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Asset Accounting (User's Guide)

In this section I cover the basic principles of asset accounting and the SAP subledger
FI-AA from the users perspective, the more asset-intensive an enterprise is the more
significant the FI-AA component is, tangible fixed assets are managed not only on the
basis of their physical location but also on their value. In addition to local accounting
principles complex fixed assets are frequently valuated in accordance with IFRS or
U.S. GAAP, in this context the depreciation posting run and its parallel valuation is a
main feature within asset accounting. I have a whole section on asset accounting in
my FI configuration and setup section.

Fixed assets can be divided into tangible fixed assets, intangible fixed assets and
financial assets

Tangible fixed assets are complex fixed assets such as buildings, machines, etc that are at the long-term disposal of an enterp
Intangible fixed assets are assets such as patents, licenses, software, etc
Financial assets are shares in other enterprises, long-term securities, long-term loans and mortgage claims

Traditional asset accounting encompasses the complete history of the asset, from
purchase order or initial acquisition (possibly managed as an "asset under
construction" (AuC)) through to retirement. The system will calculate the values for
depreciation, insurance and other purposes between two points in time and then make
these values available in many different forms in the Asset Accounting Information
System (AAIS), in addition an evaluation facilitates depreciation forecasting and the
simulated development of asset values.

The FI-AA component does not have any country specific valuation rules hard coded,
which helps with the depreciation of an asset, at present parallel valuation approaches
in accordance with local and international depreciation regulations are the normal, the
capitalization criteria for an asset in accordance with local regulations and with
international accounting standards largely correspond to each other, this means that
apart from some minor exceptions for intangible assets there are no relevant
(practical) differences between capitalization prerequisites of both.
FI-AA component

FI-AA (Asset Accounting) is used to manage and monitor tangible fixed assets with
the system, data can be transferred with other components within the SAP system for
example it is possible to assign the invoice receipt and goods receipt in the material
management (MM) module directly to the assets in the FI-AA component, also
depreciation and interest can be transferred directly to financial accounting (FI) and
cost accounting (CO). Like accounts payable and receivable asset accounting is also
treated as a subledger of financial accounting, however to cover all legal and
accounting requirements it is necessary to define some organizational elements.

We will start with the chart of accounts and the chart of depreciation, the chart of
depreciation summarizes the valuations permitted for each depreciation area (local
law, tax depreciation, IAS, etc), it basically describes the purpose of the calculation,
and as thus it is a directory of depreciation areas organized according to business
management requirements. The assignment of a company code to a chart of
depreciation is independent of its assignment to a chart of accounts. Each company
code uses one (and only one) chart of accounts and chart of depreciation, whereby a
fixed relationship has not been defined between the chart of accounts and the chart of
depreciation.

In general a chart of depreciation is setup for each country and used by all company
codes associated with this country, you should copy and existing chart of depreciation
and then use this one, the following objects are linked to a chart of depreciation

Depreciation areas

Investment support measures

Depreciation keys

Characteristics of transaction types

SAP supplies country specific charts of depreciation, (sample charts of depreciation)

in which different depreciation areas have been fully maintained,
A depreciation area shows the valuation of a fixed asset for a particular purpose, it
stores any information concerning the valuation of a complex fixed asset, the FI-AA
component provides the following

Up to 99 depreciation areas can be used, in parallel for each asset

If required the values of depreciation can be posted automatically in FI

Depreciation areas can be used without restriction, there are no technical

specifications

Each depreciation area permits the use of all forms of depreciation, interest and
revaluation calculation, for example different deprecation areas can manage the same
values and depreciation parameters but show them in different currencies, here are
some more different business requirements

local balancing of accounts in accordance with regional requirements

the balance sheet for tax purposes (if another valuation is permitted)

the balance sheet in accordance with IAS (if the valuation is necessary)

managerial accounting

parallel financial reporting ( for example, as part of a group's balancing of

accounts)
Separate transaction figures are managed for each asset and depreciation area (asset
balance sheet values, depreciation, net book book values, etc). Depreciation area 01
implements online postings to the general ledger and documents are transferred on a
one-to-one basis, this means that during online posting each original document
assigned to an asset is posted to exactly one asset without summarization. Only
depreciation area 01 which is the master depreciation area has integration into general
ledger, accounts payable and accounts receivable accounting. You can deactivate any
depreciation areas that you are not using and you can re-activate them at a later date,
or add additional depreciation areas.

