SAP FICO ENGLISH S4HANA: Asset Accounting Configuration - 05

this conference will now be recorded

alert

so we were talking about configuration

related to Furniture yesterday and we

understood

we took one example yesterday for

Furniture purchase from A supplier

bantia furniture on 5th June 2023 for

60 000 INR and we calculated

depreciation figures for first year

second year third year according to two

accounting principles character

now our Target is to configure this in

the system and bring the same figures

from the system

in order to achieve it whatever we need

to do let us try to understand from now

on

now configuration that we are doing is

not generic we are going to configure

only with respect to Furnitures from now

after that I'll do another set of

configuration for different asset class

and then I'll give you different

assignments which you will have to

perform to understand

to ensure that you are clear and

conceptually

no confusion with asset accounting

now yesterday we were talking about the

GL accounts we need these GL accounts to

be created before we proceed to the next

setting now let me open asset accounting

configuration

there is one dedicated transaction to

Define all your asset accounting config

which is orfa

if you go to orfa this will display only

the configuration related to asset

Accounting in sap

in this so far whatever we have done is

only from the organizational structure

from organizational structure what we

did is we created chart of depreciation

we created depreciation areas we have

defined zero tax codes we have made

additional currency related settings and

then we have assigned our chart of

depreciation to our company code now

everybody is able to create your chart

of depreciation with the six

depreciation areas and you are able to

assign your chart of depreciation to

your company code am I correct

yes sir yes sir

right so no doubts no confusions in this

you're not getting any errors even if

you get any error you must be in a

position to solve your error you need to

understand why you are receiving that

error and what went wrong how you need

to fix that error once that is done let

us try to define the further settings

from now on but before we Define further

settings

let's ensure that when you are doing the

configuration on the asset accounting

through IMG path always remember you

will be using orfa transaction

in this you will have to understand the

sequence of your different different

nodes

first one what we did was organizational

structure

let's open organizational structure in

this the initial settings is what we

have done next one is your asset classes

next is setting that we need to Define

in your asset accounting config is

assertive classes let me copy this

assertive class heading

I'll put this here

okay now we are trying to define the

settings related to aesthetic class

assertive class is nothing but a nature

of asset asset classification

this asset classification nature of

asset is given to you by your client

they'll tell we are going to have this

many type of assets like Furniture

fixtures land Building plant Machinery

Motor Cars softwares vehicles and on

you need to look at the number of

classes that they have accordingly you

are going to decide what is your number

of asset classes whether you are going

to have one asset class two three or ten

eight seven depending on

the business process followed by your

client you are going to decide how many

aesthetic classes you are going to have

but at any given point of time make sure

if somebody is asking you about

assertive classes immediately you will

remember a certain class is nothing but

classification of a set or nature of

asset

and if somebody is asking you how many

sat classes you have created make sure

you are not blank you get these kind of

equations in your interviews if you tell

you did asset accounting configuration

you might get a question

that how did you create or how many

asset classes you have configured

right so most of the people those who

have not actually worked will be blank

or will tell only one or two asset

classes

so you should not tell in such a way

wherein the other person is able to

identify you are not confident you are

not clear

somebody is asking go in a flow land and

building plant and Machinery furniture

and fixtures Motor Vehicles softwares

and licenses something like that at

least six to seven aesthetic classes at

any given point of time are on your

fingertips

okay how you will do what you will do

inside the system nobody cares in your

interview but on your interview make

sure when somebody is asking you a

question you are able to answer it

without any hesitation without any

confusion

now I'm writing only one a city class as

of now which is your

furniture and fittings

we are going to Define asset classes

furniture and fittings

if you go to sap

you have assertive classes inside the

asset class there are

one two three

four steps the last one we will not be

using there are four steps

where is your asset class is it on the

first position or on the fourth position

it is on the fourth position which means

before you create a certain class there

are prerequisites

before you create a certain class there

are prerequisites if I am asking you in

your interview can you direct how will

you create the assert class

you cannot straight away create an

aesthetic class because your asset class

contains certain prerequisites those

prerequisites or those three settings

which are above your asset class

one is your account determination second

one is screen layout rule third one is

number range interval without these

three things we cannot create a set

class

if somebody is asking you how do you

create a set class always make sure you

mention you talk about this these three

settings

account determination screen layout Rule

and a number range interval is a

prerequisite before creating an asset

class

now let me put these three settings here

account determination

next one screen layout rule

next one

number range interval

and finally

asset classes

report the

above 3r

prerequisites

for

asset class creation

in sap

the above three settings are

prerequisites for assertive class

Creation in sap people will specifically

put this question to check whether you

are talking about these three settings

or not

first one that you need to do is account

