Consider this scenario: Company XY is already using SAP ERP Central Component (ECC). It has the Asset Accounting (FI-AA) module implemented with depreciation areas 01 (Book dep. in local currency) and 02 (Group dep. in Group currency).

In this scenario I assume that you have completed the basic configuration on FI-AA along with a chart of depreciation configured at the country level. A legal entity is live in an SAP system with assets purchased against assets under construction (AUC) and also posted with final capitalized assets.

To view an asset with OLD as the company code, use transaction code AS03. Follow menu path Accounting > Financial Accounting > Fixed Assets > Asset > Display. The screen that appears (Figure 1) shows an asset in the company code OLD with the depreciation areas 01 (Book depreciation in local currency) and 02 (Group depreciation in group currency). 

Figure 1

An asset in company code OLD (existing entity)

In the same country, company code NEW is acquired and inducted in the SAP system. However, it has a specific requirement demanding legal specific depreciation calculations for a tax balance sheet and for local reporting because of the nature of the legal entity (i.e., a manufacturing company that needs to have a different rate of depreciation on production equipment in local tax balance sheet books than group books). Therefore, you need to include new depreciation areas — for example, 15 (tax balance sheet) and 20 (local depreciation) in local currency as shown in the Figure 2.

Figure 2

An asset in company code NEW (newly added entity with new depreciation areas)

To ensure a smooth transformation in such an event, you need to follow these steps:

1. Create new depreciation areas with new requirements
2. Set the chart of depreciation
3. Set up a retrofit process to add a new depreciation area for the new assets
4. Activate the depreciation areas in an asset class
5. Determine the depreciation areas
6. Check the last fiscal year
7. Complete the data retrofit process

Create New Depreciation Areas with New Requirements

Remember that company code OLD is set up with depreciation areas 01 and 02. A new company code NEW is required to include new depreciation areas (e.g., 15 for tax balance sheet and 20 for local depreciation).

When the head office legal entity is in one country and its subsidiaries are in different countries, the SAP General Ledger’s depreciation areas include the following standard settings for the country chart of depreciation:

• Depreciation area 01 (group depreciation in local currency) is linked to 1 (area posts in real time) in the SAP General Ledger along with target group 0L (leading ledger)
• Depreciation area 02 (group depreciation in group currency) is linked to 0 (area does not post) and used for group reporting purposes.

You need to configure the following new depreciation areas:

• Depreciation area 15 (historical tax depreciation) is linked to 0 (area does not post) and is used for local tax depreciation and reporting purposes
• Depreciation area 20 (local depreciation in local currency) is linked to 3 (area posts depreciation only) along with target group XX (country-specific non-leading ledger)

It is always required to set the chart of depreciation before you change or configure any settings in FI-AA. To set the chart of depreciation, use transaction code OAPL or follow IMG menu path Financial > Accounting (New) > Asset Accounting Valuation > Set Chart of Depreciation (Figure 3). Enter the country for which the chart of depreciation is to be set and then click the green check icon.

Figure 3

Set the chart of depreciation

Set Up a Retrofit Process to Add a New Depreciation Area for the New Assets 

Based on the legal requirement, it is required to define new depreciation areas. To add new depreciation areas for the new assets, follow IMG menu path Financial Accounting (New) > Asset Accounting > Valuation > Depreciation Areas > Define Depreciation Areas. In the screen that appears (Figure 4), click the change icon (highlighted in red) and maintain new depreciation areas as per the legal requirement of new company code.

Figure 4

Define new depreciation areas (15 and 20)

Figure 5 shows that the depreciation area 01 posts in real time with the indicator set as 1 under the G/L column to Trgt Group 0L (leading ledger only). Depreciation area 20 posts only the depreciation amount calculated based on the depreciation key with the indicator set as 3 under column G/L to Trgt Group FR (non-leading ledger; i.e., local books). Note also that the indicator 0 under column G/L means that the area does not post in real time.

Figure 5

Control posting

When the new depreciation area is added in a country already live on the SAP system, any new assets created in the company code OLD thereafter have an impact. Therefore, you must retrofit the data in the OLD company code, irrespective of the period when the NEW company code is going live during or in the beginning of the fiscal year. 