Asset xy in Year 2013

Balance Sheet value Depreciation Net Book value
Book Depreciation 100,000 40,000 60,000
Tax Depreciation 100,000 40,000 60,000
Cost Accounting Depreciation 100,000 10,000 90,000
Parallel Depreciation 100,000 10,000 90,000

SAP has a large number of valuation parameters which you define various factors that
influence the calculation of depreciation, see the below diagram

When configuring the system you need to specify if and how values are posted from
the depreciation areas to the general ledger, you need to answer the below questions

will any values be posted

will the asset balances be posted in real time and the depreciation values be
posted periodically
 will the asset balances and depreciation values be posted periodically

will only the depreciation values be posted periodically

Depreciation area 01 asset balances must be posted in real time to the general ledger,
the system uses two types of depreciation area

this is regarded as the master depreciation area that supplies values to your balance sheet, also know as the book
Real depreciation
normally designate this as 01, this area is characterized by automatic posting to FI with currency the same as that
area
not be able to adopt values/deprecation terms from other depreciation areas and you will not be able to delete t
this determines new assets values from values that have already been determined in other depreciation areas by
Derived
mathematical formula (addition or subtraction), you can setup the formula to derive the values from a maximum
depreciation area
you can also post the values from a derived area to FI.

An asset is assigned to a cost accounting object, it is therefore possible to use the

following cost accounting objects

Cost center

(Internal) order (real or statistical)

Activity type

You can post from any of the depreciation areas into controlling, for cost-accounting
depreciation of an asset you can use one of the following three options

Debiting a cost center

Debiting a (real) order

Debiting a cost center and a statistical order

Before we move on to asset master data, we need to consider the integration

relationships within the SAP system, data is transferred not only directly from
modules to asset accounting but also from asset accounting to other modules, for
example when acquiring assets or producing them in-house, the invoice and goods
receipt or withdrawal of material from the warehouse in the MM module is assigned
directly to the asset in the FI-AA component. On the other hand depreciation and
interest can be transferred directly from financial account (FI) and Controlling (CO).
Maintenance activities that must be capitalized can be settled from the PM module
(Plant Maintenance) to the relevant assets, as seen in the below diagram

For example if a product is produced in-house the asset becomes an asset under
construction (AuC), you can assign material withdrawals directly to the AuC object or
initially to the corresponding internal order. At first the corresponding order is settled
in periodic intervals to the associated asset AuC before a special transaction is used to
capitalize it to one or more assets. In the in-service phase the asset is depreciated
periodically in accordance with defined rules and the calculated depreciation values
are posted accordingly, at the same time the CO object (cost center or order) defined
in the asset master record is debited with the depreciation costs, this continues until
the end of the assets life when it is either scrapped or sold to a customer.

Master Data

When structuring fixed assets in the system you can choose from the following three
structural concepts
Balance Sheet offers three-level hierarchy at the balance sheet level, here a distinction is made between the balance sheet version,
Level the general ledger account.
asset classes are used to structure fixed assets, the assets are structured according to legal or business requirements,
Group Level
one asset class, account determination is used to assign each asset to an individual balance sheet item.
offers a four-level hierarchy at the asset-related level, the group asset makes it possible to group a number of assets
Asset-Related common valuation and depreciation, this is useful for complex machines and production lines. Below the main asset n
Level be used to further divide the asset into its asset components. The allow subsequent asset-related acquisitions to be c
lowest level consists of the transaction data that belongs to the relevant master record (line item).

Complex fixed assets with comparable properties such as a common balance sheet
account in the general ledger belong to the same asset class. Each asset will be in only
one asset class, therefore there is at least one asset class for "low-value assets" and
one for "assets under construction", you can define the parameters and default values
for each class, an example of this is shown in the diagram.

Asset classes are use for account determination, which must be defined for each asset
class, the G/L accounts of the relevant chart of accounts, which are to be
automatically posted for the various business transactions are defined for this account
determination, as can be seen in the diagram below

You can also structure assets by using group assets or subnumbers, if you want a
common depreciation calculation for several individual assets, you can group these
assets together to form one group asset. If a complex fixed asset consists of several
components that are to be valuated separately you can divide a complex fixed asset
into subnumber master records.

