Changes in Asset Accounting for Indian Companies Act 2013

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 31 March 2014 and now life has decreased to 7 years. In this scenario, WDV as on 31
st st

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 31st 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,

Malhar.

Alert Moderator

36 Comments
You must be Logged on to comment or reply to a post.

1. SAP Communicator June 5, 2014 at 9:57 am

Good One Malhar!

like (0)

1. Sreedhar Kalyanaraman June 9, 2014 at 8:32 am

Very nice one Malhar

But i have few doubts. please clarify [or i am dumb enough not to be able to follow the lucid
illustration above!!!]
The assets in the FAR will have different variety of assets having different remaining useful life of
assets as maintained in the existing Asset Master should we create so many keys depending upon the
remaining useful period of life like 1,2,3,4,5,…. etc 15?

The retained earnings [or reserve a/c] is nothing but the balance in profit and loss a/c for which a gl code
would have been assigned for, we need to give this glcode for assiging to cases of unplanned depreciation?
kindly clarify with example..

In your example number 3 you have mentioned and i quote “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 31st
March 2014 and now life has decreased to 6 years.” how it can get reduced to 6 years if original is 10 and 7
yeras already completed. not clear..

Kindly clarify

Thanks & Regards

K Sreedhar

like (0)

1. Malhar Jain Post authorJune 9, 2014 at 8:59 am

Hi Sreedhar,

Regarding the creation of new depreciation keys for different useful life is not correct. You have
to create a single depreciation key just like standard depreciation key ‘LINR’ and tickt the
depreciation to the day box and active it. Then in your asset master if the old depreciation key is
not having the ‘depreciation to the day’ box ticked then you have to assign depreciation key
‘LINR’ else you will assign new created Depreciation key and then you will update the useful life
of assets to remaining useful life of assets.

Option 3 states that if the required useful life is already over then the system should post the
unplanned depreciation for the whole NBV of the asset. take an example. Useful life of asset is
10 years and its purchased for 1000 Rs. Now 7 years are passed and NBV of the asset is 300
Rs. Now according to Indian Companies Act, 2013, the useful life of such Asset should be only 6
years. So now already 7 years are passed which is not proper. And as the depreciaiton for last
year is posted we cannot make nay changes to the same. So now the remaining 300 Rs will be
posted through unplanned depreciation debiting the Reserve GL and crediting the Accumulated
Depreciation GL.

Hope I am clear.

Regards,

Malhar.

like (0)

1. Ajit Desai June 9, 2014 at 10:34 am

Good efforts & examples with explanation.

I have one doubt about Depreciation Reserve account.

In AO90 where we have to create this GL?

Other than this in which conditions this GL get posted.

Thanks,

Ajit Desai

like (0)

1. Malhar Jain Post authorJune 9, 2014 at 10:47 am

Hi,

The Reserve GL needs to be assigned in the Depreciation Tab under the ‘Accumulated dep.
account unpl. deprec.’ But if your client is using the Unplanned Depreciation concept then a
particular GL would be already assigned then you can do is post to that assigned GL the entry of
unplanned depreciation and then pass a manual JV of that Reserve Account debit and the
expense GL assinged above credit.

Regards,

Malhar.

like (0)

2. SREE SREE September 24, 2014 at 10:06 am

Changed in useful life from 20 to 30 but depreciation instead of posting in(-) showing as(+)

in aw01n.

Thanks

like (0)
 2. Sethuraman Ganesamurthy June 9, 2014 at 8:48 am
Good effort Malhar.

like (0)

1. Malhar Jain Post authorJune 9, 2014 at 8:59 am

Thanks SAP Communicator & Sethuraman.

Regards,

Malhar.

like (0)

3. Jignesh Maniyar June 20, 2014 at 2:51 pm

Well but What to do in case of Low value assets which company has already depreciated @
100%. The requirement is now removed under revised schedule II.

like (0)

1. Ravindra Mahajan July 2, 2014 at 12:30 pm

Hello Jignesh,

Low value assets which are depreciated 100% before 1st April, 2014 no treatment is required. if
any asset is created under low value asset class after 01/04/2014 the same should be
transferred to respective asset class and need to depreciated based on useful life and not 100%.

Thanks,

Ravindra Mahajan

like (0)

4. Shripal Bhavsar July 10, 2014 at 4:59 am

Hi All
This is all about SLM of depreciation. What about WDV method of depreciation? e.g. We were
have 13.91% WDV rate on P&M till 31.03.2014, so we have to continue with WDV method
(cannot shift to SLM as it will be considered as change in accounting policy). How to
automatically calculate WDV rate of depreciation for remaining useful life of asset as on
31.03.2014. All assets have different remaining useful life as on 31.03.2014, so each asset will
have different depreciation rate, how to handle this?

Thanks

Shripal Bhavsar

like (0)

5. ACR RUBEN July 28, 2014 at 4:14 am

Hi Malhar,

What is the settings you have done for the depreciation key.