determination the moment you talk about

the moment you listen to the term called

account determination this is straight

away related to GL account mapping

anywhere you are talking about a GL

account mapping in the back end or in

the background we will be using account

determination terminology this is common

terminology in your sap wherever your

bringing the GL account automatically

from backend

those are your account determination

setting in your asset accounting how you

want to pull or how you want system to

take the GL account

now all your GL accounts are taken based

on the account determination before you

create accounted determination first you

need to understand which asset class are

we creating

currently we are creating furniture and

fittings

currently we are creating furniture and

fittings relating to furniture and

fitting what all the GL accounts that

are needed and how we are creating this

GL accounts in the account determination

we need to understand in short

yesterday's session we understood there

are

eight GL accounts that are needed in the

beginning for any asset class or for any

asset these GL accounts how you want to

connect to your asset

the GL accounts are connected to your

asset based on the account determination

if you do not have the account

determination it is not possible to

maintain GL accounts for asset for asset

Accounting in sap now when you're

creating account determination make sure

you have the naming a convention

predefined

when you're talking about naming a

convention when you go to asset

accounting config for accounted

determination how you want to identify

this accounted determination for

furniture

before you decide this you need to

decide how you are going to identify

your furniture and critics

okay so what I'll do first let me open

this account determination setting let

me click on the first icon

I'll click on new interest I'll try to

check how many digits I am able to pass

this

how many digits

I'm able to put eight digits which means

your account determination is eight

digit alphanumeric code

go back

cancel

yes

and

again let me open this asset classes

if I open a city class let me click on

new entry let me verify how many digits

I am able to take this year one two

three four five six seven eight

this is also eight digits Alpha

numerical code now here what we need to

do you need to maintain a number or a

series or a sequence which is common

between your acidic class and account

determination

it is not recommended your account

determination code is different your

asset class code is different that is

not recommended if your account

determination code is 1 1 1 0 your asset

class should also be one one zero so

that way you need to mention make sure

the assert the class and account

determination codes are unique codes are

same or similar now if you see you're on

the asset class creation screen in the

asset class creation screen you are able

to see account determination screen

layout rule number range do you find

these three as mandatory fields

character

account determination is mandatory to

create a set class screen layout rule is

mandatory similarly number range is

mandatory that is why we have listed the

above three settings are prerequisites

for asset class Creation in sap

now we understood this is eight digit

alphanumeric character how you want to

Define this eight digit is what you need

to decide

So currently if you see

how many digits are used one two three

four five six because your Ascent class

is client specific you need to ensure

the availability of the numbers when you

are in a project no other settings will

be there whatever the naming the

convention that you want you can use it

but when you are practicing make sure

the available naming a convention is

what you are going to prefer

this is one sorry

one two three four five six digits are

already used

one two three four five digit is also

already used

so what I will do is

I'll use six digit only but first digit

I am going to put an alphabet I'll put

alphabet at the beginning I'll try to

use a different six digit code because

normally even in real time we will be

using six digit code or six digit length

account determinations six digit length

asset classes

let's go to account determination

click on new entry I'll put our company

code currently which we are defining is

d e i n

OK I will put D here followed by

one series I am going to take one

one two three four okay it has become

six digits now one two three four five

six

I'll put

d e i n

followed followed by

furniture and

fittings or furniture and fixtures

clearer

this code and the description is

maintained in your KDs document when you

are implementing any project

not something that you will think when

you are configuring it these are

predefined pre-agreed by the client and

these are documented in a KDs document

based on the KDs document you are going

to update on your sap

click on Save

account determination is this for our

furniture copy this

this is your account determination d

one thousand sorry D ten thousand

next one

go back

after account determination you have

something called screen layout rule this

is screen layout rule is is related to

your asset Master data whenever you

create any asset Master record how do

you want to maintain your screen layout

rules like which field you want to

display which field you want to make it

mandatory which field you want to

suppress these kind of things are

monitored in asset screen layout rule

for everything you need to create one

screen layout rule you can create common

screen layout rule for all the asset

classes or you can create different

different screen layout rules based on

the different different assets currently

let us create a new one related to our

asset class click on new entries

now if you see here do you have new

entry option

loss

you do not have a new entry option which

means the

screen layout rule cannot be created on

your own you must create your own entry

by copying from existing entry here sap

will provide you predefined or standard

screen layout rule for every assert

class

now we are talking about furniture and

fixture I'll copy from this furniture

and fixture one zero four

click on copy

it's a four digit code one two three

four only four digits I'll put d

followed by one triple Zero D one

hundred

and in the description I'll put d e i n