One reason for doing this may be to facilitate separate value development for
subsequent acquisitions or partial aggregates, the below diagram shows how asset
subnumbers are handled for subsequent acquisitions.
Once the structure has been defined for a group of tangible fixed assets, you can
create the master data using transaction code AS01, you have two options

Specification of company code and asset class - the asset class delivers the
most important parameters for the master record

Specification of a reference - the reference master record delivers the most

important parameters for the master record

The initial screen (left-hand side) requests for a asset class (you can see some of the
asset classes in the right-hand screenshot), the company code and the number of
similar assets (you can create multiple assets that are similar in one go),
the reference field allows you to copy an existing asset

The general tab is were the account determination is defined and this cannot be
changed, the acquisition, retirement, depreciation, gain and loss accounts are defined
behind the configuration. The inventory number field is optional, you can make the
asset number correspond to the inventory number. You can use the quantity field a
master record can also be used for quantity management, in this case you would only
create one master record for the number of assets you are creating, however this has
some disadvantages, you cannot use the location or cost center. The system
automatically maintains the data in the posting information area the first time an
acquisition is posted.

The time-dependent tab is used by cost accounting, if depreciation is monthly the

system considers the current CO object, here you can see that I have defined the
business area and the cost center, there are a number of optional fields that can be
used.
The allocations tab is used for evaluations, you can define up to five (only four shown
below), you can also define a asset super number to summarize or "compound"
several asset master records (for evaluation purposes). The lower half of the screen
allows you to integrate into the Equipment Management Module EAM (Enterprise
Asset Management), the right-hand screenshot display the EAM screen of this asset,
here yo can add warranties, locations, serial numbers, stock information

The origin tab is automatically filled when an asset is purchased, the vendor master
record for the purchasing document is transferred to these fields, The net worth
tax there is a special form of taxation on fixed assets (in some countries), you require
functions for a tax on non income values or net worth tax, if your country does not
have this then you can leave this blank

The insurance tab allows you to enter any insurance details regarding the asset
Lastly the deprec.areas tab the default values are transferred from the relevant asset
class or reference master record, you can change or enhance these values, the straight
line method is used to depreciate the server over 5 years. You can see the many
different depreciate areas that this asset has.

Once saved the system will display a confirmation as seen below

There may be a case were number ranges have not been setup, you can use transaction
code AS08, I also have a complete section on how to configure asset accounting in
my FI setup and configuration section.

You can use the below transactions or use the SAP easy menu to change or delete
assets, I wont cover these in details as they are self explaining, the lock can be used to
lock a new asset until the invoice is obtained thus stopping any incorrect postings.

change - transaction code AS02

display - transaction code AS03

lock - transaction code AS05

delete - transaction code AS06

If a complex fixed asset consists of several asset components it may make sense for
technical reasons to manage these components as subnumbers of an asset, in the
below diagram we can see the asset is a PC which is made up of two subnumbers
referring to the desktop/keyboard and the monitor. You can use transaction
code AS11 to create subnumbers
Asset Transactions

Asset business transactions are subdivided into transactions that cause change in stock
(acquisitions and retirements) and that affect net income (depreciation and write-ups),
to create an asset history sheet at the end of the year we need additional information,
this information is the transaction type. Transaction types determines the type and
content of a transaction, it controls the following points

account assignment

which value fields are updated in which depreciation areas

the assignment of the corresponding asset history sheet group

whether it concerns a debit or credit posting

the document type

Each transaction type is assigned to only one transaction type group, the main control
parameters of a transaction type are derived from the assigned transaction type group,
in addition they categorize the possible business transactions (acquisitions, investment
support measures, down payments, etc), transaction groups are fixed and cannot be
changed.

The document type is a two-digit alphanumeric key that is defined in customizing, one
range range is assigned for each document type (document storage), account types are
defined for each document type and must be used when creating a document.
Document type AA means the document is posted as a gross amount, that is, without
deducting a cash discount, whereas document type AN means the document is posted
as a net amount, that is, with cash discount deducted from the capitalization amount,
here are a couple of examples

Net procedure - the invoice is $10,000 and a cash discount of $500 (5%) is
applied, because there is a net posting the value of asset 4711 immediately
decreases by the invoice amount less the cash discount, in this case the
acquisition posting is $9,500

Gross procedure - the invoice is $10,000 is immediately forwarded to the

complex fixed asset as an acquisition posting. the cash discount amount only
reduces the acquisition costs of the complex fixed asset when the vendor
payment (including the cash discount) has been made, the report SAPF181
(profit and loss adjustment) is used to adjust the values at the end of the period.