Add the screenshots also, which will be of great help.

Regards

ACR.Ruben

like (0)

6. v s July 30, 2014 at 3:45 pm

Dear Malhar,

Nice document, please share about following requirement-

1. What about Double and Triple Shift requirement?

2. How we calculate the Depreciation on WDV basis over remaining useful life?

Regards,

VS
like (0)

1. SREE SREE September 24, 2014 at 10:08 am

Changed useful life from 20 to 30 but depreciation posted is showing in+ instead of –

and shown in aw01n as +

like (0)

7. ravi mehta July 31, 2014 at 5:46 am

Dear Malhar,

Is it possible if you can provide us with the testing document,end user testing documentation and
all testing related documentation which you would have gathered from the FICO team after this
new depreciation calculation cycle.

If possible, Can you please mail the above things on my personal email id–
mehtravi@yahoo.co.in
Thanks

Ravi Mehta

like (0)

8. B V Mittal August 11, 2014 at 3:18 pm

Dear Malhar

Thanks for posting a very nice example .

We are not able to understand , as how to configure a new Depreciation Key to address the
scenario having Depreciation under WDV method and after the Asset useful life , the Asset
value has to be maintained at 5% of it’s original purchase cost .

We request you to kindly help us with a sample configuration details please .

With Regards

B Mittal
like (0)

9. Ravi Sankar Venna August 11, 2014 at 3:42 pm

Good explanation Malhar.

If you would put the screen shots of your depreciation key configuration (including base method /
multi-level method and period control method, which could be handy for consultants working for
Indian clients.

Best Regards,

Ravi

like (0)

10. shreyas kulkarni August 14, 2014 at 1:27 pm

hello Malhar,

thanks for efforts,

it would have been great help, if the screen shots of the depreciation key were mentioned

regards,

shreyas

like (0)

11. Pavan Kumar Arvapally September 2, 2014 at 5:46 am

Hi Malhar jain,

Good document….please confirm is it the only option to go with different depreciation keys for
calculating the depreciation for remaining life of the asset……?
If yes….If there are many assets which will fall under the category of ” calculating the
depreciation for remaining life of the asset” will leads to the maintenance of many depreciation
keys…

Let me clear…Is there any easier approach can be followed to achieve these new changes in the
Act.?

Regards,

Pavan Kumar Arvapally

like (0)

1. Ravi Sankar Venna September 2, 2014 at 5:59 am

Refer SAP Note:

738919 – IT Depreciation for Assets India

1761055 – Development for Asset Tracking India

1846262 – India Asset Accounting: Enhancement to Amount field length

like (0)

1. Pavan Kumar Arvapally September 2, 2014 at 6:08 am

Thank you Ravi….I will check it.

Pavan

like (0)

1. Ravi Sankar Venna September 2, 2014 at 7:28 am

Hi Pavan, please check the configuration document within the first note, hope it would be handy
for your purposes.

like (0)

1. Gopal Krishna M May 28, 2015 at 6:53 am

Sir,

Our Book Depreciation area is 01 with FY- Jan to Dec. When we made the configurational
changes the remaining depreciation is calculating taking the Year opening NBV as Base amount.
Is there any solution in which we can put the NBV of 1st April. Please suggest
like (0)

2. SREE SREE December 29, 2014 at 7:57 am

W e have two ledgers IFRS (01) Depreciation area and Local (20) Depreciation area

When we change the useful life for Local (ie) 5 to 4 years in 2014 it is adjusting in 2013

And showing as ➖in 12 period how to solve kindly guide and also in IFRS it is showing for
the same

For 2013. W e have two ledgers IFRS (01) Depreciation area and
Local (20) Depreciation area

When we change the useful life for Local (ie) 5 to 4 years in 2014 it is adjusting in 2013

like (0)

2. SREE SREE September 24, 2014 at 10:03 am

Changed in the useful life from 20 to 30 but depreciation instead of debiting it is being
credited and shown in aw01n any advice.

Thanks

like (0)

1. Malhar Jain Post authorSeptember 24, 2014 at 10:11 am

Hi,

Please share the screen shot of your asset explorer. That will have to provide proper solution.

Regards,

Malhar.

like (0)

1. SREE SREE December 29, 2014 at 7:48 am

can you send me your mail id to pvsreekri@gmail.com
like (0)

1. SREE SREE December 29, 2014 at 8:02 am

pls
W e have two ledgers IFRS (01) Depreciation area and Local (20) Depreciation area

When we change the useful life for Local (ie) 5 to 4 years in 2014 it is adjusting in 2013

And showing as ➖in 12 period how to solve kindly guide and also in IFRS it is showing for
the same For 2013.

like (0)

2. SREE SREE December 29, 2014 at 9:20 am

We We have Two depreciation area we have two depreciation keys one for each for
IFRS and Local
Depreciation is calculated by useful life and not by rate that is what we are following
previously also
And we are following straight line method
Further we have two books of accounts IFRS (0L) and Local(L1)
Asset depreciation area is 01 for IFRS Period is Jan to Dec .
Local Area 20 for Local -April to March
So just tried to change the useful life of the asset
When we change the useful life for Local (ie) 5 to 4 years in 2014 it is adjusting in 2013
And showing as in 12 period how to solve kindly guide and also in IFRS it is showing for the same
like (0)

12. VAISHALI GHARAT September 3, 2014 at 11:51 am

Dear Malhar,

Can you tell us whether you have ticked for Depreciation to the day in ZS15 key created for
depreciation as per new companies act 2013?
Our company calculates the depreciation on SLM with depreciation to the day tick & with residual
5%.

