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Changes in Asset

Accounting for Indian


Companies Act 2013
created by Malhar Jain on 05-Jun-2014 11:28, last modified by Nathan Genez on 05-Jun-
2014 14:36
Version 2
inShare3

Below is the changes that will be taking place in the system due to changes in
Company's Act 2013 incorporation:

1.) If life of the asset has decreased:- e.g. there is asset for which original life is
10 years, 3 years already completed as on 31st March 2014 and now life has
decreased to 7 years. In this scenario, WDV as on 31st March 2014 should be
depreciation over the period of 4 years instead of 7 years. How to carry out this
change
1. A New Depreciation key would be created which will calculate the depreciation on
the remaining useful life of assets as maintained in the Asset Master.
2. For the New Assets, no changes are required but for Existing Assets, the changes in
the Asset Master is required to be done in the Useful Life of Asset as well as in
the Depreciation Key of the Asset. This changes will be done by the User's.

2.) If life of the asset has increased:- e.g. there is asset for which original life is 10
years, 3 years already completed as on 31st March 2014 and now life has decreased to 12
years. In this scenario, WDV as on 31st March 2014 should be depreciation over the period of
9 years instead of 7 years. How to carry out this change
3. This will be catered in the same way as is done for the above point (1.)

3.) If the life of the asset is already over after change in rates:- e.g. there is asset for
which original life is 10 years, 7 years already completed as on 31 st March 2014 and now life
has decreased to 6 years. In this scenario, WDV as on 31st March 2014 should be charged to
the opening reserve. How to carry out this change
4. In this case an entry is to be posted in the system by User, for which the GL's needs
to be provided by the business.

Below shows the detailed example for the above mentioned points.

1. If the Life of asset has decreased:

Asset No. : 211000112


Depre key ZS15 which is depreciating the Asset on Useful Life basis.
The planned values for depreciation posting is as below for Fiscal year 2015 :
Now changing the useful life of assets from 4 years to 3 years. So now the Asset will be write off in 3
years as shown below:

The Comparison tab is as below:


Depreciation planned values for the year 2015 is as follows:
From above we can see that depreciation per period has changed from 415.63 to 581.88 due to
change in useful life of assets.

2. If the Life of asset has increased:

Asset No. : 211000113


Depre key ZS15
The planned values for depreciation posting is as below for Fiscal year 2015 :
Now changing the useful life of assets from 4 years to 5 years. So now the Asset will get written off in 5
years as shown below:
The Comparison tab is as below:
Depreciation planned values for the year 2015 is as follows:

From above we can see that depreciation per period has changed from 1607.81 to 1250.52 due to
change in useful life of assets.

3. If the life of the asset is already over after change in rates :


Asset No. : 211000038
Depre key ZS15
The planned values for depreciation posting is as below for Fiscal year 2015 :
Now changing the useful life of assets from 4 years to 1 years. But here already the expired useful life
is of 2 years, whereas according to Company's Act, 2013 the useful life of Asset should be 1 year only.

The Comparison tab is as below:


Depreciation planned values for the year 2015 is as follows:
From above we can see that depreciation per period has changed from 3750.66 to 0 due to change in
useful life of assets. And the remaining NBV of the Asset of 86265.40 will be removed by executing T-
Code ABAA for this Asset as shown below:

Then press enter. After this on next screen enter the NBV of the Asset i.e. 86,265.40

After this save the Document as below:


We can check in the Asset Explorer that the above document is posted and the NBV of the Asset is 'Nil'
Here the Document is posted in AA only and not in FI. The unplanned Depreciation entry will get
posted in FI when Depreciation Run is executed for this period through T-Code AFAB as below:

After this Execute the same :

From above we can see that this entry will be getting posted in the system. The accounting entry for
the same is :
This is the testing GL that we have used in posting key 40, that would be the Reserve GL that would be
provided by the Client.
After this the entry will be posted in the FI and by AA and FI will be in synchronization.

Kindly revert if any additions or changes or suggestions for the above document.

Regards,

Amendments in depreciation
policies as per Companies
Act 2013-Configuration and
workflow for Indian clients
created by on 16-Aug-2014 05:06, last modified by
Sethuraman Ganesamurthy Sethuraman
Ganesamurthy on 20-Aug-2014 07:28
Version 2
inShare5

Hello friends,

As we all know Companies Act 2013 has to be implemented from this FY 14-15.
The major change in respect to Asset accounting is, depreciation has to be calculated based on useful life
rather than rates of depreciation.

Lets see examples of possible scenarios

Those who use depreciation rate can calculate useful life by divide 100 by the rate and those who use
useful life method already can use the same while seeing the below scenarios.

Asset class Depreciation rate Calculated useful life CO.ACT 2013 Useful
life
1 20% 5 5
2 10% 10 5
3 5% 20 30

Scenario 1:

For Asset class 1, useful life is same in old method as well as Companies Act prescribed useful life. So
there is no impact in depreciation.

Scenario 2a:

If for some assets in asset class 2 expired useful life is 3, then net book value should be depreciated over
remaining useful life of 2 years.

Scenario 2b:

If for some assets in asset class 2 expired useful life is 6 years, then whole net book value should be
charged off immediately and has to adjusted in opening retained earnings.

Scenario 3:

For assets in asset class 3, the net book value should be depreciated over remaining useful life.

So we have to do configuration of depreciation keys to meet the requirements as per companies act
2013. Fortunately we are in SAP environment. So making changes in our system is very easy. It
calculates automatically the retro calculations also. Lets see the configuration part.

We need to create only one depreciation key which will suit for all asset classes and all type of scenarios.

SAP has provided one depreciation key LINS for depreciation of assets over remaining useful life. Just
clone LINS and create customised dep key say ZLIN. The properties are shown in screenshots.

Depreciation Key ZLIN is created vide T code AFAMA by cloning LINS


Then we will see the base method vide T code AFAMR

Then we will see Multi level method vide T code AFAMS


Then we will see Period control method vide T code AFAMP

These are all the config steps. Kindly make suitable changes to suit your requirements.

Now the next step after creating dep key is to update existing assets with the new dep key say ZLIN and
useful life.

Many companies may be having lakhs of asset reocrds. So do you feel it is a herculean task to update
asset with new dep key and new useful life. Thats where SAP comes in for our rescue. We can do all
mass updates with little work.

SAP has provided a T code OA02 to mass update of asset records.


Let's see the steps involved in mass update.
Create substituition vide T code OA02.
Then go to T code AR01 or any other standard reports like S_ALR_87011990 and create worklist
Then release the worklist vide T code AR31
The mass changes can be done vide other modes like LSMW or BDC also. You can choose which is
suitable for you.

Thats all freinds.

Hope I have explained the steps clearly.


Kindly provide your valuable feedbacks to update the document so that it will be complete and useful
to many.
Awaiting for your comments.

Regards,
G.Sethuraman