Final Companies Act Solution Proposal v5 2

8/10/2019 Final Companies Act Solution Proposal v5 2

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Companies Act Legal change effective from 01.04.2014

Remarks:

1) This solution is valid only for new depreciation engine (which can be used when theFinancial Extension (software component EA_FIN) is activated).

2) New depreciation engine is available from SAP ERP 6.0 SP05 and above3) For WDV assets, which do not have any scrap value maintained, it will not reach exact 0

at the end of useful life. It will reach near to 0 value.

Requirement 1 - Depreciation calculation change

The depreciation should be calculated based on the remaining useful life of the asset from 2014onwards.

Solution Proposal:

For example: The asset 12457 was acquired on 01.04.2013 which has a useful life of 20 years. Itis following depreciation rate of 10% as per the old law. From 01.04.2014 onwards, it shouldfollow the new rule. It should be calculated based on the remaining useful life (SLM).

Depreciation calculation before the new changes


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1) Creation of the new depreciation key for SLM (Remaining useful life):

Make sure that you create a depreciation key as follows for the new legal requirement.


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i. Base Method settings:

If the setting is different for the base method 011 in your system, please create your own basemethod with the following settings and assign to the new depreciation key


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iii. Period control Method settings:

As per the legal requirement, all transactions should be effective from that particular date, sothe period control method for all transactions should be 01.


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iv. Multilevel Method settings:

If the setting is different for the multilevel method 001 in your system, please create your ownmultilevel method with the following settings and assign to the new depreciation key


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Save and activate the depreciation key with the following settings

Changeover method: No changeover (0) or blank.

Multiple shift: Increase in depreciation and expired useful life

Scrap value: Base value is reduced by scrap value amount if you want to consider the scrapvalue from the beginning itself. If you do not want to consider the scrap value at the beginning,set Consideration is controlled by cutoff value key .

Shut down: Yes / No based on the requirements.


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v. Assigning new depreciation key in asset master data:

Go to AS02, depreciation areas tab.


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Click on Add interval button


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Add new interval valid from 01.04.2014. Assign the new depreciation key there.


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Save master data and recalculate the values. Go to asset explorer and check the comparisonstab

From 2014 onwards, the system is following straight line depreciation on remaining useful life.


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Net book value at the start of 2014 = 90000

Remaining useful life = 19

Depreciation = 90000/19 = 4738.8* (Set the rounding rule as per the legal requirement)

2) Creation of the new depreciation key for WDV method:

Create the following depreciation key for WDV method.

i. Base method settings

Make sure that the country specific method (1) is used in Depreciation method


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ii. Declining balance method


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iii. Period control method

iv. Multilevel method


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v. Depreciation key settings

Save and activate the depreciation key with the following settings

Changeover method: No changeover (0) or blank.

Multiple shift: Increase in depreciation and expired useful life

Scrap value: Base value is reduced by scrap value amount if you want to consider the scrapvalue from the beginning itself. If you do not want to consider the scrap value at the beginning,set Consideration is controlled by cutoff value key.

Shut down : Yes / No based on the requirements.

vi. Assigning new depreciation key in asset master data:


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Go to AS02 depreciation area tab and double click on the depreciation key.

Click on Add interval button and add a new interval valid from 01.04.2014 with the newdepreciation key and scrap value.

Save and recalculate the values for the asset and check the asset explorer. More scenarios forWDV is listed in the attachment Scenarios_for_companies_act_LC_2014.PDF

3) Mass change functionality to add new depreciation key level in the asset master data

BAPI (needs own program) or mass change functionality can be used to add new intervals oftime dependent data. Both BAPI and mass change functionality have been enhanced andsupport ANLBZA changes now. The following notes can be used for your reference.

1491266 - Changing time-dependent depreciation terms using BAPI 1519278 - Mass data change/reporting - substitution ANLBZA1564907 - Mass data change/reporting - substitution ANLBZA (II)

2018032 - BAPI_FIXEDASSET_CHANGE: change expired useful life (error message BAPI1022 004)
https://css.wdf.sap.corp/sap/support/notes/1491266https://css.wdf.sap.corp/sap/support/notes/1491266https://css.wdf.sap.corp/sap/support/notes/1519278https://css.wdf.sap.corp/sap/support/notes/1564907https://css.wdf.sap.corp/sap/support/notes/2018032https://css.wdf.sap.corp/sap/support/notes/2018032https://css.wdf.sap.corp/sap/support/notes/2018032https://css.wdf.sap.corp/sap/support/notes/1564907https://css.wdf.sap.corp/sap/support/notes/1519278https://css.wdf.sap.corp/sap/support/notes/1491266


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Requirement 2 - Low value Assets

Prior to 1 st April 2014, all assets with values 5000 or less would be adjusted to the P/L in thesame year and they were not displayed as a part of the assets being depreciated. However, theact of 2013 has not provided anything for this item. Hence, going forward, they also will go by

the useful life concept and they need to be depreciated accordingly.