representing our company code furniture

and fixtures

clearer

nothing is given inside just a code and

then the description proceed to save

this

enter

go back

and the last one is number range

interval how you want to decide your

asset naming convention or a certain

numbers whether you want to create six

digit number for a set four digit number

for a set or eight digit 10 digit a

number for a set ideally we will be

proceeding with six digit number or

eight digit number for a set so let us

create a set number with six digits only

put your company code here d e i n

and then click on edit intervals or

change intervals here

after this put number range make sure

here also you follow a sequence a logic

currently for the furniture and fixture

we have decided d one all zeros I'll put

D1 here

and this one I want to identify with one

series I'll put one

we are going ahead with a six digit

number one two three four five

it has become six digit and then I'll

put

one followed by five lines

clear up

one two three four five six digit

enter and then

saved

when you create the asset Master under

furniture and fixture this is the

numbering sequence for furniture asset

Masters

go back

now we have created account

determination screen layout Rule and

then aesthetic and then number ranges

after creating these three settings now

you can create your asset classes click

on asset classes

add a new entry

same thing this is a six digit I'll put

D followed by one two three four five

how many zeros one two three four five

I'll take the same code

I think one zero I put extra

okay D 10 000 I'll put

d e i n

furniture

and fixtures

short text if you want anything you can

put I'll put d e i n

for nature

account determination we have already

created

same code as your

asset class is your account

determination screen layout rule we

created a D100

okay next one base unit how your if you

want to measure this asset how you are

going to measure this asset is this in

each or is this in liters or how you are

going to measure the asset let's put E A

here

sorry this is base unit is each

you are going to count the assets based

on pieces like each one asset to a set

likewise

number range we have created D1

clearer

are these assignments clear whatever we

have created and whatever we are

assigning here

so as far as the number range is

concerned uh in the real time what we

follow like uh do we create the number

in this for each asset classes or a

single number is to be used by all asset

classes for each asset class there will

be a different number range because

based on the a certain number you want

to identify whether this is land

Building plant Machinery motor vehicle

software license same like your GL

number range or customer vendor same

logic

like you you will have a different

number range right for every

classification same logic

yes sir got it sir okay and after this

you have one more Point here status of

AUC

you have one asset class called as asset

under construction or cwip called as

capital work in progress asset either

asset under construction AUC or Capital

work in progress asset cwip or CVP asset

only for those assets you are going to

select line item settlement otherwise

this is strictly no you see summary of

management of AUC

okay AUC we will talk separately as of

now apart from AUC for everything this

is no AUC

only the four things that you are going

to update even in your real environment

configuration press enter and then click

on Save

okay now your asset class has been

created

clearer

after creating this asset class next

thing that we need to do is

go to integration with general ledger

accounting after asset class go to

integration with general ledger asset

accounting

in this you have one option called

assign GL accounts

you have an option called assign GL

accounts let me put this here

not writing the configuration steps in

detail I will give this configuration

steps as an activity to

and then I want you to create the

configuration document for asset

accounting for your company code with

your screenshots

in the same way you are going to create

the similar configuration document in

any project that you work

so in that way you are going to

understand how documentation is made how

configuration documents are prepared by

sap FICO consultant

you're not going to refer the

configuration document instead you are

going to prepare the configuration

documents here clearer

assign GL accounts if you go inside the

assigned GL accounts

it is asking you to input chart of

depreciation we know what is our chart

of depreciation we have created d e

in as the chart of depreciation

put Den chart of differentiation enter

inside

once you go inside this is giving you

chart of account which is assigned to

your company code now what I have given

in the initial screen I have given chart

of depreciation but system is giving

chart of account corrector

what we have given chart of depreciation

what system is showing

chart of account yes no

yes sir how did system come to know that

this is your chart of account for your

chart of depreciation on what basis

on the company code basis

how did system figure out that

based on the charts so we're going to

assign the company code

right

when we have assigned chart of

depreciation to your company code now

whatever the chart of depreciation you

have given on the initial screen if you

go inside

that will ask only first time again it

will take the same screen same chart of

depreciation which is recently used

the chart of depreciation that you have

used system will take to which company

code this startup depreciation is

assigned now it will take that company

code and it will check for this company

code what is the chart of account

assigned accordingly it is bringing your

chart of account here

okay now against this startup account

you will have to assign the GL account

for assigning a GL account in asset

accounting your key combination is chart

of depreciation followed by chart of

account next account determination

in d e i n chart of depreciation for d e

g r chart of account

you have to select the respective

account determination double click on

this

if you double click on this you have to

see your chart of account here and then

from this list of the account

determination pick your account

determination our account determination

is what D 10 000.

