What is the use of depreciation key in asset accounting?


Before understanding depreciation key lets understand depreciation method and period control method.

When depreciation is run end of the month then below accounting document gets posted.

depreciation document

In order to be able to post above document, sap software needs to calculate depreciation amount.

For sap to be able to calculate depreciation amount, below inputs needs to be provided to sap:

 

1.Depreciation method:

Different depreciation calculation method will lead to different depreciation amount. Below some of the depreciation calculation methods are shown for understanding the concept:

 

Straight line depreciation

Declining balance method

Written down value method

Multi level method

Maximum value method

Appropriate method is used for calculation of depreciation of the asset.

 

2. Period control method

Consider an example: Company has fiscal year from January to December.

 

Asset acquisition

Asset is acquired on 7th July.

Now, when depreciation run is performed end of the month (July), what should be depreciation start date?

Should depreciation start date be 1st July and depreciation calculated for entire 1 month?

Should depreciation start date be 1st Jan of the same year and depreciation calculated for 7 month?

 

Addition of asset:

Asset is added on 10th August.

Should depreciation be charged starting from 1st August and depreciation calculated for entire 1 month?

Should depreciation be charged starting from 1st Jan of the same year and depreciation calculated for 7 month?

 

Asset retirement:

Asset is retired on 17th Sep.

Should effective date for depreciation calculation be taken 1st September?

Should effective date for depreciation calculation be taken 1st October?

Should effective date for depreciation calculation be taken 1st January?

 

Asset transfer:

Asset is transferred on 22nd Nov

Should effective date for depreciation calculation be taken as 1st November?

Should effective date for depreciation calculation be taken as 1st December?

Should effective date for depreciation calculation be taken as 1st January of the same year?

 

 

Effective date plays an important role in depreciation calculation. Different effective date will lead of different depreciation amount. Hence, input (instructions) needs to be given to sap on the basis of which sap can determine effective date for depreciation calculation.

Instruction for determination of effective date for depreciation calculation is supplied to sap in the form of period control.

 

Now let us understand how instructions are captured in period control.

period control in depreciation key

Period control is used for determination of effective date for depreciation calculation.

 

→ Depreciation calculation method and period control both are captured in depreciation key. Depreciation key is assigned to asset class.

→Depreciation key is assigned to each depreciation area separately.

→ When an asset is created, asset automatically gets the depreciation key which is assigned to the corresponding asset class..

Depreciation key assigned to depreciation area

 

Below link to help you understand depreciation key better

https://blogs.sap.com/2013/09/11/different-methods-of-depreciation-calculation/