Asset

Accounting
Overview
• Introduce the asset master records and see how posting to them is
connected to the General Ledger through a reconciliation account
• Introduce the Asset Explorer report and show how it summarizes
posted and planned activities for an asset
• Examine some of the closing procedures in Asset Accounting, such
as running depreciation and executing the Asset History Sheet
report

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Unit Objectives
After completing this unit, you’ll be able to:
• Maintain an asset master record
• Describe the role of an asset class
• Describe the role of depreciation areas in asset accounting
• Post various asset transactions
• Print inventory lists
• Create asset history sheets

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Contents
• Master Records in Asset Accounting
• Standard Accounting Transactions in Asset Accounting
• Closing Procedures in Asset Accounting

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Master Records in Asset
Accounting
Lesson Overview
• Discuss the asset master record and examine the key components
of the asset master record
• View the link to the general ledger reconciliation account from the
asset master record
• Learn the asset class, which is similar to the account group in G/L,
AP, and AR
• Study deprecation areas and examine how depreciation is
calculated in mySAP ERP Financials

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Lesson Objectives
After completing this lesson, you’ll be able to:
• Maintain an asset master record
• Describe the role of an asset class
• Describe the role of depreciation areas in asset accounting

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Assets
• An organization may possess a variety of assets, including
tangible, intangible, and financial assets
• Tangible assets have a physical form, whereas intangible assets
are nonphysical
• Examples of tangible assets are computers, machinery, and buildings
• Examples of intangible assets are intellectual property, patents, and
trademarks
• Financial assets include a variety of financial instruments such as
securities, long‐term notes (debts), and mortgages
• Companies use asset accounting to track the financial
consequences associated with the entire lifecycle of an asset, from
acquisition to disposal

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Assets (Cont.)
• Accounting data about each asset are maintained in asset
subledger accounts
• These data include acquisition costs and depreciation
• Like other subledger accounts (such as customer and vendor
accounts), asset subledger accounts are created when the asset
master record is created
• The subledger account and the master record share the same
account number
• As in the case of customer and vendor accounts, asset accounts
are associated with a reconciliation account in the general ledger
• However, in contrast with customer and vendor accounts, the association
between an asset account and a reconciliation account is not
straightforward
• Rather, it depends on which asset class the asset belongs to

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Assets and Organizational Units of
Financial Accounting

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Assets and Organizational Units of
Financial Accounting
• Each asset belongs to a company code and business area
• All postings made for the asset (acquisitions, retirements, depreciation, and
so on) are posted in the assigned company code and business area
• Assets are assigned to a company code and, by virtue of this assignment, all
asset‐related transactions are posted to the general ledger associated with
the company code
• This arrangement ensures that asset transactions are properly reflected in the
company’s financial statements
• Additionally, user can assign the asset to various Management Accounting
objects (cost center, internal order, activity type, and so on) and logistic
organizational units (for reporting and selection purposes only)
• In asset accounting, the primary cost is depreciation expense, which is the
loss in value of an asset over time
• When a company incurs a depreciation expense, it must allocate that expense to a cost
center

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Asset Class

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Asset Class
• An asset class serves the same functions as an account group for customers,
vendors, and G/L accounts
• An asset class is a grouping of assets that possess similar characteristics
• For example, all computing equipment such as computers, printers, and monitors can be
included in one asset class
• Each asset class is associated with a specific reconciliation account in the
general ledger account
• The asset class is the main criterion when defining the asset
• Each asset must be assigned to one asset class at the time of creation
• In the asset class, user can define certain control parameters and default values for
calculating depreciation and other master data
• The asset class is similar to the account group in that it defines the screen
layout of the asset master record and has a number range assigned to it
• Assets that do not appear in the same line item of the balance sheet (such as
buildings and equipment) are typically assigned to different asset classes

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Asset Class (Cont.)
• Additionally, there is at least one special asset class for assets under
construction and one for low‐value assets
• E.g. the asset classes used by IDES for this are:
• 4000 for assets under construction
• 5000 for low‐value assets

• User can also create asset classes for intangible assets and leased assets
• Functions are available for processing leases
• The Plant Maintenance (PM) component is used for the technical
management of assets
• The Treasury (TR) component is used for managing financial assets
• Finally, each asset class includes a variety of parameters that determine
how an asset belonging to that class is treated
• The two most important parameters are account determination and
depreciation