enter

pick

this account determination you will find

all the accounted determinations because

this is client level setting anything

which is client level setting system

will display all the records do not get

confused these things will happen only

in the practice environment in the Real

Environment you will find account

redeterminations which are related to

your client only unnecessary things will

not be there in the real system clearer

don't think that the same way you will

be able to see in the Real Environment

it is not the similar way

unwanted things practice related things

will not be there

select your account determination now

you have three type of accounts one is

your balance sheet account second one is

depreciation account third one is

reserve related account but out of these

three two are mandatory which are your

balance sheet and depreciation related

select the account determination double

click on balance sheet accounts

if you double click on balance sheet

account it is giving you two

depreciation areas area number one and

area number three character

this is giving depreciation area one

depreciation area three but how many

depreciation areas we have created

six six we have created six but it is

giving you only two let us open our

depreciation areas once again

I'll go to one more window

or f a

General valuation is where you can find

depreciation areas

click on depreciation areas

Define depreciation areas

you have six depreciation areas

but system is showing only

I think it is stuck

out of six how many we are able to see

on the screen

only two right

I think my only leading

okay

you can see both side by side right if

you look at the left hand side where you

are able to maintain the account

determination setting system is

displaying a depreciation area one

depreciation area three on the right

hand side if you look at the list of

depreciation areas that we created you

are able to find six one two six

why system is picking only two it is

going to give you the depreciation areas

where there are postings

wherever there are postings only those

posting related depreciation areas will

reflect in your account determination

setting otherwise it will not come

if you look at this depreciation Area 1

has a setting of area Post in Real Time

character

it has got area Post in real time one is

appearing here

two area does not post if there is no

posting there is no point of GL

determination am I correct

prediction

there is no posting there is no point of

GL account

you need GL account only if you are

posting

two is not posting so there is no jail

posting GL account redetermination

similarly three

three has got area Post in real time you

are able to see three here corrector

now four five six area does not post so

456 is not appearing clear why only two

out of 6 is appearing here

right so you will be maintaining GL

determination only for the areas which

are posting real time if the

depreciation area is not posting in real

time there is no setting of GL

determination system will not allow you

to maintain the GL accounts wherever you

put the setting as area does not post

now I will come back

close this

select area number one

depreciation area one and you need to

select balance sheet accounts double

click or you select this double click on

area one

if your double clicks are not working

select this click on this

detail option

okay you will get this screen opened up

here you have a list of GL accounts

which are used based on the business

requirement

first one is acquisition and account

assignment second one is retirement

account assignment third one is

revaluation account assignment fourth

one is account assignment of cost

portions not capitalized last one is

balance sheet account

we will not be using everything we will

be using only the first three segments

first one related to acquisition account

assignment second one retirement account

assignment third one revaluation account

assignment the first three segments is

what we will be using most commonly in

real environment

okay now you see balance sheet APC

yesterday we have listed something here

apcgl account APC GL account is nothing

but your asset main account

if you are talking about furniture and

fixture you need to put the GL account

called furniture and fixture

let us open our chart of account

let me open

fs00

I'll change company code to

d e i n

in this company code fixed assets

category

inside the fixed asset do you have

inside the fixed assets we have an asset

called furniture and fixtures okay this

is the GL account that we need to use

copy this GL account number

and fittings

go to the other screen put this here

when when you hit enter you will get the

account description here clearer

chart of account is degr account

determination is d1000

and depreciation area is 1 IFRS leading

Ledger INR currency your balance sheet

APC account is furniture and fixture

next one if you have any down payment

you have to maintain this GL account if

you have any inter company related

things you will have to maintain this

we will be updating this GL accounts

when we execute these scenarios

okay I'll show you the error messages

and then I'll give you the GL accounts

what you need to update how those

postings will happen

as of now only one GL account is

sufficient to run our scenario

next one retirement account assignment

unit loss made on asset retirement

without Revenue

this is nothing but loss without revenue

is what

scrapping character

yes you're retiring an asset without any

Revenue this is called as scrapping

so here you'll have to put scrap related

GL account

I'm just putting the text as of now just

to make you understand

second one is clearing account revenue

from asset sale so here you will be

putting

asset

sale

clearing GL account

okay third one gain from asset sale is

what

perfect

again from asset sale is nothing but

profit on sale of asset loss from sale

of asset is your loss from sale of asset

last one clearing Revenue sale to

Affiliated company if you have winter

company asset sales then you will be

maintaining clearing asset sale

inter-company

clearer which GL accounts to be assigned

here I am not assigning GL accounts as

of now

I'm not assigning GL accounts now I am

only assigning balance sheet account

clear it

I have assigned balance sheet account

in area number one if you click on this

right next entry you'll have to put

balance sheet account for

income Indian companies act also this is

for your IFRS

click on right arrow you get next entry

are you getting anything

any screen

if you click on next

nothing right

next previous nothing is coming proceed

to save this

enter

go one level back

now select depreciation Area 3

balance sheet account click on this

details

now you're on area number three Indian

companies act D1 Ledger INR currency put

APC account same

clearer other accounts we are not

updating now we will be updating after

posting the asset transaction save this

clear up

yes

clear what we did we are not assigning

all the GL Accounts at the beginning

itself

we are trying to understand everything

based on the exact scenario accordingly

we will add all the other settings

