Understanding Basic Settings for Asset Accounting with Universal Parallel Accounting (UPA)

Checking Asset Accounting Configuration Data

Objective

After completing this lesson, you will be able to analyze​ the predefined configuration data for Asset Accounting

Introduction to Asset Accounting

The Bike Company, a multinational company known for the production and distribution of high-quality bicycles, has decided to start a new business in Germany.

The Bike Company uses SAP S/4 HANA Private Edition to support it’s finance (FI) processes, including Asset Accounting.

Hello, my name is Kevin. I am part of the project team that implements and supports the FI processes, including integration with Controlling. As part of the implementation project, Asset Accounting is optimized and seamlessly integrated into the existing SAP S/4HANA system.

In the team, I am responsible for efficiently setting up a new company code for Asset Accounting and linking it to the other organizational units in accounting.

For this reason, I need to get an overview of the current organizational units and the preconfigured settings in Asset Accounting of the Bike Company. In addition, I need to get an understanding of different areas of Asset Accounting such as Valuation Views, Depreciation Areas, Charts of Depreciation, Asset Classes and Account Determinations.

If you are setting up a new company code for Asset Accounting, the following general prerequisites must be fulfilled for your company code:

  • The Company Code already exists in the SAP S/4HANA system.

  • Make the posting-relevant settings for the Company Code.

In this lesson, we will get an overview of the pre-requisites of Asset Accounting in the SAP S/4HANA system.

Accounting Organizational Levels and Objects in Asset Accounting

Hierarchical diagram illustrating how Client and Company Code (0005, 0007) link to Balance Sheet, which connects to Business Area, Profit Center, and Segment (1000, 2000, 3000), with corresponding asset and expense categories listed below.

It's important to have a basic understanding of how the organizational units are connected in the SAP environment.

The following are the organizational units and objects used by Asset Accounting (FI-AA):

Client

The client is the highest level in the SAP system hierarchy. This level denotes the specific logical system that you're working on. Specifications that you make at this level apply to all company codes.

Company Code

Each company code is an independent accounting unit. The legally required balance sheet and profit and loss statement are created at this level. At the Company Code level, the following objects are assigned:

Global Chart of Accounts

This is a list of accounts that are available to be extended to the Company Code for financial use.

Fiscal Year Variant

This determines the financial periods for the Company Code.

Ledger and Accounting Principle

This is a core financial accounting component that records all financial transactions in SAP. The ledger is assigned to a Company Code. The ledger contains entries in different currencies, such as Company Code and Global currency among others. Only 1 ledger can be the main or "Leading" ledger in each client, but additional ledgers can also be created for specific purposes such as tax reporting or different Accounting Principles (International Financial Reporting Standards (IFRS) or a local generally accepted accounting principle (GAAP) that is required for separate reporting possibly by country/region regulations.

Profit Center

A profit center evaluates the success of independent areas that are responsible for costs and revenues within a company. You decide whether you need to create only a profit and loss statement at the profit center level (document breakdown not active), or a profit and loss statement and a financial statement (document breakdown active). A Profit Center can be assigned to multiple Company Codes.

Segment

A segment is a division of a company for which you can create financial statements for external reporting. Certain accounting principles, for example, Generally Accepted Accounting Principles (U.S. GAAP) (SFAS 131) and IFRS (IFRS 8), require companies to perform segment reporting. You can define segments in your SAP system for this purpose and provide information on the financial results of these business segments.

Business Area

Each business area is regarded as a financially separate unit for which an internal balance sheet and profit and loss statement can be created. Before using the Business Area characteristic, you need to define the business areas you want to work with in Customizing for Enterprise Structure under Definition → Financial Accounting → Define Business Area.

Asset Accounting Concepts

Asset Classes

Table maps asset classes (Buildings, Machinery, Furniture, Assets under Construction, Low Value Assets) to their number ranges, account determination keys, and corresponding G/L accounts.

