Negative Net Salvage Value

[drdaniel]

LES is a utility company. We recently completed a depreciation study and it was recommended that we collect negative net salvage value, typically between 5 and 25% of the initial asset value. However, we do not know how to configure a depreciation key, or find any other function to allow for depreciation that is greater than the asset value.

Has anyone successfully implemented this feature? We are currently on SAP ECC 6.0.

Example. We have an asset that has a 20 year life and was $100. We expect that retirement costs will be 10% of the value of the asset, so over 20 years, we need to depreciation $110. As this is a fairly standard industry practice, we didn't think it should be so hard to do this, but we have yet to find anyone who can give us direction on how to do it.

Any assistance is much appreciated.

[ajaycwa1981]

Dep after Planned Life End - This is used when depreciation is based on Original useful life.. So if you modify useful life or post any writeup during the life of the asset, the asset may not become zero at the end of life. This setting allows dep to continue after planned life end, so that it becomes zero

Dep below NBV Zero: I never fiddled with this, but you can try your luck once.

Per me, if there are any uninstallation costs, decomm costs, they can be accumulated on an internal order, then settle the IO on the asset and towards the end period, you can have 10 extra depreciation. But if you seem to have 10 extra dep spread over the period of useful life, i dont think any other way exists than to capitalize the asset

I suggest you can also open a service message to SAP if that is a legal requirement.

[NathanGenez]

Ajay's solution would be one option. You could control the posting so that it goes to a different GL account if you needed to hide it in the GL if necessary.

Another option would be to change the calculation via a BADI. That would definitely work but I think there's a chance it could still be done via a custom depreciation key.

[drdaniel]

Thank you for your response. For regulated utilities in the US, negative net salvage is often used to ensure that decommissioning or other retirement costs are accounted for across the life of the asset. I came across a couple of discussion threads that reference "Base Method" within depreciation and when I ran S_ALR_87015147 I was able to find two drop downs in there seem to reference a change to allow depreciation to continue after net book value reaches zero.

They are:

Dep. after plnd.life end

Dep.below NBValue zero

Have you ever modified either or both of these to have a "yes"?

[NathanGenez]

I'm familiar with that and with Cost of Removal calculations too. SAP had an asset solution dedicated to the regulated Utilities sector called Asset Lifecycle Accounting that accounted for different reserve components such as COR. When I last dealt with ALA I didn't have this requirement to depreciate past the asset's APC cost; we just had to break out the depreciation amounts by these different components. Either way, ALA is currently not being sold anymore. It might get resurrected in S4HANA once SAP gets around to it but there's no guarantee of that happening.

You're in the right place but I wasn't referring to either of those settings. I was thinking of possibly coming up with a custom base method which would require code but it would be extremely simple in this case. I'd pursue that option first.

[ajaycwa1981]

Hi

If this is a legal requirement in your country, check with Sap. I never faced this

You will have to capitalise the extra 10$ on the Asset first, before you can depreciate it. Standard process will only depreciate what is capitalised

So debit the asset and credit an expense account for 10$ and then you can depreciate it for 110

[drdaniel]

Thank you for your response. For regulated utilities in the US, negative net salvage is often used to ensure that decommissioning or other retirement costs are accounted for across the life of the asset. I came across a couple of discussion threads that reference "Base Method" within depreciation and when I ran S_ALR_87015147 I was able to find two drop downs in there seem to reference a change to allow depreciation to continue after net book value reaches zero.

They are:

Dep. after plnd.life end

Dep.below NBValue zero

Have you ever modified either or both of these to have a "yes"?

[drdaniel]

The $10 is not part of our investment cost, so we cannot add it into the asset value. Our auditors would not accept this as a solution. Being an SAP user and not an expert, I only have conceptual understanding of these topics, but it would seem to me as if a setting could be updated, either through a depreciation key or by updating the base method (options seem to be in the attached picture) and attaching it to a depreciation key to allow for depreciation to continue past zero net book value.