next one if you want to update

depreciation related accounts you need

to select the respective depreciation

area

select a depreciation click on this

details

okay if you click on this details

it will ask you to put accumulated a

depreciation account ordinary

depreciation account and other accounts

related to depreciation

here we will be updating the first

segment ordinary depreciation specialty

special depreciation unplanned

depreciation first three we will be

using

if you are using revaluation we will

also be using revaluation related

GL accounted determination

next

so as of now I am not updating any GL

account for depreciation also I have

only updated one GL account for

acquisition

go back

clearer

clear essential accounts

we are updating only one GL account as

of now because for us to run this

scenario you need only one GL account

next one which is very important in S4

Hana only technical clearing account for

integrated asset acquisition

asset acquisition is only asset purchase

or all the asserted transactions

only a set purchase

a set

acquisition represents only the asset

purchase in short your technical

clearing account in sap s4hana asset

accounting is used only for asset

purchase related transactions not for

all the transactions only if you are

purchasing the asset the technical

clearing account is used

now why and how this technical clearing

account is used we will practically see

and understand when we are posting the

asset purchase related entry but for now

we need to maintain this GL account I am

not updating the GL account now because

I want you to see the error message and

then update the GL account

so that we will understand the Logics

connecting points why these are all

updated in s4hana system what will

happen if you don't update

I am just opening the setting now Define

technical clearing account just open

this drop down

here it is asking you to put your

chart of account corrector

or if I put a new entries this is asking

us to put chart of account and then

technical clearing account

we need to ensure you will put your

chart of account which is degr

and you will put the technical clearing

account which you have created so far we

have not created we will create one

technical clearing account we will

assign it here while posting the asset

acquisition entry as of now we are not

updating this entry clearer

we are not creating this now

because our intention is to see all the

errors

understand why the error is coming what

we are missing how these errors are

connected to your asset accounting go

back

after this straight away

you go to General valuation in general

valuation we need to open

currencies inside the currencies first

you go to specify use of parallel

currents did we already do this as part

of your basic asset accounting conflict

org structure

yes sir

right now it's time to revisit this you

need to open this once again if you open

here once again how many areas we have

created

six

yes sir

we created six differentiation areas

representing three accounting principle

companies act Income Tax Act and then if

Paris

first two will represent IFRS local

currency IFRS group currency second Auto

will represent companies act local

currency companies act group currency

last two will represent Income Tax Act

local currency Income Tax Act group

currency

now here you are able to see

area number one currency type is blank

area number two currency type is 30

group currency but do you know what is

the currency here

are you able to see which currency is

used here or no

no sir no right you are not able to see

which currency is used here

ignore the description this is something

that we have given manually

but next to currency type it is giving

blank and then 30. now this 30 what is

this 30 we do not know you need to

ensure these currencies are properly

mapped for that just go one step back on

this same you will find another setting

on the above this Define depreciation

areas for foreign currencies open this

if you open the above setting you will

have to look at your company code

your company code is appearing here Dell

computers India limited select this

company code double click on

depreciation area currencies

if you double click on this

are these currencies correct or there

are any corrections

if you see area number one

area number three area number five these

are INR is INR appearing there

1 3 and 5

yes sir right which is correct area

number two is your group currency

according to us what is our group

currency

dollar what is appearing here

Euro Euro from where your group currency

comes from which screen that is updated

client level

scc4 let's go to sec4

if you look at scc4 and this client

number which we logged in is

800. against 800 what is the currency

resolution

US dollar

here what is the currency

Euro

so

you go here change this to Dollar

manually and then press enter clearer

second one

for area number four also dollar

for

and for area number six also this will

be dollar

press enter

and then save it

clearer

now all your device is not getting

updated automatically

somebody would have changed in between

which is not reflected in this table

but the change of your group currency is

not recommended when you are in a real

environment

OK certain things we will be changing

frequently in the test environment only

but ideally once you decide that your

group currency is dollar

in this client irrespective of your

company company code country group

currency remains dollar it will

automatically detect a dollar

but if somebody is changing system might

update or it may not update

depending on the link in the backend

yeah okay

save this clear with the depreciation

areas

clearance

now we ensured that you have six

depreciation areas each depreciation

area is properly aligned to the

currencies that you are using for your

company code

after this

just minimize General valuation straight

away go to depreciation what we are

doing we are coming in sequence

Arc structure we created asset classes

integration with GL account we created

GL accounts

General valuation we ensured

because we created GL account GL

accounts are related to posting related

to posting you need to ensure your

currencies are properly updated

after this you need to go to

depreciation in depreciation ordinary

depreciation

if you go to ordinary depreciation you

have determined depreciation areas this

is again going to call the same thing

your depreciation areas

okay go back

straight away we need to open in this

valuation methods

if you remember

while creating the GL account

determination we have seen three

segments

ordinary depreciation special

depreciation unplanned depreciation

character

yes sir right if you are if you want to

use unplanned depreciation

you need to ensure your depreciation

areas are properly defined

this is ticked this area can be posted

for unplanned depreciation also if this

is unticked this cannot be used for

unplanned depreciation this we will see

later on

similarly special depreciation you need

to ensure

if you want to use this for special you

need to take this if you don't take this

this area cannot be used for special

depreciation

