A depreciation area in SAP contains the parameters required to evaluate an asset. It is defined by a two-digit numeric key. You may use more than one depreciation area to represent different asset valuations for cost accounting or legal reporting. For example, A chart of depreciation is made up of a list of such depreciation areas.
Depreciation is the reduction in the book value of an asset due to its usage over time or due to the legal framework for taxation reporting. We usually calculate the depreciation considering the economic life of the asset, the expected value of the asset at the end of its economic life (junk /scrap value).
In SAP, we have various methods of depreciation calculation, such as Base methods, Decline balance methods & more. Which method of depreciation calculation to choose depends on the company’s law, income tax information etc.
We have two categories of Depreciation in SAP.
Planned depreciation brings down the value of the asset after every planned period (say every month), till the asset value is fully depreciated over its life period. By this, you will know what will be the value of an asset at any point in time in its active life.
On the other hand, Unplanned depreciation is the sudden happening of an event or occurrence not foreseen (there could be a sudden break out of a fire damaging an asset and forcing you to depreciate fully as it is no longer useful economically) resulting in a permanent reduction of the value of the asset.
In SAP, we have two types of depreciation:
As I mentioned in the starting, a chart of depreciation contains a list of depreciation areas. You need to define at least one depreciation area, usually denoted by 01 (book depreciation). Also, you can have a maximum of 99 depreciation areas.
Although it is possible to create the depreciation areas at any time, even after Go Live, I recommend creating them well in advance, in the customization phase itself.
Also read: ASAP Methodology & Phases of implementation
To define new depreciation areas and maintain the values for existing areas, use the T -Code OADB
Also read: Popular TCodes in SAP FICO
You need to know how to set up Depreciation Areas postings to FI from Asset. For this, you should define how the various depreciation areas need to post to FI-GL.
It can be any of the following scenarios:-
However, you have to ensure that you configure at least one depreciation area to post values automatically to the FI-GL. Normally the depreciation area will be 01 (book depreciation) of the depreciation areas.
Learn More: SAP FICO Scenarios defining real-time issues
We use the depreciation Area table in SAP to store all the depreciation areas. In SAP, the Depreciation Area Table is – T093B.
Related: Tables in SAP FICO
Before implementing Asset Accounting, you should determine the types of valuation for which you need different depreciation areas. You need to adopt these areas from the SAP reference chart of depreciation. Conversely, you can copy the existing depreciation areas, make sure to redefine them.
SAP also gives us the option to delete any depreciation areas from the standard chart of depreciation, in case we do not need any. Furthermore, we can also open new depreciation areas when the system is live.
SAP Depreciation is part of SAP Financial Accounting, thus, is important to learn practically for SAP FICO consultants or if you are (or want to be) a S/4HANA Finance consultant. Gaining its on-system knowledge will help you understand it in real terms.
What is SAP MRP? SAP MRP (Material requirements planning) is a planning tool to help…
How is SAP Career for Freshers? SAP Career for Freshers seems challenging initially. If you've…
SAP S/4 HANA covers the business processes like Procure-to-Pay, Order-to-Cash and record-to-report. To understand the…
What do we require to Configure Material Master? Master data in materials management requires a…
SAP New GL Activation and Migration From Classic GL During a new installation, the New…
SAP Material Management in S/4HANA Logistics SAP Material Management is an integral part of Logistics.…