Performing Processes in Asset Accounting

This lesson will provide you with an overview of asset accounting. We will cover all main aspects of the asset lifecycle. From creating an asset master data to all kinds of asset transactions, like asset acquisition or depreciation. Finally we will close with asset retirement.

Your company has a number of assets that support its business in one way or another, starting from laptops that employees use on a daily basis all the way to complex industrial machines that are used to manufacture products. Each asset has an initial value, often referred to as acquisition and production cost (APC) and each asset depreciates month after month. During their life-cycle, assets can also be transferred, scrapped or sold. All these events in the assets life lead to different asset transactions that need to be recorded in our accounting.

Asset Accounting in the SAP system is used to manage and monitor fixed assets. In Financial Accounting, it serves as a subsidiary ledger to the general ledger, providing detailed information on transactions involving fixed assets.

The basic functions cover the entire life of the asset, from the purchase order or initial acquisition (which can be managed as an asset under construction) all the way to the asset retirement. The system calculates, to a large extent automatically, the values for depreciation, interest, and other purposes between these two points in time, and places this information at your disposal in varied form using the Information System. There is a report for depreciation forecasting and simulation of the development of asset values.

The asset class is the main criterion when defining the asset. Each asset must be assigned to one asset class. In the asset class, you define certain control parameters and default values for depreciation and other master data.

The main purposes of an asset class are:

• Account Determination
• External or Internal Asset Number
• Providing Screen Layout Rules (Example: Definition of mandatory Asset Master Record fields)
• Default Depreciations parameters in relation with the Depreciation Areas

You valuate your fixed assets by applying different valuation approaches for different business, taxation, and legislation purposes. With Asset Accounting (FI-AA) as a Financial Accounting (FI) subledger, you can manage different valuation approaches for each asset in depreciation areas.

The depreciation areas are made available to the individual company codes using so called charts of depreciation. 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. All postings that are executed for the asset (acquisitions, retirements, depreciations, and so on) are recorded within the assigned company code.

You can create the acquisition posting in the department that is primarily responsible for the business transaction.

The following are the methods of posting external acquisitions (acquisition of an asset from a business partner):

• In FI-AA with automatic offsetting entry, but without a link to a purchase order and any AP integration, the posting is done when the invoice has not yet been received, or when the invoice was posted by the AP department beforehand in a separate step.
• In FI-AA with AP integration, the posting is done when an incoming invoice is available without any reference to a purchase order.
• In Materials Management (MM), the assets are posted and activated in Logistics (LO).

Acquisition from in-house production is the capitalization of goods or services that are partially or completely produced by the enterprise. The costs for these in-house produced goods or services must be capitalized to assets. To capitalize production costs, create an investment measure (order or project) in Investment Management (IM) and settle to an asset under construction (AuC), then to the final asset.

The depreciation posting run can be performed for several company codes and accounting principles.

All types of depreciation (normal depreciation, special depreciation, and unplanned depreciation) are calculated and initially kept in the form of planned values in the Fixed Assets application.

After the period depreciation posting run, depreciation values are also displayed in the G/L accounts and the financial statement.

Besides the postings to the corresponding depreciation accounts in general ledger accounting, it is possible to post depreciation values to Management Accounting (controlling or CO) objects, for example, cost centers, or Work Breakdown Structure (WBS) elements assigned to the asset master record.

Typically, the values of depreciation area 20 (Cost Accounting) are transferred to CO.

Asset retirement is the removal of an asset or part of an asset from the asset portfolio. This removal of an asset (or part of an asset) is posted from a bookkeeping perspective as an asset retirement. Depending on organizational considerations, or the business transaction which leads to the retirement, you can distinguish the following types of retirement:

• Retirement with revenue and customer (integrated asset retirement)

• Retirement with revenue but without customer (not integrated)

• Retirement without revenue (asset retirement by scrapping)

The proportional value adjustments that are calculated on the basis of the asset parts being retired are determined and reset by period.

At the same time, the system posts the asset retirement.

The gain or loss result depends on the balance of the following:

• Amount of the original APC value

• Amount of value adjustments

• Revenue (for example, the sales price) that is received for the asset

Asset Master Record

Asset Acquisitions

Asset Retirement

Post Depreciations

Integration