Acquisition costs and production costs are key terms in asset acquisition, the include
the acquisition price the incidental acquisition costs less the acquisition price
reductions, the incidental acquisition costs are those costs needed to make an asset
operational, whereby sales and administration costs and other overhead costs are only
included in the acquisition costs if they can be attributed directly to the acquisition of
the asset. The acquisition posting can be made in the department that is responsible for
the transaction, you have three options (also see diagram below)

In the FI-AA component with integrated accounts payable accounting without a

purchasing order reference

In the FI-AA component without integrated accounts payable accounting and

without a purchasing order reference

In the MM module (Material Management) with integrated accounts payable

accounting and a purchase order reference.
I will not show you the first option FI-AA with integrated accounts payable
accounting without a purchase order reference, the "asset to vendor" posting is
frequently made by accounts payable accounting, when posting to the vendor account
or asset account, the corresponding G/L accounts are automatically updated via the
defined account determination (payables or asset balance), we can use transaction
code F-90, this is familiar with the accounts payable and accounts receivable data
entry, we enter the header details (left-hand screenshot) using posting key 31 and the
vendor account pvalle, we then fill in line item 1 details (right-hand screenshot top
section), the next line item details are filled in at the bottom of the screen, we will use
posting key 70 (debit asset) and we select the asset from the list in the account section,
see the popup box listing our server 10
The complete details of line item 1 is the left-hand screenshot, notice I have a
transaction type of 100 (external asset acquisition) as the next line item and we have,
when you enter we filling the line item 2 details (right-hand screenshot top section)

Again as in accounts payable/receivable we can simulate the posting to check that

everything is correct before we post, the left-hand screenshot is the simulated and the
right-hand screenshot is the simulated G/L

Once you are happy then post the document and a confirmation will be returned at the
bottom of the screen detailing the document number
So lets see what this has been done to our asset master record, the first time an
acquisition is posted the system automatically writes the following information

date on which the asset was capitalized (reference date)

initial acquisition date (reference date)

acquisition year and period (posting date)

The system derives the ordinary depreciation start date from the reference date of the
acquisition posting in connection with the defined period control method (depreciation
key) and then writes this information to the depreciation areas of the asset mater
record. These dates are used to determine the planned annual depreciation and planned
interest.

We can see that a document type KR was created in the subledger vendors account
(PVALLE)
The document entry is as per the simulated test we performed earlier

Now lets have a look at the asset through the asset explorer using transaction AW01N,
here we can see the rate of depreciation, immediately we can see the asset has
depreciated by $500.00 and the net book value is now $4500.00
If you use the comparisons tab we can see the rate of depreciation over the coming
years, this is a simple straight line depreciation over 5 years. The asset has a value of
$5,000.00 and we have a ordinary depreciation of $500.00 this year, the calculation is
based on a useful life of 5 years, annual depreciation is 20% that is $1000.00 per year
as we are half way through the year it means $500.00 for 2013. You can then see the
calculations from the remaining years.

You can also use the different depreciation area buttons to compare the rate of
depreciation by different depreciation areas,
You can use the below transactions codes for the remain methods

In the FI-AA component without integrated accounts payable accounting and without a purchasing order r

TCODE: ABZON

TCODE: ME21 or ME21N

In the MM module (Material Management) with integrated accounts payable accounting and a purchase or
Depreciation

Depreciation is used to describe the wear and tear of any complex fixed asset in a
balance sheet, property and land is an exception because it is not subject to wear and
tear. There are two types of depreciation

Ordinary depreciation - is a periodic scheduled recurring loss in value

Unplanned depreciation - is based on extraordinary circumstances (flood, fire,

etc)

Lets looks at unplanned depreciation, you can use transaction code ABAA or the SAP
easy access menu

We adjust the server that we entered above in the same acquisition year, we select the
server, posting period and the transaction type (650 unplanned depreciation on new
acquisition, use 640 for the previous year and 660 for the following year),
You can then enter the unplanned depreciation amount

Once you press enter or save you run through each of the various screens with each
different valuation approaches for depreciation

The system will then confirm the posting

We can now go back and look at the asset (using transaction code AW01) and see the
unplanned depreciation, the system only posts to the subledger whenl a periodic
depreciation posting run is performed. You can see our 750.00 unplanned depreciation
in the left-hand screenshot, if you select the posted values tab you can see how the
unplanned depreciation is split through the year, in our case 125.00 per month.