As per new act, we are trying to create depreciation key based on useful life

with Dep.to the day tick,

Base method with % from useful life,

Multilevel method with base val 24 & remaining life tick

We have applied above key for newly created asset whose acquisition cost is 125000 useful life
is 15 years but in Asset explorer in comparison it shows depreciation 7916.67 for
2014,2015,2016,2017,2018,2019

7928.59 from 2020 till 2023

7968.00 from 2024 till 2025

7967.99 for 2026

7968.00 for 2027

7662.37 for 2028

Vaishali Gharat

like (0)

13. Balasubramanyan Ramaiah September 30, 2014 at

12:47 pm
Dear All,

From the above scenario is it necessary to change the Dep key and useful life for 3rd Procedure
Ie “If the life of the asset is already over after change in rates“ ?
what is the nature of Depriciation Resrve GL I mean Bal sheet or P&L, Client is asking for a
balance sheet A/C but to ma knowledge we can assign only P&L Account in Depriciation folder
setting of AO90.

My Client requires entry to be passed like this

Depreciation Reserve debit

Accumulated depn credit
to Arrive the above Entry how I need to Maintain the AO90 Settings ?
Bala.

like (0)

1. Ravi Sankar Venna September 30, 2014 at 12:51 pm

If the client is asking for balance sheet account to be assigned, you need change the message
control in OBMSG or OBA5, then you do your configuration in AO90, which would allow you to
do the configuration.

like (0)

14. yogesh jayanarasimaiah October 4, 2014 at 5:25 am

Hi Malhar Jain ,
Very good documentation..

I have typical scenario:

1. Balance useful life is exist but Net Book value is less than 5% (Residual value) of Gross Block
Value in this scenario i am unable to update the balance useful life, however, my client is not
agreeing to appreciate the asset value to meet the 5% of GBV.

Work around solution: currently i update Expired UL as same as Useful life.

2. Is same as Point No.1 but there is an addition to it in 2014 (July’14) since i am unable to
update the balance useful life depreciation for the addition is not computing.

Is there any way out for above issues.

regards,

Yogesh. J

like (0)
 15. Thilak Chagantipati March 20, 2015 at 7:24 am
Dear All,

As per new com act depreciation will be cal on useful life basis SLM is ok but in the WDV method
calculation like this (in Excel).As per Our requirement is like this

Opb Balance Dep Rate-27.700% APC-12,654,425

2013 12,383,503 668,154 11,715,349 5%

2014 11,715,349 3,245,152 8,470,197 28%

2015 8,470,197 2,346,245 6,123,953 28%

2016 6,123,953 1,696,335 4,427,618 28%

2017 4,427,618 1,226,450 3,201,168 28%

2018 3,201,168 886,723 2,314,444 28%

2019 2,314,444 641,101 1,673,343 28%

2020 1,673,343 463,516 1,209,827 28%

2021 1,209,827 335,122 874,705 28%

2022 874,705 242,293 632,412 28%

Res 5% 632,721 diff-310

But in sap the calculation is different and every year the rate of dep is changed like this

As per Sap

Op Bal Dep Net Book Val

APC 12,654,425 ROD

2013 12,383,503 668,154 11,715,349 5%

2014 11,715,349 2,310,199 9,405,150 20%

2015 9,405,150 2,046,341 7,358,809 22%

2016 7,358,809 1,771,300 5,587,509 24%

2017 5,587,509 1,502,698 4,084,811 27%

2018 4,084,811 1,234,097 2,850,714 30%

2019 2,850,714 967,563 1,883,151 34%

2020 1,883,151 695,742 1,187,409 37%

2021 1,187,409 427,584 759,825 36%

2022 759,825 127,103 632,721 17%

 Res Val 632,721

0
we need dep rate is uniform for entire useful life of asset

like (0)

1. ARPIT ASAWA November 24, 2015 at 8:05 am

Dear Thilak,

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 and also the rates are not uniform year on year basis.
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. How you resolved for your company?

Regards,

Arpit Asawa

like (0)

16. Sonam Soni June 16, 2016 at 8:10 am

Nice document malhar sir 🙂

like (0)
Share & Follow








Privacy
Terms of Use
Legal Disclosure
Copyright
Trademark
Sitemap
Newsletter