Sum of the year digit method and declining balance method

[Former Member]

Hi,

My Client want Deprecation methods Sum of the year digit and declining balance method for tax purpose. This requirement for Colombia Country.

Which Deprecation Area I activate and how will configure above two methods.

Regards

Venki

[anjireddy_appireddy]

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

[Former Member]

Hello.

Thanks for your good explanation but In SAP How I can defined these two methods like what are the base method, delcilining method, period control method and Mulitiple Method

Finally How i can define at deprecatio key.

Regards

Venki

[anjireddy_appireddy]

Please take the reference of standard depreciation keys

DIG4- Sum-of-the-years-digits dep. 4 years

DG30--Declining balance 3 x

[Former Member]

Thanks, valuable information, I had resolved Declining Balance Method with your reference, but 4.6c Standard Depreciation Key DIG4 is not available.

Please give DIG4 Dep.Key Base Method, Declining Method, Multiple Method and Period Method keys base on that I would defined Sum of Year Digit Method.

Regards

Venki

[anjireddy_appireddy]

Hi cvsreddy99 ,

Please find the following parameters for sum of the year

Base method 0001 Ordinary: sum-of-the-years-digits

Decl.-bal. method 001 0.00x / 0.0000% / 0.0000%

Prd cont 003 01/06/02/02

Multilev.meth. 003 APC, any life

Class : Declining balance at the time of creation of DEP KEY.

[Former Member]

Hello,

I try to create Dep with your giving information then I am getting following error.

CO01 ZST3 N 1 : Choose 'Acq.only allowed in capitalization year'

Message no. ACRSL 029

Diagnosis

The ordinary depreciation key represents either unit-of-production depreciation or sum-of-the-years-digits depreciation.

In this case, you have to choose the 'acquisition only allowed in capitalization year' option.

Procedure

Correct your entry.

Regards

Venki

[anjireddy_appireddy]

In which Screen you are getting above error.Any way follow these steps.

While creating dep key please select following parameters.

DepType -Ord. depreciation

Phase - From start of Depreciation

Multiple Shift : increase in depreication and useful life

Scrap value : consideration controlled by Cut off value key

shut down : no

[Former Member]

I have done Thanks for your help

Regards

Venki

[Former Member]

Hello,

I had setup my Deprecation Keys for Sum of Year Method and Declining Balance Method, but two methods are showing wrong amount for deprecation.

For Example:

1. Declining Balance Method: APC Value 10000 and Useful life 10 years and Ordinary Dep start date. 1st May, 2010

System is showing Depreciation 2000. Is it correct.

2. Sum of Year Digit Method

APC Value 10000 and Useful life 10 years and Ordinary Dep. start date 1st May, 2010.

System is showing Depreciation 1212. Is it correct.

Regards

Venki

[Former Member]

Hello,

Please respond above inputs.

Regards

Venki

[Former Member]

Hello,

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

Regards

Venki