Asset Retirement

A non-revenue asset retirement is the same as scrapping, ideally you would like
revenue generated from the sale of an asset to exceed its book value, this would be
known as a gain, however if the sale value is less than the net book value this is
known as a loss, there are three ways to retire an asset

With or without revenue

With or without a customer (I will explain this one)

As a complete or partial retirement

We will only look at asset retirement with revenue and a customer as the others are
very similar anyway, basically we are selling the asset to a customer, the system
automatically calculates the loss and adjusts the corresponding asset balance sheet and
proportional accumulated depreciation. The asset value date and the period control
method of the depreciation key are used to determine the asset value period of the
asset retirement. The proportional accumulated depreciation calculated as a result of
the retirement is withdrawn for the specific period. Therefore a gain or loss is the
balance of the asset retirement amount, the accumulated depreciation amount and the
revenue obtained from the customer for the asset, for example

Asset balance 200,000

Depreciation 70,000
Revenue 110,000
Loss 20,000

You can use the SAP easy access menu or transaction code F-92,

The initial is similar to the other posting we have seen before, we enter the header
data (top left-hand screenshot) and the first line item details (bottom left-hand
screenshot) then enter the first item details (top of right-hand screenshot) and then the
second item details (bottom right-hand screenshot)

Then enter the second line items details, notice the asset retirement checkbox
When you enter you will be requested for the asset, here we will in the details below,
don't forget to tick the complete retirement checkbox

Again like before we can perform a check and a G/L simulate

Once posted we can then look at the asset (transaction code AW01), notice the sale of
this transaction, we can see that we had a 2834.91 loss on the asset.

If we look at the master data of the asset (transaction code AS03) we can see that it
has been retired,

Now I had a few issues when posting the above document, the first is regarding
negative and positive values, these parameters are set in transaction code OABN (left-
hand screenshot) and transaction code OADB (right-hand screenshot), change where
needed, I discuss these control parameter in my asset valuation section in the FI setup
and configuration section.
Last I had a problem posting to a affiliated company for a specific transaction type,
transaction code AO74 can help here

Asset Transfer

The FI-AA component distinguishes between intracompany-code transactions

(transfers) and transactions between different company codes (asset transfers), there
are a number of possible reasons for a transfer

A master records was created in or posted to the wrong asset class

 There has been a change of location and you need to change non-modifiable
organizational allocations in the master record

You want to split up an asset

You want to settle an asset under construction

If a new master record is created within the transfer transaction you can use the field
transfer rules to determine which of the input fields are to be transferred from the
source asset to the master record of the target asset. You can use the SAP easy access
menu or use transaction codes ABUMN and ABT1N

The initial screen (transaction data tab) the left-hand screenshot you enter the details
of the existing asset and the dates of the transfer (used to calculate the net book
value), you can supply some informational text, you can either transfer to an existing
asset or a new asset, the additional details tab has the posting period, document type
and any additional information that you may require, these enable you to control
whether the transfer variant concerns an intracompany-code transfer or a cross-
company-code asset transfer and how the asset values are transferred from the sending
asset to the target asset.

Because only 50% is to be posted in this example you must switch to the partial
transfer tab, here you can enter a specific or percentage or quantity amount, because
we created the asset in the current year we selected from curr-yr aquis (current year
acquisitions)

Again we can simulate the transfer before posting, notice the short text entries
regarding the original asset 30001 and the new asset 300007

Inter-company transfers are the same except you enter a company code as per the
screenshot below
Evaluations

There are many evaluations in SAP for assets, we will cover a few in this section and
leave the rest for you to investigate, we will also cover a few of them in the closing
operations section (asset history, lists of an inventory, evaluations that concern the
depreciation posting run), the examples below are day-to-day activities of an fixed
asset accountant but is only a fraction of the many possible available.

