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Understanding percentage factor and period factor involved in calculation of Asset Depreciation in SAP

Understanding Asset Depreciation Calculation in SAP

In this post, I’d like to explain how asset depreciation calculation works in SAP, with a specific focus on the percentage factor and period factor involved in the calculation.

Note: This example assumes that the depreciation key is maintained for day-wise calculation.

Introduction

Brief Overview of Asset Depreciation: 

Asset depreciation is a method used to allocate the initial cost of a tangible asset over its estimated useful life. This process takes into account the decrease in value of an asset due to factors such as wear and tear, obsolescence, or aging. By depreciating assets, businesses can account for the expenses of acquiring and maintaining them in a manner consistent with the revenue generated over time. This approach is utilized for both accounting and tax purposes, enabling businesses to accurately reflect the economic value of their assets.

Key Terminology

  • Depreciation Key: The depreciation key determines the method and frequency of the depreciation calculation, such as straight-line or declining balance methods.
  • Useful Life: The useful life of an asset refers to the period over which it is expected to provide value to the company. This information is essential for calculating depreciation and is stored in the asset master record.
  • Planned Depreciation Start Date: This is the date when depreciation is set to begin, typically when the asset is placed into service.

Depreciation Calculation in SAP

Now, let’s walk through the depreciation calculation in SAP. For this, we’ll use transaction code AW01N.

  1. Enter the Company Code, Asset Number, and Fiscal Year and press Enter.
  2. The following screen will display. Click on Display Depreciation Calculation (highlighted in the screenshot below).



 

The below screen will display, now you can click on display depreciation calculation (see the highlighted)



 

Here is the calculation factors considered by the system, how to understand these factors ☹..



 

There is an interesting part in calculation here we go 😊…

 

Depreciation Calculation:

Let's break down the calculations with the following example:

Unavailable Days Breakdown:

Month

Unavailable Days

Jan-24

31

Feb-24

28

Total Unavailable Days

59

 

Other Parameters:

  • Ex Period (Useful Life): 000/032
  • Remaining Life (as of Nov 2024): 011/333
  • Depreciation Start Date: 30-Nov-23

 

 

Asset Details:

Life of Asset (Years)

No. of Days

12

4380

(12 years * 4380 days)

 

  • Ex Period Useful Life (Days): 32 (entered in Asset Master data)
  • Net No. of Days Available: 4348 (4380 - 32)

 

Calculation Breakdown:

  1. Period Factor Formula:

                   

 

  1. Percentage Factor Formula:

               



  1. Unavailable Days Adjustment:

            




  1. Net Days Available Calculation:

4348 − 58.83879 = 4289.161202


Depreciation amount =  Acquisition Value X Period Factor X  Percentage Factor

                            =621835.44 X 0.22773*0.085098 =144.58


Below is a screenshot of an Excel sheet used to perform the calculations for reference


.

This provides an overview of how asset depreciation is calculated in SAP with focus on the period factor and percentage factor. I hope this helps you understand how these elements play a role in depreciation calculations for your assets in SAP!

These screen shots are taken from SAP S4HANA 2023.

Please leave a comment here.

Best Regards,
D Durga Prasad

Labels:
Location: Guntur, Andhra Pradesh, India

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