The asset class assignment plays a central role in the creation of the asset master record. Each asset must be assigned to exactly one asset class. This is important as certain control parameters and default values are defined for depreciation and other master data in the asset class.

The Asset Class will determine the general ledger accounts that are used during posting for the asset such as acquisition, depreciation, and retirement, the asset number range and the field layout for the asset. Let's say you buy three things on the same day: a $50,000 forklift, a $30,000 car, and a $5,000 office desk.

Without Asset Classes, you'd have to manually figure out how each one depreciates.

With Asset Classes, you just assign the forklift to the 'Machinery' asset class, the car to the 'Vehicles' asset class, and the office desk to the 'Furniture' asset class. SAP then automatically knows:

  • How fast to depreciate each one
  • Which general ledger account to book it to
  • What the residual value might be
  • When it needs maintenance attention

It is basically a map to place the asset into the correct financial area and how to manage the asset through the asset lifecycle.

Valuation Views

Diagram shows a configuration table for asset class with valuation views mapped to company codes, accounting principles, and depreciation keys across different ledgers.

SAP Asset Accounting has several concepts that work together to manage, process and present the financial information according to necessary external regulations and internal policies. The valuation view is the fundamental concept that maintains multiple parallel valuations of the same fixed asset for different accounting principles.

Some common valuation views are:

  • Book Depreciation – used for internal reporting and management accounts
  • Tax Depreciation – used for tax compliance and filing requirements
  • IFRS/Local GAAP – used for external financial reporting
  • Group Accounting – used for consolidated financial statements
  • Cost (Management) Accounting – used for internal management accounting

A valuation view consists of several key components that determine values for an asset:

  • Acquisition Value – Original purchase cost
  • Accumulated Depreciation – Total Depreciation to Date
  • Net Book Value – Current asset value
  • Depreciation Methods – Calculation procedure for depreciation
  • Useful Life – Asset depreciation period
  • Residual Value – Expected salvage value

Chart of Depreciation and Depreciation Areas

Organizational hierarchy diagram maps client-level chart of depreciation and depreciation areas to country-specific company codes, each linked to their respective charts of accounts and depreciation.

A valuation view is represented by a depreciation area. Depreciation areas are grouped into charts of depreciation to group valuation methods for an asset class.

All of the general ledger (G/L) accounts are defined in the chart of accounts. FI-AA works with the chart of accounts assigned to the company code in FI. You can modify the chart of accounts to suit your needs, such as global, industry-specific, or country-specific requirements.

Charts of depreciation are used to manage various legal requirements for the depreciation and valuation of assets. You define the keys for the automatic depreciation of assets flexibly in each chart of depreciation. They are based on elements for calculation (calculation methods, period controls, and so on) that are available client-wide. Since charts of depreciation must be country-specific, SAP provides sample charts of depreciation for many countries. You can use these country-specific sample charts of depreciation to create your own company-specific chart of depreciation. It is not possible to use these standard charts of depreciation directly. You must create your own chart of depreciation by copying the reference chart of depreciation. You can delete any depreciation areas on the reference chart of depreciation that are not needed.

Each depreciation area represents a specific type of valuation, such as book depreciation or tax depreciation. You can also define your own depreciation areas for a chart of depreciation.

Each company code uses one (operative) chart of accounts and one chart of depreciation. Multiple company codes can work with the same chart of accounts and the same chart of depreciation.

Summary

  • Company Code Prerequisites: Verify company code existence and posting-relevant settings before activating Asset Accounting functionality.

  • Asset Classes: Define control parameters, default values, depreciation methods, G/L accounts, number ranges, and field layouts for assets.

  • Valuation Views and Depreciation Areas: Enable parallel valuations for different accounting principles, such as book, tax, IFRS, and management reporting.
  • Chart of Depreciation: Group depreciation areas to manage country-specific legal requirements and valuation methods for asset classes.
  • Account Determination: Configure G/L account assignments for asset transactions, including acquisition, depreciation, and retirement postings.
Learning

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