okay just go back this we will see later

on

straight away you need to go to

valuation methods

open this valuation method in this go to

depreciation key in this calculation

method

now your completed depreciation is

dependent on

depreciation key

system is going to calculate

depreciation based on depreciation key

clearer

now this depreciation key is used this

depreciation key is used or is created

based on certain prerequisites the way

you have a certain class prerequisite in

the similar way you have depreciation

key prerequisites for depreciation key

unit

base method declining method maximum

method multi-level method period control

method first we will create in short

what is what and then we will in detail

understand after creating an asset by

looking at the numbers we will try to

revisit all this we will practically

understand what exactly each method is

doing with your asset numbers

first let us create base method open

this

click on new address

how many accounting principles we have

how many accounting principles we have

we have three

companies act Income Tax Act IFRS

now for these three are you going to use

same depreciation methods or different

depreciation methods

defensive

right according to IFRS depreciation

calculation is different according to

companies act it is different according

to income tax act this is different for

each you are going to create a different

base method so I'll create let's say

I'll put

DF Furniture 0 1

ignore the naming conventions because we

are only creating for one Furniture one

asset class to understand the logic once

we understand the logic we will Define

everything in detail

in the kdf format

I'll put

let me put d e i n

base method

IFRS clearer

this is d e i n base method for IFRS

type of depreciation we have seen there

are three types ordinary special and

then there is one more thing called

interest you will be using either

ordinary or special tax depreciation we

are using this for ordinary purpose

select ordinary

depreciation method

depreciation method how you are going to

charge this depreciation method

now when we calculated this

we used only two accounting principles

first one is IFRS IFRS is based on what

percentage or life

percentage

IFRS is based on percentage from the

depreciation method check do you find

anywhere percentage

awesome

you need to look from alphabet

anywhere you find percentage

person based from useful

this is life

percentage is your Peak stated

percentage

okay stated percentage is depreciation

based on percentage take this p b

p b is life

not b D is your life useful life we are

not based calculating based on useful

life we are calculating based on stated

percentage clearer

enter

clear with this the remaining things we

are not going to use as of now only the

three points

base method

and then type of depreciation

depreciation method clear with this

next one I'll put

df02

same description base method for ICA

Indian

companies Act

this is also your ordinary depreciation

for Indian companies act what we are

doing

life

is for life

so here I'll put

life is what d

percentage from useful life character

put D enter

third one

we have not defined as of now but let us

create third one also based on

percentage only

third one I'll put df03

IIT Indian income tax

according to Indian income tax also let

us take based on percentage for

percentage we were taking P stated

percentage corrector

agree clear with these three

depreciation based methods

this

clear everyone

your base method is going to talk about

what kind of a depreciation it is

whether it is ordinary depreciation or

special depreciation Point number two

whether your depreciation is calculated

based on useful life or based on

percentage

come back

after this declining balance method this

is optional we are not going to use

declining balance method okay this is

exclusively used in U.S Canada certain

specific countries not in every country

this is limitedly used by specific

countries

and we will be using the standard

declining balance method only

next one maximum amount method this is

also not mandatory this is also used

based on certain countries if you want

to restrict depreciation by certain

amount limit then you will be using

maximum amount method this also we are

not using now we will execute one

scenario for each of this in the

upcoming sessions

at that time we will Define this but for

now it is not required

next one multi-level method this is

important let me open multi-level method

one minute

foreign

foreign

Sarah your voice is not audible sir

sorry

I think

am I audible now

yes sir could you please uh I mean tell

us from the first yeah I'll go back

okay now let's define

multi-level method

declining balance method we discussed

that we are not going to use it this is

country specific especially used in U.S

Canada certain countries not in all the

countries

maximum amount method is used to

restrict a depreciation posting to a

specific amount Beyond this maximum

amount system is not going to charge

depreciation

multi-level method is important in the

multi-level method you are going to

decide how your depreciation to be

charged straight line method percentage

or wdb method percentage useful life is

decided in your multi-level method in

multi-level method you have to create

three levels because you have

three accounting principle based methods

in short three type of depreciations

first one I have taken as df1 let me

double click on this I have taken df1

description d e i n Furniture 15

straight line method for IFRS accounting

principle next one this is

when I want this depreciation to be

charged I wanted this depreciation to be

charged from ordinary depreciation

start date in majority of the cases you

will be using option number two ordinary

depreciation started

select this

press enter depreciation by fiscal year

we will not be using this is used in

case of ear dependent fiscal year

let's say current year you have

different fiscal year start date

different fiscal year end date next year

you are changing your fiscal year start

and end dates that is where you will be

using

depreciation by fiscal year otherwise we

don't use it even in real time you are

going to use only these three settings

save this once this is saved go inside

your levels left hand side double click

you will find an option add a new entry

here

now here you need to decide whether you

are going to charge 15 percent entirely

asset life cycle or are you changing the

depreciation maybe after two years or

after three years you may have certain

requirements initial two years or

initial three years I want to charge 15

percent from fourth year onward or from

third year onward I want to reduce my

depreciation from 15 to 10 percent

or from straight line method to wdb

Method all those things are possible in

your multi-level method

because your you can have multi-level

which means multiple level of

depreciation treatment within

multi-level method

here what we have the first option is

acquisition year

now here if I put 2023

if I put 2023 system is going to treat

or system is going to apply this

multi-level method for the assets which

are purchased until 2023.