Activate the Depreciation Areas in an Asset Class

In a standard SAP system, all the configured existing asset classes are automatically updated with new depreciation areas when the company code is going live. To activate a depreciation area in an asset class, follow IMG menu path Financial Accounting (New) > Asset Accounting > Valuation > Determine Depreciation Areas in the Asset Class. At the country chart of depreciation level, activate the new depreciation areas in all the asset classes with the required depreciation keys, useful life, and layout. As shown in Figure 6, by default the new depreciation areas in all asset classes are deactivated (i.e., the check box is on).

Figure 6

New depreciation areas are deactivated by default at the asset class level

As per the legal requirement, the depreciation keys need to be customized and configured along with the required life at the asset class level. These keys should be updated for the entire asset classes in the country configured. As shown in Figure 7, for better understanding, I have maintained the same depreciation key for depreciation area 15 and the custom depreciation key in depreciation area 20. However, the base of calculation is kept the same as depreciation areas 01. Also note, activation of depreciation is done by unchecking the check box.

Figure 7

Activate the new depreciation area

Determine the Depreciation Areas  

To determine depreciation areas, follow IMG menu path Financial Accounting (New) > Asset Accounting > Depreciation > Ordinary Depreciation > Determine Depreciation Areas. At this step, it is required to activate further the ordinary depreciation posting at the depreciation area level (i.e., the depreciation areas in which you want to manage ordinary depreciation as shown in Figure 8). This specification means that the specified value type is allowed in the depreciation area and that the system does not issue an error message when corresponding depreciation terms in the asset master record are maintained.

Figure 8

Activate the new depreciation area

Assign Accounts 

To assign accounts, follow IMG menu path Financial Accounting (New) > Asset Accounting > Depreciation > Ordinary Depreciation > Assign Accounts.

The general ledger accounts for ordinary depreciation are configured and maintained at the chart of depreciation or chart of accounts level. Further, the account determination for Balance sheet Accounts, Depreciation, and Special reserves are at the depreciation area level. 

Check the Last Closed Fiscal Year 

When you have completed the above configuration settings and the asset load is completed in the rolled-out site, you need to check the following as a part of a prerequisite: Check the last closed fiscal year. To complete this step follow IMG menu path Financial Accounting (New) > Asset Accounting Preparing for Production Startup > Tools > Reset Year-End Closing > Reverse Year-End Closing for Depreciation Area.

The new depreciation area in the company codes OLD (Figure 9) and NEW (Figure 10) appear on the screen. However, to complete the data retrofit activity, make sure that the last closed fiscal year under the new depreciation area is not before the current year (1), as shown in Figure 10. 

Figure 9

Automatic update of new depreciation areas in an existing entity

Figure 10

Automatic update of new depreciation areas in a new entity

The screen shown in Figure 9 shows that the last closed fiscal year (2012) is the current year (1). To carry on with the year-end closing of previous years, you need to use transaction AJAB. After you execute the transaction, enter the company code and fiscal year to be closed. Press enter.

Complete the Data Retrofit Process

To add a new depreciation area, use transaction code AFBN to open the depreciation area for all the assets in the company code OLD – Existing Entity. The SAP system provides you with an option to set the indicator Depreciation term from Asset class. If it is set, the system copies the depreciation terms from the superior asset class into the new depreciation area and applies them to unposted assets.

Figure 11 shows how to open a new depreciation area in the existing company code – OLD. Also, it shows on the new rolled-out site (i.e., company code – New), that there are no updates, as the new depreciation area defaults during the legacy data transfer of assets.

Figure 11

Automatic opening of NEW depreciation areas in assets of company code OLD (existing entity)

Repeat the same exercise for any additional new depreciation areas that you need to enter. Finally, in the asset master, the values can be verified via transaction AW01N.

Figures 12 and 13 show the comparison before and after the update of a depreciation area in the asset master.

Figure 12

Asset master in the company code OLD – existing entity before retrofit

Figure 13

Asset master in the company code OLD – existing entity after retrofit

Configure a Substitution Rule to Update the New Depreciation Keys 

The purpose of defining new depreciation areas is to cater to the legal requirements. By default the depreciation key from the superior asset class is copied via transaction AFBN. Via substitution rules, the old depreciation key can be changed and updated with the new depreciation keys. To complete this process, use transaction code OA02.

