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Asset Impairment

08 Sep 2009 8:11 am || 2

Example:
Asset with a cost of $1,000 has a useful live of 5 years. At the end of year 2, the NBV will be $600. At this point of time, there is impairment on this asset and it has to be written down to $450. An unplanned depreciation of $150 will be posted. Subsequently, the assets should be depreciated at a rate of $150/year for the remaining 3 years. However, current SAP configuration calculates depreciation based on the initial acquisition costs (in this case it will be based on $1,000 which will have an annual depreciation of $200/year and the asset will be fully depreciated before the end of Year 5.

A way is needed in which the asset written down will be depreciated based on the new cost basis ($450). Maybe a unique depreciation key is usable.


Comments

  • 31 Jan 2013 7:17 am Helpful Answer
    In this case, you can use a depreciation key which calculates the depreciation on the basis of NBV and remaining useful life. In this case what will happen for the first year, the depreciation will be calculcted as 1000$/5 = 200$, in the second year, it will be 800$/4 = 200$. Now you post unplanned depreciation in the end of second year for an amount of 150$ as impairment, hence the alue transfered to the next year (3rd year) will be 600$-150$ = 450$ and the depreciation will be calculated as 450$/3 = 150$ in the 3rd year and same in the 4th and 5th year.
  • 03 Nov 2017 3:46 pm Helpful Answer

    Asset Impairment occurs when events or changes in circumstances indicate that carrying amount of the asset may not be recoverable may be due to Market price of the asset has decreased significantly or the use or physical condition of the asset has changes significantly ..Impairment loss or gain should be determined such cases..