1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

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Amendments in depreciation policies as per

Companies Act 2013-Configuration and
workflow for Indian clients
August 16, 2014 | 1,365 Views |

Sethuraman Ganesamurthy
more by this author

FIN Asset Accounting

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Hello friends,
https://blogs.sap.com/2014/08/16/amendments-in-depreciation-policies-as-per-companies-act-2013-configuration-and-workflow-for-indian-clients/ 1/13
1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

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.

Let’s 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 CO.ACT 2013

life 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. Let’s see the configuration part.

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

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1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

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

https://blogs.sap.com/2014/08/16/amendments-in-depreciation-policies-as-per-companies-act-2013-configuration-and-workflow-for-indian-clients/ 3/13
1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

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
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1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

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

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1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

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.

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1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

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

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19 Comments
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Diwa p

August 16, 2014 at 9:37 am

Hi Sethuraman Ganesamurthy,

usefull document.thanks for sharing.

Here i have doubt about asset class.as you have mentioned asset class 1,asset class
2.can you please explain what is meant by asset class 1,2,etc..whether it is plant
machinery,or buildings or furniture fittings etc…

Regards,

Diwakar

Sethuraman Ganesamurthy Post author

August 16, 2014 at 10:05 am

https://blogs.sap.com/2014/08/16/amendments-in-depreciation-policies-as-per-companies-act-2013-configuration-and-workflow-for-indian-clients/ 7/13
1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

Hi Diwa,

These are all sample asset classes which I have used only for explanation
for easy understanding.

I didnt intend to mention any Building or P&M.

You can fit in your asset class in any of the above scenario.

Regards,

G.Sethuraman

Sridhar Bolisetti

August 18, 2014 at 3:24 am

Hi Sethuraman,

Nice explanation without leaving any room for doubts. Good one. Thanks.

Regards,

Sridhar

Sethuraman Ganesamurthy Post author

August 18, 2014 at 3:51 am

Hi Sridhar,

Thanks a lot for your comments

sateesh p

August 20, 2014 at 8:30 am

Hi Sethuraman,

Nice article.

https://blogs.sap.com/2014/08/16/amendments-in-depreciation-policies-as-per-companies-act-2013-configuration-and-workflow-for-indian-clients/ 8/13
1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

I had a query regarding point 2b in the above article. I understand that I can post the wdv
of the asset as unplanned dep and then pass transfer entry to reserves GL. Is there any
way I can directly transfer the amount to reserves GL. I tried to assign the Reserves GL
in AO90 but it allows me to assign a only a P&L account GL.

Regards,

Sateesh

Sethuraman Ganesamurthy Post author

August 20, 2014 at 9:16 am

Hi Sateesh,

I think you cannot assign Reserve GL directly here.

You have to use GL accounts created as P&L statement account in FS00.

Regards,

GSR

MallikArjuna Chowdary

June 28, 2015 at 9:04 am

Hi Sateesh/Sethuraman

Have u got any solution about Reserves GL in AO90, Is there any way I can
directly transfer the amount to reserves GL,Can please help on this.

Regards

MKC

Sada Bandla

September 6, 2014 at 6:23 pm

Hi Sethuraman Ganesamurthy,

https://blogs.sap.com/2014/08/16/amendments-in-depreciation-policies-as-per-companies-act-2013-configuration-and-workflow-for-indian-clients/ 9/13
1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

Its very clear nicely presented ,thank you for sharing useful info..

Sethuraman Ganesamurthy Post author

September 8, 2014 at 2:48 am

Hi Sada,

Thanks a lot for your comments and rating

Nirmal-Sagar Shah-Jhala

September 13, 2014 at 5:42 am

Hi Sethuraman Ganesamurthy,

Very usefull document.thanks for sharing.

Act 2013 given the useful life but not given the method whether it will be SLM or WDV
mehtod of deprecation hence if any change in the existing mehtod from SLM to WDV or
WDV to SLM then it is considered as change in accounting policy as per Accounting
Standard and required disclosure.

I would like to know how this work under WDV method and what is deprecation key for
WDV mehtod based on useful life and remianing useful life. My understanding is that
Whatever you explained that is for SLM Mehtod.

Sethuraman Ganesamurthy Post author

September 13, 2014 at 5:50 am

Hi Nirmal,

Thanks for your comments.

SAP has released a note 2052506 for it.

Kindly go through it it will help you.

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1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

Nirmal-Sagar Shah-Jhala

September 13, 2014 at 5:57 am

thanks for prompt input. how to get note 2052506

Sethuraman Ganesamurthy Post author

September 13, 2014 at 6:13 am

Hi,

Contact your basis team they will get the SAP note from Customer service
place in SAP

Mariks .

September 15, 2014 at 11:10 am

Very good document..thanks for sharing…

Sethuraman Ganesamurthy Post author

September 15, 2014 at 11:22 am

Thanks a lot

sandeep guptha

September 29, 2014 at 5:40 am

thanks for sharing document … nice information. thanks

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1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

ARPIT ASAWA

November 24, 2015 at 5:52 am

Dear Sethuraman,

As per not 2052506 – India Companies Act solution effective from 01.04.2014 – New
Depreciation engine we have done the changes.

However when we are using the WDV method based on useful life we are facing issues.
The depreciation is not getting posted till the end of useful life of the asset. Suppose
asset life is say 60 years, the NBV will reach to its scrap value before completion of 60
years.

Due to this we are not able to post depreciation for 2014-15 and closure of our books of
account is held up.

Request your inputs.

Regards,

Arpit Asawa

Sethuraman Ganesamurthy Post author

November 24, 2015 at 6:20 am

Hi,

Sorry.

We have only straight line method in our company and I am not sure of
WDV.

Karteek k

May 18, 2016 at 10:07 am

Hi,

Nice document. Thanks for sharing your knowledge.

Regards

https://blogs.sap.com/2014/08/16/amendments-in-depreciation-policies-as-per-companies-act-2013-configuration-and-workflow-for-indian-clients/ 12/13
1/22/2018 Amendments in depreciation policies as per Companies Act 2013-Configuration and workflow for Indian clients | SAP Blogs

Karthi

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