can specify several cutoff percentage rates with different periods of validity and acquisition years.
In addition, you have to make the following specifications:
Whether depreciation should first be calculated without considering the scrap value or cutoff value, and then ends when the scrap value is reached. Or whether the scrap value should be deducted from the base depreciation value from the beginning.
In the first case, depreciation stops before the end of the planned useful life. In the second case, the scrap value is the net book value reached at the end of the planned useful life.
At which point the cutoff dates for the defined depreciation levels should start (for example, starting on the capitalization date)
You can assign a scrap value key to each depreciation key in its definition.
Example
Start date: capitalization date
Percentage: 5%
Validity period: 5 years
A cutoff percentage rate of 5% is valid for assets that are no older than 5 years old according to their capitalization date.
Explicitly Defined Scrap Value
When maintaining the area-specific asset master data, you can enter an absolute scrap value, and/or a percentage rate, in the detail screen of each depreciation area. If you enter both an absolute value and a percentage, the standard system uses the percentage rate.
Note
We recommend that you always enter a percentage rate.
This value is not depreciated.
If you defined a scrap value key, the system ignores the cutoff value percentage of the key and treats the amount entered in the asset master record as the scrap value. Depending on the cutoff value key, the amount is either subtracted from the depreciation base before the depreciation calculation start date, or depreciation ends when the value is reached.
Memo Value
You can define a memo value or cutoff value for specific assets, as described above. You can also define a memo value that is valid for all assets in a given depreciation area. You enter this memo value in the depreciation area. In Customizing for
Asset Accounting
, choose
Valuation
Amount Specifications (Company Code/Depreciation Area)
Specify Memo Value
.
This memo value is then valid in this depreciation area for all assets. You can exempt certain asset classes, such as low value assets (LVAs) from the memo value by means of an indicator in their asset class master record.
The system reflects the memo value by reducing the planned annual depreciation of the acquisition year by the amount of the memo value.
Recommendation
Usually you do not need to manage memo values, since
Asset Accounting
(FI-AA) always manages gross values. This means it records both the acquisition value and accumulated depreciation, not just the net book value of assets. In this way, the system guarantees that even fully depreciated fixed assets appear in all legally required reports, even if they have a net book value of zero.