Purpose

Explain the concept of smoothing and catch up functionality when defining depreciation posting rules via transaction OAYR. This write up also explains the calculation of depreciation under smoothing and catch up methods of depreciation.

Overview
Typically, depreciation is posted by the system at the end of each posting period. The fre uency of depreciation posting is defined via transaction OAYR !i.e, "onthly posting, #i$"onthly posting , uarterly posting etc..%. Once the fre uency for posting depreciation is defined, the specifications are valid at the company code and depreciation area level. &n the same customi'ing step, there is an important option called (moothing. This option determines how the system behaves if settings li)e the depreciation )ey or useful life have changed in the Asset during the fiscal year, resulting in changes in the value of depreciation ! either high or low%. &f the smoothing option is activated, the difference is distributed e ually among the remaining posting periods of the current fiscal year. &f this option is not activated, the entire difference is posted to the current period which is )nown as catch up.

Business Scenario
*epreciation relevant parameters li)e depreciation )ey or useful life of an asset is changed in the asset master or in customi'ing. This results in change in the depreciation amount.

Example
An asset is ac uired for +,-,... on .,/.,/-.,- and its useful life is ,. years. 0ence the yearly depreciation will be +,-,.../,. years 1 +,,-.. per year and the monthly depreciation will be +,,-../,- months 1 +,.. per month. *epreciation is posted for period , to period 2. 3ow the useful life of the above asset is changed from ,. years to 4 years in the asset master record in the mid of the year i.e on .,/.5/-.,-. Then, the revised !new% depreciation will be +,-,.../4 years 1 +-,6.. per year and the monthly depreciation will be +-,6../,- months 1 +-.. per month. This resulted in increase of *epreciation from + ,-.. to +-6.. for the fiscal year -.,-. Original *epreciation7 + ,../ "onth Revised *epreciation7 + -../"onth

What happens with the difference between the original and new depreciation in periods 1- 6

There are - possibilities7 (moothing or 8atch$9p

Smoothing
The difference will be e ually distributed over the remaining planned periods7 Period Original !epreciation "ew !epreciation !ifference #mount to be Posted 1 % & ' ( 6 ) * + 1$ 11 1% Posted -1$$ Posted -1$$ Posted -1$$ Posted -1$$ Posted -1$$ Posted -1$$ Planned Planned Planned Planned Planned Planned %$$ %$$ %$$ %$$ %$$ %$$ %$$ %$$ %$$ %$$ %$$ %$$

1$$ 1$$ 1$$ 1$$ 1$$ 1$$

&$$ &$$ &$$ &$$ &$$ &$$

,atch up
The whole difference will be posted in the next planned period7 Period Original !epreciation "ew !epreciation !ifference , : Posted -1$$ Posted -1$$ Posted -1$$ -.. -.. -.. #mount to be Posted

6 4 2 5 ; < ,. ,, ,-

Posted -1$$ Posted -1$$ Posted -1$$ Planned Planned Planned Planned Planned Planned

-.. -.. -.. -.. -.. -.. -.. -.. -..

2..

;.. -.. -.. -.. -.. -..

,onclusion
&f the depreciation parameters are changed after the transaction and depreciation are posted. -he depreciation posting run executed with the smoothing method divides the difference between planned annual depreciation and the depreciation amount posted to date among the remaining posting periods in e.ual shares/ 0f the catch up method is used1 the depreciation posting run posts this difference as one total in the current posting period/