Explaining the Definition of a Contract Object

Objectives

After completing this lesson, you will be able to:

  • Explain the different contract objects in the context of SAP Real Estate Management

Contract Objects

Yesterday, Chris had his first working day in the Finance and Real Estate Department. Today, he will meet Maria again. He read a lot on the SAP Help page yesterday and he has some more open questions. He wants to find out more about the contract object.

Select the play button to learn more about contract objects.

Chris is meeting Maria in the office again. He asks her his questions about the contract object.

Select the play button to get an explanation of what a contract object is.

If a contract object is freely defined and created in the contract, certain information must be filled in the system.

The contract object contains a definition set in which you can freely define which object it is. This can be a real estate object, such as a building, a floor, or a room. Of course, you can also enter land or equipment, such as a laptop or vehicle.

Once you’ve decided what kind of object to create, you can enter further data about the object.

To make sure you can use the contract object in further contract processes, such as conditions and periodic posting, you need to complete the account assignment of the contract object. With the account assignment you’ll define which master data object is to be used from controlling for the account assignment. This object is considered during the posting processes.

To differentiate contract objects by type, you’ll define the type of contract object as an attribute for the contract object. The contract object type is used as a differentiation criterion when determining the asset class during balance sheet valuation. For example, you can have an object type for buildings, land or property, hardware, building equipment, machinery, or vehicles.

Furthermore, you can define a relationship timeline that specifies the date on which an object has a relationship to another object.

Remember, contract objects exist only in the contract and do not have their own master data. Let me show you how that works in the system.

In this exercise, you will assign and maintain a contract object.

Contract objects are mainly required for setting up conditions. Conditions are required for periodic postings to real estate contracts and are the basis to make postings in SAP S/4HANA Financials. You can store different time-dependent conditions for each real estate contract. A condition provides an exact definition which specifies the amount paid to the landlord or by a tenant for a specific service. For example, basic rents, advance payments for operating costs, and so on.

In this example you can see that there is one contract. In this contract there is a contract object which is representing a building, and a second contract object which is representing a car. The first step is to assign the building contract object to the condition for which you want to pay basic rent. In this example, a fixed amount of 1.000 EUR per month must be paid. There might also be a situation where you need to pay advance payments for the building. Therefore, you would create a second condition and assign the contract object to the corresponding advance payments condition. In this example, a fixed amount of 250 EUR needs to be paid on a monthly basis.

In this example we also lease-in a car which needs to be paid for. A third condition with a fixed amount of 500 EUR is paid as a basic rent and assigned to the second contract object.

The following slide will help you to understand the accounting and controlling processes, which are related to the contract object.

The periodic posting for real estate contracts function posts the amounts derived from contract conditions. In the case of contracts with debit partners that is the receivables. In the case of contracts with credit business partners that is the liabilities. In summary, the account assignment object is defined by the business partner. The cash flow of the contract is generated for the partner-related postings (partner cash flow). The cash flow forms the basis for periodic postings and contains the planned records for the postings. If you enter conditions in the contract, the system will generate a partner cash flow (payment plan) that updates planned records for periodic postings per condition type. Periodic postings post the planned records due in active contracts and converts them to actual records using the Periodic Posting app.

Cost and revenue objects belong to internal controlling. They are referred to as controlling objects or account assignment objects. You already learned that you can assign a cost center, internal order or work break structure elements to a contract object. This assignment defines the controlling object to which the costs within a valuation process are assigned. For internal purposes, the costs incurred per building can then be considered.

Chris has been dealing with the contract objects all day today. He sums up his learning.

Select the play button to see a summarization of the contract objects.

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