Sum of the year digit method and declining balance method

Hello,

Any body knows how will configure Sum of year digit method and Declining Method for deprecation .

Regards

Venki

Sum-of-the-Years-Digits Method of Depreciation

Use

For each year of the expected useful life, the system notes the remaining useful life for the assets and totals the figures in each year. In each fiscal year, the remaining life is divided by this total in order to calculate the depreciation percentage rate for that fiscal year. This method leads to depreciation amounts that are reduced progressively by the same amount each period.

Since the remaining useful life is no longer defined after the end of the planned useful life, this depreciation method does not allow for depreciation after the end of the planned life. However, you can change to another method after the expected useful life has expired.

Acquisitions after the depreciation start year or post-capitalization will necessarily lead to a positive net book value at the end of planned life. For this reason, such transactions are not allowed when using the sum-of-the-years-digits method of depreciation. With this method, you have to handle subsequent acquisitions by creating sub-numbers. It is also a requirement that the acquisition year is the same as the depreciation start year.

Calculation :

Depreciation = APC * remaining useful life (current period) / total of remaining useful life (over entire useful life)

APC: 1000

useful life: 4

Total remaining useful life: 10 (= 4 + 3 +2 +1)

Depreciation 1st year = 1000 * 4 / 10 = 400

Depreciation 2nd year = 1000 * 3 / 10 = 300

Depreciation 3rd year = 1000 * 2 / 10 = 200

Depreciation 4th year = 1000 * 1 / 10 = 100

Declining-Balance Method of Depreciation

Use

For the declining-balance method of depreciation, the fixed asset is depreciated by a progressively falling rate. A constant percentage rate is calculated from the expected useful life and a given multiplication factor. This is multiplied with the falling net book value of the fixed asset. For mathematical reasons, the net book value will never reach zero using this method. You change over to straight-line or complete depreciation under these conditions:

Declining-balance depreciation < straight-line depreciation

Net book value < x percent of acquisition value

Net book value < fixed amount

Net book value < straight-line depreciation

The changeover method is specified in the internal calculation key.

Calculation :

Depreciation = net book value * percentage rate from expected useful life and factor

APC: 1000

Exp. useful life: 10

Net book value: 700

Multiplication factor: 3

Depreciation = 700 * (100% / 10 * 3) = 210

OR You can use following link

http://help.sap.com/saphelp_45b/helpdata/en/4f/71de3b448011d189f00000e81ddfac/frameset.htm

http://help.sap.com/saphelp_45b/helpdata/en/4f/71de3b448011d189f00000e81ddfac/frameset.htm

Regards,

ANJIREDDY

Edited by: ANJIREDDYA on May 8, 2010 12:09 PM

Edited by: ANJIREDDYA on May 8, 2010 12:10 PM