Depreciation Calculation Differences Between the Old and New Depreciation Engines

We’ve already posted several blogs regarding SAP’s New Depreciation Program, aka the NewDCP, back when it was first released around 2006.  But here in 2024 and having recently gotten back from the SAPinsider 2024 conference in Las Vegas, we’re still fielding questions on it.  I’ll admit that I find that surprising for a few reasons.

 

It’s Practically Mandatory

First, the NewDCP has been a prerequisite for most every asset related solution that SAP has pushed out since then.  Asset Retirement Obligation Management, the Asset Mirror Tool, Asset Lifecycle Accounting, New Asset Accounting, and now S/4HANA.  All of these solutions require the NewDCP to function.  Plus, if you’re doing revaluations, impairments, or other tax related changes, there is some functionality in the NewDCP that makes the solution a de-facto requirement.  I can’t imagine doing a revaluation without it…  and I’m surprised that the bulk of SAP customers haven’t had a requirement at some point since 2006 that would require to get it activated.

Secondly, it’s been nearly 20 years since it was released!  It seems to me that it would be more risky than safe for a customer on ECC to remain using old technology.  And to be perfectly open, we all know that SAP isn’t going to make any change to the old engine unless there is some statutory requirement in the market.  Their answer every time there is a limitation is usually something along the lines of “Yes we are aware of that and addressed it in <new solution name>. You might consider upgrading to that as soon as possible.”  I can’t criticize that response in anyway. 

It’s simple to activate the NewDCP, is well documented, and let’s face it… it’s not that new anymore!  So there is little risk pushing it out.

 

What’s in it?

Here’s a quick review of the functionality delivered in the NewDCP:

  1. Time-dependent depreciation changes can now be made to the asset master record
  2. Depreciation methods can now be changed on a period level
  3. Base Values can be determined on a period level
  4. New transaction type groups have been delivered. This also includes the introduction of new Period Control groups as well, both of which are geared towards period level determination for different value postings.  One of those is for revaluations which, again, makes it a de-facto standard for any revaluation project.
  5. New BAdIs for easier enhancement of the depreciation calculation.  If necessary, you can access any variable in the depreciation calculation to customize it for your unique requirements.
  6. New depreciation trace. This is far simpler to follow than the old one which makes troubleshooting difficult depreciation issues easier.
  7. Several other fixes that are mostly country specific.

 

Are There Any Differences Between the Two?

Yes there are!

Overall, the differences are minor.  As a reminder, the goal of the Old vs. New engines is to yield the same results.  The equation may change but the math should result in the same monthly depreciation figure.  

However, there are a few exceptions where you could have a specific process or just an expectation that the calculated depreciation amount should be X based on your experience with the OldDCP, yet it ends up being a different amount Y in the NewDCP.  While the differences are, again, minor, they are well documented by SAP in SAP Note 965032

Here is a rundown of the items that I personally look out for when upgrading a customer to the NewDCP.  I make sure the customer is aware of these because these are items that SAP acknowledges as normal/expected differences between the two engines.  If the customer has specific processes around, ex: subsequent acquisitions, then we need to chat through that and how the NewDCP interprets it a bit differently than how they might be used to.  Also, there are more differences documented in the note (and elsewhere) but these are my personal Top 5 list of items to watch out for.

 

1 – Enhancements

All of the old user exits that dealt with depreciation were deprecated when the NewDCP was released (there was one exception but that too had been folded into the NewDCP in S/4HANA). 

I list this one first because it’s the first question I ask a customer.  “Have you implemented any user exits related to fixed assets?”.  If they have then it significantly impacts the scope and work effort.  This requires that the logic be ‘migrated’ over to the new BADIs FAA_DC_CUSTOMER and FAA_EE_CUSTOMER.  I put migrated in quotes because there isn’t a migration or technical process.  It’s more of a re-coding of the solution from one area into another.  It’s not as long as starting from scratch but it will definitely take the developer some time to move the code over.  And it will most likely be a very important area that has to be tested under the NewDCP.  This is particularly true when working with Oil&Gas as they frequently have a user exit regarding UOP depreciation.  This frequently requires a change to the UOP depreciation keys as well.

 

2 – New Period Controls

The NewDCP delivered new period control options.  They are:

  • Revaluations
  • Investment Support
  • Unplanned Depreciation
  • Write-Up Depreciation

I’ve had little use for the investment support one but the other three present some new options for me.  As I alluded to above, I flat-out can’t do a revaluation here in the US without the NewDCP… at least, not in the way that most customers expect for the amounts and calculations to work out. 

For the two depreciation related ones, I’ve had a requirement or two where they wanted their depreciation adjustments posted in a certain way that was different from the Acquisitions period control that these used to use.  They’re worth reviewing.

Lastly, I make sure to get these populated for all period controls even if it’s just a copy of the old Acquisitions period control. It doesn’t make a technical difference but it’s part of having a tidy and clean solution in my opinion.

 

3 – Subsequent acquisitions

Most SAP customers don’t have a well-defined policy on how they manage subsequent acquisitions to an asset. This is a good time to review it and the implications of how they want depreciation to be recognized between an acquisition made outside the original capitalization year, and the amount carried forward.  The good news is that the NewDCP handles this better and in a more intuitive fashion than the old way.

 

4 – Changeover Methods

There are some differences in how changeovers are handled with the NewDCP.  I usually look for issues or expectations where they want the changeover to occur at a period level (which is certainly possible and a big selling point of the NewDCP).  This may require that the FAA_DC_CUSTOMER BADI and method DEFINE_USE_OF_MAX_PERIODS be implemented.

 

5 – Rounding

This was always a known item and intentionally called out by SAP when the NewDCP was introduced.  But I list it here because I always make sure the customer is aware that when we perform a recalculation after the switch is made, that it’s normal to expect a series of recalculations.  Potentionally, you could get a very long list of assets in the log but the aggregate change should be very minimal.

 

WrapUp

That’s it… that’s my personal Top 5 items to look at when working with a customer going through this.  Overall, it’s a simple process but it warrants a few questions and a bit of investigation before proceeding.  Also, this was just a quick overview as the note goes into more detail on these and other items.  While you’re at it, also take a look at SAP Note 964860 and 1131960.