# Straight Line Method of Depreciation Calculation in SAP FI

Depreciation is a method by which the cost of the asset is spread over its entire useful life of the asset. The useful life period will be the period after which the asset will no longer be valuable or not usable without extensive overhaul.

Any asset can be depreciated if the asset has a usable life of more than one year and in production gradually wears out over time. Since land does not wear out, it can not be depreciated.

Method of Depreciation calculation

Globally there are two methods which are generally used for depreciation calculation:

1. Straight Line Method
2. Written Down Method

Straight Line method of calculating depreciation

Straight line method is the simplest method available and it’s a method of calculating depreciation of an asset which assumes the asset will lose an equal amount of value each year. Under straight line method annual depreciation is calculated by subtracting the salvage value of the asset from the purchase price, and then dividing it with the useful life of the asset. SAP has the flexibility of calculating depreciation with the help of depreciation key. SAP has delivered some standard keys for calculating depreciation under this method. User can use one of this method as they like.

Example of calculating straight line method of depreciation:

A machine has a cost of \$ 80,000 and an expected salvage value of \$ 10000. It’s expected to be in service for 7 years.

Depreciation of the asset under straight line method is = (80, 000 – 10, 000)/7 = 10, 000 per year

Percentage per year = 10000/80000 = 12.5%

Path for configuration:

Financial Accounting > Asset Accounting > Valuation > Determine Depreciation areas in Asset class

SAP TCode:  OAYZ

Example: If you have an asset which required to be depreciated at the rate of 2% under straight line method then you need to go to OAYZ and under your asset class for depreciation area assign the key for 2.5% straight line method.

Under SAP standard method GL25 key is set for 2.5% straight line depreciation.

Next step is to create an asset under the same asset class to which you assigned the depreciation key.

T Code for asset Creation: AS01

Now you need to acquire an asset with the T code F-90

After a posting of a specific amount to the asset you are ready to run your depreciation.

To Run this SAP T Code is: AFAB