but are you configuring asset accounting

only for current year or for all the

years

on the years

you are configuring a set accounting for

all the years which means you are

configuring this at company level or at

client level if you purchase a set last

year current year next year future

anywhere this should work as it is for

which to happen you have to mask

acquisition year which means this

multi-level method is valid for assets

purchased until these many years

currently you're in 2023 you are in 24

25 20 53 000 any year this is valid

according to this now corrector

if you put double line double line This

is valid for Lifetime

this is called as you are masking this

acquisition year double line double line

people will ask you why do you put 9999

in multi-level method

make sure you are able to answer this is

only for masking purpose if you put any

year this multi-level method is valid

until that year assets purchased till

that year it will be valid if I put this

as 2022 my settings will not work for my

asset because I am going to purchase my

asset in 2023

system is going to look at this

acquisition here it will understand this

method is applicable only for the asset

purchased until 2022. if you purchase in

2023 this is not valid so this setting

is not going to work

to avoid such kind of things you will

always put masking by way of double line

double line clearer

thank you

create session

okay

so you need to mask it with double line

double line

next one from

acquisition year till how many years you

want to keep this valid now just now we

discussed one asset can have multiple

depreciation treatment first two years

or something next to three years

different way you want you got that

point

yes no

yes sir

yes sir so what

I was saying

let's say asset is purchased in 2023

and I have 2024

let's say these many years this is your

Year One

year five

so I may have a requirement

first to two years 15 percent

and

third and

fourth year

10 percent

fifth year onwards

five percent

this may be my requirement

let's say you may get a requirement like

this

now according to this 10 15 percent is

valid for how many years

so yes ten percent

how many years

this is valid for

two years this is valid for 25.26

two years

and third one is valid for how many

years from here this is fifth year

onwards so here you are going to put

99

or triple nine

whenever you put this this is valid from

there until they exit or until the end

of your asset life

now this is called your multi-level

method if you talk about multi-level

method this is what represents your

exact multi-level method one asset

having different level of depreciation

treatment

first two years it will charge fifteen

percent next two years it will charge

ten percent from fifth year onward no

matter how many years your asset will

exist it will be charged only five

percent

clearer

now according to our requirement are we

charging like this or are we charging 15

percent fixed

fifteen percent fix we are charging 15

fixed do we have multi-level or single

level

you have single level depreciation

treatment or depreciation calculation

for which come here

from the purchase of your asset here

you put triple 9 which means

until the end of the asset life there is

a single treatment this whenever you put

valid years as triple line which

represents it's a single level not

multi-level it's a single level

next one is period normally we don't use

it

period is normally used

if you want to tell two year

12

-5 months if you want to use two year

eight months

then you are going to use this is

periods

here you will put periods but normally

we do not use periods in real time it is

always year specific at the end of the

year you are going to change the

treatment of depreciation not in the

middle of the year

in case if you wanted to put then if you

are talking about 6 you'll have to put

six

okay if you put 6 it will consider 999

years and 6 months whatever the months

period you put those many months it will

consider

we can put pulsory there

if you put it well it will take one year

12 periods is nothing but one year no

okay

next one before you put base value you

have to understand your depreciation

logic now according to IFRS how we are

calculating a depreciation

15 slm straight line method for straight

line method your depreciation percentage

is applied on the same value every year

am I correct

this

for straight line method your

depreciation value is always applied on

same method before I update base value I

put percentage what is our percentage 15

you put 15 here

you will get another question here on

your interview where do you maintain a

depreciation percentage

you tell that you created a depreciation

key for 15 percent

fine I am fine all your questions all

your answers then I am going to put a

single question where do you maintain

that rate of depreciation

so most of the people will get confused

here make sure you are not getting

confused be very clear confident your

rate of depreciation is always

maintained in multi-level method

clearer

you see here is where I am putting 15

this is only the description

so you'll put 15 percent or rate of

depreciation always in the multi-level

method now this 15 percent you need to

apply on something if you look at your

manual calculation

this 15 percent depreciation per annum

we calculated on something which is your

sixty thousand sixty thousand is your

APC value

this is called as your asset main value

now here according to IFRS 15 percent

straight line method in year one two

three every year you are going to get

same depreciation because it is straight

line method

according to straight line method make

sure your base value is

always acquisition value

it is always acquisition value in short

for any straight line method

depreciation you are going to use 0 1

acquisition value option number two if

you have wdb method you are going to use

Network value 24 only these two we will

be using the rest we will not be using

even in real time

one for straight line methods 24 for wdb

methods since this is straight line

method select 0 1

and then press enter

the remaining two things we will be

discussing later on based on different

scenario currently these two are not

relevant to us

click on Save

this is your one multi-level method

enter

now let us create second multi-level

method for Indian companies Act

next entry

go back

new entry

I'll put DF to

I'll put

Indian companies act here

this is

useful life

how many years five years five years is

five years

Indian companies Act

okay useful life five years Indian

companies act validity start date this

is always ordinary depreciation start

date

enter

save this first

now go to levels

click on new entries

acquisition year double line double line

this is just masking you you do not have

any multi levels in this for the entire

life of the asset you are going to

charge fixed so you will put validity as

triple 9

next one period you are not going to

measure two year three months like that

if you have such requirement you have to

put period normally we don't put periods

base value and then percentage for

useful life method there is no

percentage percentage is automatically

calculated by dividing a set value with

the life

now here you are not going to maintain

percentage because this is useful life

method

for useful life method what you will do

whenever you talk about useful life that

is straight away straight line method

for straight line method we will be

using 0 1 or 24.

0 1.

for straight line 0 1 let us pick 0 1

here

since this is useful life method I am

not going to put percentage here

I'm not going to put percentage here

I'll just save this clearer

is it

saved go back

next third one let us create for income

tax act

for income tax act also we have created

based on percentage only

let me go back

new entries

said we have the standard we don't use

that

normally we don't use it we will be

creating different naming conventions to

differentiate your client level things

because this is at client level setting

standard things will also reflect when

your user is opening the drop down

so you will have a different naming

convention and you will be strictly

instructing users to pick only with this

naming conventions

okay

next one df3

furniture

I'll put

now this I'll put

20 percent

wdv

20 percentage

wdv

IIT

now we are covering the third one

in short we are using all the three

possible depreciation methods corrector

this

one asset you are using straight line

wdb useful life and then let me save

this

and let's go inside the levels

new entries

acquisition here as usual double line

double line years triple line these two

are just masking

and

percentage 20 this 20 percent straight

line or wdv this is wdv 24 wdb we have

to use not 0 1

you'll have to use Netbook value select

24.