We start with looking at the asset balance evaluation, you can use the SAP easy access
menu or any of the transaction codes in the below screenshot, there are many ways to
sort as you can see, each targeting a specific group (cost center manager, plant
manager, etc)
Lets take a look at individual assets (by asset number), fill in the required filtering
details, you even have the option to select different depreciation areas and change the
sorting.

The report then will return the filtered asset balances, remember these are all on the
same balance sheet regarding the depreciation area 01, you can see the acquisition
values, the accumulated depreciation and the net book value, if you see a book value
of 0 then this asset has fully depreciated but are still available to the company.

Next we will look at the directory of unposted assets, again the initial screen is used to
perform some filtering, I will most it it blank as I do not have many assets configured
The report returns the assets that have not been capitalized, there could be a number of
reasons for this but its good to have a list that can be used to investigate the assets.

New G/L and FI-AA

The new G/L is a new optional component however it does have many benefits,
see new G/L section for more details, ledgers are now associated with the depreciation
area for each accounting principle, this means that there is a new delta depreciation
area in asset accounting. In the below example we can see that the asset were
capitalized in the "fixture and fittings" asset class

Account Description Debit Credit U.S. GAAP Local GAAP

21000 fixtures and fittings 20,000 0L L6
160000 payables 20,000 0L L6
The posting clearly shows a single posting document updating both ledgers, the
acquisition was posted with the ledger field blank, now if we consider the different
depreciation postings in accordance with local GAAP and U.S. GAAP the below table
shows that the ledger approach in SAP general ledger works with identical accounts
for different valuation approaches.

Account Description Debit Credit U.S. GAAP Local GAAP

211100 Depreciation of tangible assets 5,000 0L No Posting
Accumulated depreciation of fixtures and
21010 5,000 0L No Posting
fittings
211100 Depreciation of tangible assets 4,000 No Posting L6
Accumulated depreciation of fixtures and
21010 4,000 No Posting L6
fittings

The need for an additional delta depreciation area becomes apparent when selling a
complex fixed asset, for example the sales revenue value is 10,000 that is a loss of
5,000 in accordance with depreciation area 01 (U.S. GAAP) and a loss of 6,000 for
depreciation area 60 (Local GAAP), account receivable postings are always
permanently associated with depreciation area 01 for all accounting principles, this
results in the below table

Account Description Debit Credit U.S. GAAP Local GAAP

Accumulated depreciation of fixtures and
21010 5,000 0L L6
fittings
825000 Clearing of asset retirement 10,000 0L L6
200000 Loss from asset retirement 5,000 0L L6
21000 fixtures and fittings 20,000 0L L6

This method updates a incomplete valuation approach in every nonleading

depreciation area even though there is another valuation for ledger L6, an additional
depreciation area is required in asset accounting to correct this issue in the general
ledger as part of periodic posting of balance sheet values.

Account Description Debit Credit U.S. GAAP Local GAAP

Accumulated depreciation of fixtures and

21010 1,000 No Posting L6
fittings

2000000 Loss from asset retirement 1,000 No Posting L6

In many countries a cash discount reduces the acquisition and production costs for a
complex fixed asset, previously the entire invoice amount was activated during gross
procedure in SAP, for example if a complex fixed asset costs 100,000 and the input
tax was 10,000 the total payable is 110,000. For outgoing payments and cash
discounts can only be posted in certain cases and in certain amounts, lets say we give
a 3% cash discount which reduces the payable by 3,300 to 106,700 the net price of the
fixed asset by 3,000 and the input tax by 300, however in SAP the asset is still listed
as 100,000 in asset accounting even though it should be 97,000 after the outgoing
payment, the acquisition and production costs were not reduced until adjustments
made at the end of the period, the program SAPF181 was used for this purpose.
Thanks to document splitting the original document itself already contains the
information about how amounts are to be proportionately deducted from the complex
assets in the case of cash discount deductions. When the outgoing payment is posted
the complex fixed asset in asset accounting is immediately reduced to 97,000. There is
no need for a periodic activity in asset accounting, which reduces the effort at the end
of the period.

I will cover other asset accounting related information (for example depreciation run,
etc) in the closing operations section.