1. This is applicable only for new assets acquired in the year 2014-15.2. They will be no carrying amount for these assets as the previous years assets will be

adjusted to the P/L account in that year itself (including 2013-14)

Solution Proposal

Assumptions: This means that there will not be any new low value assets. All assets will beconsidered as normal fixed assets.

Solution:

Low value assets are identified in the system with the following customization:

SPRO->Financial Accounting - > Asset accounting -> Valuation -> Amount Specification -> SpecifyMax. Amount for Low-Value Assets + Asset Classes


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i. Asset class + Chart of depreciation + Area level , maintain how to check LVA (No check /Check with quantity / Check without quantity)

ii. Maintain the maximum amount for the low value asset at Company code + Depreciationarea level. This is not done at asset class level.


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The above settings are not time-dependent. So, the customers have to use any of the followingthree options:

a) Change the maximum amount for LVA from the setting b) once they are done with Fiscalyear 13-14 reporting and year end closing.

OR

b) Change the asset class setting mentioned in step a) into No check for the LVA assetclass once they are done with Fiscal year 13-14 reporting and year end closing.

OR

c) If you cannot close the fiscal year before doing this change, you have to create a newasset class where setting a) will be with No Check and all new assets will be createdunder this new asset class.

Requirement 3 - Depreciation as per shifts

a. If the Original useful life is 15 years (single shift)b. If it is used for 2 shifts, 50% more depreciation is allowed which is 10 yearsc. If it is used for 3 shifts, 100% more depreciation is allowed which is 7.5 years

Solution Proposal:

Based on the %, use the fields shift factor (from asset master time-dependent data) and variabledepreciation (time dependent depreciation area level).

For example, the asset 12459 is a normal asset without any additional shift.

The fixed depreciation for a year is 100000 (10%) (useful life 10).


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In case of double shift from 2014 onwards, please maintain the following entries. Go to time-dependent tab in asset master data and click on more intervals button. Add a new interval withshift factor as 2 from 01.04.2014 onwards.

Go to depreciation areas tab and double click on the depreciation key.


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Maintain the variable dep.portion as 50%


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Make sure that the depreciation key has the following customization in the field Multiple shift.


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Go to asset explorer and check the values. Do recalculate values option if required.

Shift factor has to be changed based on double or triple shifts.


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If the double shift is only applicable for one month, change the shift factor by adding additionaltime interval in time-dependent data of master data only for that month.

Requirement 4 - Monthly depreciation posting

1.

The depreciation that is applicable for the year is divided into 12 parts and posted everymonth2. In case of shift based depreciation, the amount to be posted every month will change in

the months where additional shifts are applicable3. Where, during any financial year, any addition has been made to any asset, or where

any asset has been sold, discarded, demolished or destroyed, the depreciation on suchassets shall be calculated on a pro rata basis from the date of such addition or, as thecase may be, up to the date on which such asset has been sold, discarded, demolishedor destroyed. Both the Companies Acts contain similar provisions

Solution:

This will be already working with the core functionality. The depreciation posting will be doneproperly even in the case of multiple shifts.

Make sure that period control method in depreciation key is done correctly. It should followmethod 01 (Pro rata at period start date) for acquisition, retirement etc.


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Requirement 5 - Unplanned depreciation posting to reserve account

If the original value of the asset is 100000 and scrap value is 5%. The total useful life of the assetwas 2 years and expired useful life is 1 year by 2014.

The total useful life of the asset is changed to 1 year from 2014 onwards. NBV as on 31 st march2014 is 50000.

As the new useful life is already expired by 2014, the remaining amount has to be posted toGeneral reserve account using unplanned depreciation posting (ABAA transaction).

i.

The following G/L accounts has to be maintained properly in the following path.

Transaction code: AO90

SPRO IMG -> Financial Accounting (New) -> Asset Accounting -> Integration with General LedgerAccounting -> Assign G/L Accounts.

Select the account determination and click on Depreciation section. Maintain the following g/laccounts in Unplanned depreciation account assignment .


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Accumulated dep. account unpl. Deprec: Accumulated depreciation account

Expense account for unplanned deprec.: General reserve account

The following accounting entry will be generated after unplanned depreciation posting.

Debit General Reserve

Credit Accumulated depreciation.

ii. Update the asset master data with the new useful life


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iii. Post unplanned depreciation using transaction code: ABAA for the net book valuereduced by scrap amount.Transaction type for prior year acquisition: 640Transaction type for current year acquisition: 650

Final Companies Act Solution Proposal v5 2

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