click on

save

go back

clearer period control methods also we

are not going to use now this also I

will explain with different example

different scenario we will be using

standard period control method 0 0 1

you will be using standard period

control method 0 0 1. go back

now once you define all the calculation

methods then you will have to Define

your depreciation key

let me open this depreciation key

will create depreciation key and then we

will stop

add new entries you have three

treatments you need to create three

depreciation case

first one

df01

I'll put d e i n

furniture

15 percent straight line method

IFRS

now maximum amount method cut off a

value key I am not assigning I'll

explain all these points with a

different example

now you need to click this depreciation

to the day if you are using this

depreciation to the day your period

control method is invalid

okay if you take this period control

method is not applicable so that is why

I said we will not be using period

control method if you want to use period

control method you should not take this

if this is thick period control method

is by default ignote clearer

enter

first save this depreciation key

so it's not saving without giving the

assignments

let's go inside the assignment of

calculation methods

add a new entry here

depreciation type

you select this is your ordinary

depreciation

phase this is always the first one from

the start of depreciation

next one base method we have created

three base methods which is your DF

okay

now we are creating d e i n Furniture 15

straight line method IFRS you select

base method for IFRS

next one declining balance we are not

using this is not assigned period

control method you will be using 0 0 1

which is standard

multi-level method you need to assign we

have created D series

df1

tf1 Furniture 15 straight line method

IFRS

after this you need to select class this

has got no relevance this is only for

the information purpose whether you give

you don't give does not make any

difference anywhere

since this is a straight line method

I'll take straight line method change

over method change over rate we are not

currently using because if you want to

change the depreciation key

after a certain years then you will be

using this changeover normally these are

used for

machineries that are used in the plants

because they will be using single shift

double shift based on that we will be

using these functionalities otherwise we

don't use it

Simply Save this now

enter

first depreciation key is created

go back

now let us create secondary depreciation

key

DF

0 to

second one was

five years

for Life Indian companies Act

depreciation to the detect

go inside the assignment

new entries

depreciation type is your

ordinary depreciation

face is from start of depreciation

base method this is df02 we created in

the similar logic df2

Indian companies Act df02

declining we are not using period

control method standard 001 always

multi-level method df02 we have created

DF series

df2 useful Life 5 years Indian companies

Act

class this is also part of straight line

method enter

the remaining things we are not using as

of now click on Save

second depreciation key is created

go back

now third depreciation key

df03

this is your 20 percent

wdv Indian Income Tax Act

here also same thing depreciation to the

day active

go inside assignment calculations

new entries

depreciation type is

ordinary depreciation

phase from start of depreciation

base method

df03

declining you are not using period

control method standard 001

multi-level method DF

3 for nature 20 wdv Indian Income Tax

Act class here I'll select declining

balance depreciation

enter

saved

now we have created three depreciation

keys

we need to check the status of this

depreciation case

go back

if you look at depreciation case from

this list

one two three status is inactive if this

depreciation key is inactive this cannot

calculate your depreciation

make sure you will activate your

depreciation case select your

depreciation Keys click on activate icon

on the top click this

click on continue

now you will see one two three have been

activated

click on Save

continue

clearer this is how we create three

depreciation keys for your furniture

in your company code also you create the

same settings create a set class number

ranges screen layout rules

multi-level method base method and then

depreciation key

clear it whatever we have created now

I have a question

yes

sir because we have already created the

depreciation names and the percentage in

the multiple methods so why do we again

uh you know uh doing the same steps in

uh depression key

because system will calculate

depreciation for every single asset

yes sir right in asset Master you need

to assign only one key

now whatever you have done you have

created best method separately you have

created

period control method standard one you

have multi-level method separately in

short you have three four methods that

are already configured

right sir

so in your asset Master you will not be

able to assign these many case instead

you will combine all these key

combinations into one single

depreciation key this depreciation key

will call all the methods that are

configured and then assigned in your

depreciation key

foreign

okay whenever you are giving

depreciation key inside the asset master

your depreciation key will determine all

the associated methods base method your

declining balance method period control

method cut off whatever is there

everything is predetermined from your

depreciation key

It's a combination of all the

calculation methods

got it sir since the second question is

uh in the in the interviews I think we

get a question like

you are not Audible

hello

am I Audible

yes sir

okay I think

on the asset

yes

yes

we defined uh depreciation key for

calculation of uh

depreciation as per Income Tax Act Right

all right

but all together there is a different

configuration for calculation of

depletion as per ITX

where we create all the group grouping

on uh grouping of the assets and defined

at the percentage of the Precision

there you will be using group asset

concept

right so

here we are not representing India here

we are only representing the third

accounting principle for reporting

purpose only we are not representing

Indian Income Tax Act here we just put

Indian Income Tax Act but this is a

depreciation calculation for reporting

requirement where there is no lecture

okay when we extract report we also get

the r reports on the basis of our third

depreciation df03t according to that

also correct

so then would it would not it make a

confusion we are making two type of

depreciation as per its

so the description itself we have given

as income tax act

but you can give any description to it

okay it's only the description that we

have

right if I said please continue up you

continue

yeah we have just given that the

description as income tax act as an

accounting principal

okay but in India for income tax act you

have group asset concept you will have

to group The assets let's say if you

have

under Furniture if you have some 500

Furniture so you'll have to group all

these 500 Furnitures into a single asset

group asset

correct and then at this group level you

have to charge depreciation we are not

doing that way we are only we have only

given this description but the logic

behind creating this is to understand

you can create a depreciation without a

ledger without posting also these are

commonly used in real environment for

different calculation purposes

only for the reporting requirement

okay then uh we can we say that that

income tax

income taxes per it depends for its part

of our depreciation area that's why we

need to make a depreciation key for it

correct

you may also

foreign

depreciation area because you want to

calculate a set

depreciation in a different logic in a

different mechanism in a different

method

okay let's say I want to have

now your charging depreciation

to ensure that at what level or at after

how many years your asset will become

zero let's say you have a computer which

is expiring or which has a life of five

years

now you need to ensure at the end of a

fifth year you need to replace your

computer

character

yes sir and you need to arrange the

funds accordingly

yes

right now for you to do this kind of

things you may be according to the ACT

you may be charging this for five years

but internally you want to ensure that

you have sufficient funds for your

internal reporting purpose you are not

posting anything just to know what

level of funds you need to reserve for

depreciation for replacement of assets

you may need another depreciation

calculation this is purely internal

according to your own

calculation process I want to charge

let's say 30 percent according to IFRS

this may be 15 percent according to your

Indian companies act this may be five

years but according to your company

policy your internal policy you may want

to charge differently

but practically if you are using the

accounting principles you are using it

for five years or six years but

practically you may be using it for

eight years

you also want to show

to calculate your Provisions internally

within your organization for your

internal liquidity forecast or for your

cash inflow or flow forecasting

you need different calculation Logics

every time you cannot take all the

assets and then calculate the numbers

corrector

you want system to give the numbers

according to your desired format your

desired calculation logic

yes sir

create one more depreciation don't put

any ledgers to it it's only for your

calculation purpose

so whenever you want to know according

to a different reporting requirement

maybe internal or external

just put that in depreciation area run

the report you will get all the values

predefined according to your

configuration

okay

clear up

yes

any other questions

hello

yes

no you're not audible if you're talking

any other questions

all right if no questions let me stop

this recording