Presented by Kent Bettisworth
Is your company's tax asset depreciation managed within SAP ERP or in a separate tax-specific system? Over the past 30+ years, Kent has encountered many tax managers and some finance managers, with a risk-aversion or reluctance to connect the tax asset depreciation process to SAP.
Join ERPfixers and Kent Bettisworth for this recorded session to discuss:
- SAP fixed asset designs that work for both, finance and tax departments.
- The ERP process and system challenges and suggested mitigation actions.
- Two specific SAP fixed asset designs with choices for finance and tax integration
- The impact of design choice , Tax tight integration or relaxed-integration on the risks.
Q&A
Q: What is the #1 barrier to using SAP’s depreciation system for calculating Tax depreciation?
A: The reluctance to give up control. If you have your own tax system, then you are in control of your own destiny. A majority of people do not like to give up that control. The weak link in that, is that you still have to get the acquisition, retirement, and transfer data from the finance team. Additionally, some account executives have mentioned they have been burned by having their tax data in SAP and this has increased the perception that SAP is not a reliable resource.
Q: I understand SAP’s depreciation calculation is often wrong and hard to understand…is this correct?
A: A common complaint typically from finance or auditors is the calculation on their spreadsheet is not the same as SAP’s depreciation calculation. This is an incorrect perception and the math in SAP works. Typically, the misunderstanding is how it works. It is a math problem and you need to understand what the math is. it is important to understand: useful life, the method, declining balance, percentage, straight line, and what the acquisition value you are starting with is. The most common part of this that is misunderstood, is in the first year of the depreciation calculation - what is the starting day? The answer for this is to figure out what did the depreciation key say is the start date. So, if it is tax for example, it does not matter when you acquired it in May (for example), the start day can be in the middle of the year.
Q: Whose authorization is needed to allow Tax department employees access to SAP fixed assets and tax depreciation?
A: There are three scenarios: tax accountants are included in the finance team, so the finance manager decides and works with IT, finance accountants work for the tax department manager so the tax department manager has control, or the finance manager and the tax manager both have control and both have different systems and this has to be resolved with IT and the audit team in terms of responsibilities. It is ok to let tax make tax only adjustments. There is functionality in SAP that allows you to make adjustments to requirements so it depends on which scenario exists in determining who has the authorization.
Q: Does the configuration set-up and process changes required for the ‘relaxed’ Tax integration solutions require major spend?
A: There’s two generic answers for this: if you are already in the SAP classic design and want to implement the tax only asset classes it is just a matter of setting up the basic config tax only transactions, tax only assets and numbering ranges and then doing a transfer and this can be done in a phased in approach but less involved. If you are in a separate tax system and you are going to bring all of your tax data into SAP, it is a little bit more involved. This is primarily because of the asset data mapping and the data migration exercise not the actual configuration. This scenario might be simpler because you do not have a lot of historical data in your finance assets. On a scale of 1-10, going from a separate tax system to a relaxed approach in SAP is probably a 5 or 6. Taking an existing system and converting it to this laxed approach is probably a 3 or 4. It is not a full year exercise, this is most likely a 3-4 month exercise. It could be less or more depending on the scenario. This will only be done if you have done your pros and cons and understand the value you are receiving which should be tied back to the obstacles you have in reporting accurate tax depreciation as well as some of the obstacles on the finance side. There is some benefit on the finance side as well as the tax side that should be considered in any project.
Q: Does SAP provide reports to enable Tax depreciation reporting on the IRS 4562 Asset Depreciation? And the IRS 4797 Asset Dispositions?
A: No, if you went looking for these on the SAP Chain of Reports, you would not find it. The Asset History Sheet Report will get you close to this. With a little bit of manipulation this report can help you extract the data but then you would have to download it into an Excel spreadsheet. Kent provides a tool to help with this, it is two reports built into Excel workbooks that use queries to pull the data and show the results right alongside the IRS forms. This is called ‘The Faster Time to Analysis’ . So instead of wasting time getting the data, your time is spent analyzing the data. For more information on this please visit www.bettisworthassociates.com