If it is required to change the depreciation keys in all the new depreciation areas, create as many rules as necessary. Continuing the scenario considered, let’s change the depreciation key from LINS to ZLFR in depreciation area 20.

The defined substitution rule can be applied on all the asset masters in the existing company code retrofitted. If the company code is OLD with the depreciation area 20 and the depreciation key LINS if TRUE, then replace the depreciation key with ZLFR (Figure 14).

Figure 14

A substitution rule to update the depreciation key from LINS to ZLFR in depreciation area 20

Create Worklists for Mass Update of Depreciation Keys

To create a worklist to use as a report of asset history in a standard SAP system, use transaction code S_ALR_87011990. Execute the standard report using the company code OLD. The existing entity on depreciation area 20 needs to be updated with the new depreciation area (Figure 15).

Figure 15

Execute Asset History sheet

Upon execution, go to the worklists menu in the output of the report to create the worklists. Follow menu path Edit > Worklist > ... create (Figure 16). After you create the worklist, the system populates a dialog box that includes a WL name (Figure 17). Maintain the substitution rule defined in Figure 17. After you update the substitution rule, the system compiles and creates a work queue with a unique number (Figure 18). 

Figure 16

Create the worklists for bulk or mass change

Figure 17

To maintain the worklist name

Figure 18

Create a work queue

Repeat the same process for as many new depreciation areas created as per the legal requirements and or specific requirements for company code NEW – newly added entity to extend to company code OLD – existing entity.

To execute a worklist, follow menu path Accounting > Fixed Assets > Environment > Worklists or use transaction code AR31. The work queue created is used to edit or execute the worklist and release the queue for the same depreciation key to update all the asset masters in the legal entity OLD. To release the worklists, click the release button (Figure 19).

Figure 19

Create a work queue and release

After you click the release flag, a screen appears showing the work queue after the worklists have been released (Figure 20).

Figure 20

Work queue after release

The above steps result in changing the depreciation key in the selected depreciation area in the specified company code via a substitution rule. At the end of the process, all the assets in the company code OLD are updated, as shown in Figure 21.

Figure 21

Update of the depreciation key in depreciation area 20

Validate the Data 

Before you can calculate the depreciation and post it in the new depreciation area, you need to validate the data. Run transaction FAGLB03 to display balances in both leading and non-leading ledgers with the selection of G/L accounts created for asset accounts, depreciation accounts, and accumulated depreciation general ledger accounts. The main objective of this step is to have the same value after the repeat run of depreciation updating the local books linked to depreciation area 20. If the depreciation run is carried for the previous month, technically, the posting to both leading and non-leading ledgers would have already happened. With the new depreciation area to post only to local books, it is required to rerun the depreciation for the previous month. Run Repeat Run for the previous period. This activity posts the accumulated depreciation in local books against the depreciation area 20.

I recommend that you perform the retrofit activity at the beginning of the fiscal year. If the data retrofit is performed during the fiscal year, then at the first day of the month the depreciation posting for the previous month in local books should be reversed. This is because the depreciation values for the previous month are posted before the data retrofit activity both in the leading and non-leading ledgers, and after the retrofit posting on the non-leading ledger. Therefore, to avoid duplication, reverse the depreciation posting only in local books (Figure 22). 

Figure 22

Document on Repeat run of depreciation posting in non-leading ledger

Check the balances in the leading and non-leading ledgers (local books) for the selected G/L accounts corresponding to B/sheet and P & L accounts. Run depreciation: Repeat Run to post depreciation in NLL ONLY (Figure 21). Check the G/L balances. Values should be posted only in the NL Ledger. Run transaction OASV to post the reversal in the NL ledger, with correct document date and posting date (Figure 23).

Figure 23

Reversal document posted in non-leading ledger

To check the G/L balances, use transaction FAGLB03. It should be same as the step before the posting on new depreciation area and its reversal (Figure 24).

Figure 24

To keep back the balances in both leading (0L) and non-leading ledger (FR) [fragment]

Simulate the depreciation for the subsequent month to make sure that the depreciation calculated is in line with what is expected from the business. In Figure 25, I have the same values in both leading and non-leading ledgers.

Figure 25

Posting of depreciation in both depreciation area 01 and 20 are same (Dep. Key is configured the same)

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