A2R-03

Control Description

SAP S/4HANA is configured to automatically calculate depreciation using system-defined parameters. The calculation logic is strictly governed by the approved Chart of Depreciation, Depreciation Keys, Asset Classes, and Useful Lives assigned within the system, ensuring alignment with corporate accounting policies.

Risk

Incorrect depreciation parameters or unapproved charts of depreciation could be assigned to asset classes, leading to misstated depreciation expense and inaccurate net book values on the financial statements

Implementation Details

• Chart of Depreciation Setup: The SAP FICO consultant creates or copies a Chart of Depreciation (CoD) to act as the master container for all country-specific or corporate accounting rules (e.g., US GAAP or IFRS).

• Company Code Assignment: The consultant links the operational Company Code to the approved CoD (OAOB), ensuring all assets within that legal entity follow the assigned rules.

• Depreciation Area Definition: Parallel valuation books (areas) are configured—such as Area 01 for Book Depreciation and Area 15 for Tax Depreciation—to track different financial perspectives simultaneously.

• Asset Class Configuration: The consultant defines Asset Classes (OAOA) to categorize equipment types (e.g., IT hardware, vehicles, machinery) and links them to specific General Ledger account determination rules.

• Default Rules Assignment: Standard depreciation keys and default useful lives are mapped directly to each Asset Class (OA02), ensuring newly created assets automatically inherit compliant calculation parameters.

• Calculation Engine Tuning: The FICO configuration team builds and maintains the mathematical framework behind Depreciation Keys (AFAMA), combining base methods, declining-balance rules, and multi-level phases to match corporate policy.

• Master Data Governance: Business users populate asset master records (AS01), where the system automatically enforces the inherited depreciation keys, useful lives, and capitalization start dates.

•Month-End Execution Setup: The recurring execution of transaction code AFAB is established, defining the standard operating procedure for running periodic depreciation.

• Test and Productive Run Protocols: Controls are set up requiring the execution of AFAB in test mode to catch master data errors (like missing useful lives) before running the final productive posting.

Test Procedures

Test of Design (ToD)
• Management Inquiry & Policy Baseline: Inquire with management to understand the approved corporate depreciation policy, including standard useful lives and calculation methods for each asset category.

• Configuration Table Extraction & Inspection: Extract and join SAP tables ANKB (Asset Class: Depreciation Area) and ANKT (Asset Class Description) to verify that the default depreciation keys, useful lives, and valuation parameters mapped to each asset class align with management's stated policy.

Test of Operating Effectiveness (ToE)
• Sample Selection & Parameter Extraction: Select a representative sample of active assets across various classes and extract the foundational calculation inputs, including historical cost, capitalization start date, useful life, and depreciation key.

• Independent Recalculation: Re-perform the mathematical depreciation calculation independently for a selected period using the assigned formulas (such as straight-line or declining-balance) based on the asset's active parameters.

• System Output Comparison: Compare the auditor's independently calculated depreciation amount against the actual system-generated posting from transaction AFAB or asset history reports to verify calculation precision.

• Exception Review & Variance Validation: Investigate any minor variances to confirm they are driven by system-defined conventions, such as mid-month capitalization rules, partial-period proration, or scrap value deductions.