1/22/2018 What is the use of depreciation Key when we are using Block key Concept for IT Depreciation

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What is the use of depreciation Key

when we are using Block key Concept
for IT Depreciation
HI Experts,

https://archive.sap.com/discussions/thread/3496094 1/6
1/22/2018 What is the use of depreciation Key when we are using Block key Concept for IT Depreciation

I am Pretty confused with income tax depreciation concept.what is the use of depreciation key when we are
using block key concept. how ever Depreciation will calculate on WDV. we will update WDV according to
blockeys and even we will maintain Depreciation percentage according to block keys same blockeys we will
update in asset master according to that depreciation will be calculated if we are going to acquire new
assets same it will be updated to block keys and we will update transactions and WDV as usual.but here
Depreciation key no where plays any role then why do we want assign depreciation key to income tax
depreciation area.what is the use of it and if it is mandatory to assign depreciation key then can't we assign
dummy depreciation key.many of them are confused with this concept can any take in cation and explain the
same.

Thanks in advance

Regards

Diwa

Tags: erp_financials, asset_accounting, assetaccounting, fixed_asset, sap_erp_financials, maheshwari, fico;,

tax_reporting, fixed_assets

(https://people.sap.com/diwa.p)

Diwa p (https://people.sap.com/diwa.p)
February 05, 2014 at 18:14 PM
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Helpful Answer by Pankaj Pareek (/discussions/message/14767179#14767179)

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6 replies

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1/22/2018 What is the use of depreciation Key when we are using Block key Concept for IT Depreciation

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Pankaj Pareek (https://people.sap.com/pankaj.pareek)replied February 08, 2014 at 04:26 AM

Hi Diwa,

I was not able to understand fully what you are asking. Are you asking why we assign
depreciation key to income tax depreciation area?

Financial reporting is done differently for shareholders and tax purpose. In case of
shareholders the motive is usually to show good profits so as to please them (less profit in
case company wants to give less dividends etc. Read any good book on financial
reporting). One way to do this is by adopting such accounting policies where depreciation
is shown less thus Total Asset balance in balance sheet is more resulting into higher
retained earnings.

However, when it comes to tax then one will try to pay less tax. For this one will show
higher depreciation thus resulting into lesser profit and lesser taxable income.

SAP also provides the facility to generate financial statement for reporting and tax purpose
and in case one wants to differ in the way depreciation is calculated in both the reporting
then they can go for different depreciation key in both of them thus there is provision of
assigning depreciation key to income tax depreciation area.

I am not sure if this answers your question but let me know if it is helpful. Rephrasing your
question might help me to understand it better.

Regards

Pankaj Pareek.

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Diwa p (https://people.sap.com/diwa.p)replied

February 08, 2014 at 06:27 AM

Hi Pankaj,

Thanks for your reply

My question is what is the use of depreciation key when we are

using block key concept (new concept)for income tax
depreciation.

Regards

Diwakar

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1/22/2018 What is the use of depreciation Key when we are using Block key Concept for IT Depreciation

(https://people.sap.com/malharjain)
Malhar Jain (https://people.sap.com/malharjain)replied

February 08, 2014 at 12:57 PM

Hi Diwa,

According to me the concept of Block of Asset has come into

SAP dince ECC 6.0 EHP5 only. In earlier SAP versions the
concept of Group Asset was there in which the Asset for
Depreciation Area 15 (Income Tax Area) needs to be assigned
to a Group asset and then the Group Asset was nothing but a
block of assets of similar nature just like Block of Assets. So in
that case in Asset Master the Depreciation key is to be
assigned to the Dep Area 15 as per Income Tax and by that
way the values in AW01N can be displayed in Group Assets.

Regards,

Malhar.

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Diwa p (https://people.sap.com/diwa.p)replied

February 08, 2014 at 13:17 PM

Hi malhar,

thanks for reply

As mentioned above in block key concept depreciation will be

calculated based on the percentage which we have assigned
to block.if that is the case why we want assign depreciation key
for income tax depreciation area.

Regards

Diwa

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 Helpful Answer

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1/22/2018 What is the use of depreciation Key when we are using Block key Concept for IT Depreciation

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Pankaj Pareek (https://people.sap.com/pankaj.pareek)replied February 09, 2014 at 12:16 PM

Hi Diwa,

I have encountered asset block till now only for tax computation for India.

In India, depreciation on assets for the purpose of computation of net income as per the
Income Tax (IT) Act 1961 is calculated over a block of assets instead of individual assets
as allowed under the Companies Act 1956.

In order to peform this SAP has provided us with asset block feature (Assign Asset to
Asset Block (J_1I_UPDBLKTOAST) - Depreciation - SAP Library
(http://help.sap.com/erp2005_ehp_05/helpdata/en/16/469f57ada94a3ebf9570e0cd17400e
/content.htm?frameset=/en/de/e9713a236640b1a9aa05e8643ce1eb/frameset.htm)).
However, in case you want to calculate depreciation at individual asset level then you will
need depreciation key. Also, Depreciation key facilitates us with period control method
(apart from allowing us to define the depreciation calcuation methods) which I am not sure
how to do with block key.

Is block key country specific concept? Because I have heard of Asset Block but not Block
Key. Let me know in case you have any more input. It will be interesting to learn more
about it.

Regards

Pankaj Pareek

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