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Asset Valuation
• Often asset balances and transactions need to be valuated
differently for various purposes
• User may, for example, use various valuation methods for:
• Financial statements based on regional requirements
• Financial statements for tax purposes (if a different deprecation method
is allowed)
• Controlling (costing)
• Parallel financial reporting for group financial statements (per IAS, US
GAAP, and so on)
• Replacement value (using an index figure)

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Depreciation Areas

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Depreciation Areas
• Depreciation areas are standard delivered and are country
specific
• They contain all the rules for depreciating various types of assets, based
on country tax laws, for example
• To keep more than one valuation basis, depreciation areas are
kept in the SAP system
• Separate transaction figures are kept in each area:
• Per asset and depreciation area
• For individual value components such as balances, depreciation,
remaining book value

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Control Data in Depreciation Areas

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Control Data in Depreciation Areas
• In the asset master record, different data for valuation areas are
stored
• These data control the calculation of normal and special
depreciations for the respective valuation areas
• User can thus use a different depreciation method for general
business procedures from the depreciation method required by
the tax authorities

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Account Determination

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Account Determination
• Since the depreciation areas in asset accounting do not exist in the
general ledger, these values have to be posted to various G/L accounts in
the general ledger
• The G/L accounts are then used in various financial statement versions
(financial statements per GAAP, financial statements for tax authorities, group
financial statements, and so on)
• The following G/L accounts are used in various financial statement
versions:
• Balance sheet accounts, which record the adjustments to the asset's value
• Depreciation accounts for depreciation and appreciation
• The assignment of the G/L accounts to different valuation areas is stored
in one single account assignment key
• This key is entered in the asset class and appears as a standard value on the
asset master record
• Assets of the same asset class all have the same account assignment key, that
is, their values are all posted to the same reconciliation accounts

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Account Determination (Cont.)
• In the General tab of an asset master record, user can see the
account determination key
• From the master record, user can drill down on the account
assignment key to the APC account (Acquisition and Production
Cost), the reconciliation account posted to when the asset is
acquired
• Many companies prefer to keep parallel valuations in asset
accounting (either statistically or for information purposes) and
not in the general ledger
• In this case, user does not need to make the related G/L account
assignments

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Group Assets and Subnumbers

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Group Assets and Subnumbers
• For reporting purposes, components of an asset can be kept under
asset subnumbers, and assets can be combined into group assets
• The main asset is assigned the subnumber 0, allowing the asset
subnumbers to be assigned as desired
• Group assets are assets that are depreciated at the top group level
(such as a telephone line that has many telephone poles, each of
which is, in itself, an asset) or a production line that has many
machines
• Subnumbers are used to represent components of an asset
• E.g.: A computer is the main asset (subnumber 0)
• The different parts of a computer are created as subnumbers, for
example, the mouse and the keyboard
• A group asset has its own master data
• Several main assets can be assigned to a group asset

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Group Assets and Subnumbers
(Cont.)
• Depreciation is calculated at the group asset level
• This is important in certain industries, such as telecommunications
• In the USA, for tax reporting, valuations are done at group level
• This means that not every asset has to be evaluated individually
• Each individual asset in the group must be retired before the
group asset can be retired

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Lesson Summary
You should now be able to:
• Maintain an asset master record
• Describe the role of an asset class
• Describe the role of depreciation areas in asset accounting

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Standard Accounting Transactions
in Asset Accounting
Lesson Overview
• Discuss daily transactions with assets
• Review the asset explorer and see how it is updated by posting
transactions to the asset

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Lesson Objectives
After completing this lesson, you’ll be able to:
• Post various asset transactions

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Transaction Type

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Transaction Type
• The transaction type is an addition to the asset posting keys 70 (debit)
and 75 (credit)
• It has to be included when posting to an asset account
• It helps the subledger system analyze the transaction
• The transaction type is necessary for asset accounting because it
specifies exactly where the asset posting is listed in the asset history
sheet
• The transaction type is the distinguishing characteristic of the various
asset postings, for example:
• Buying and selling
• Credit memos
• Acquisitions from internal production
• Adjustment postings
• Retirements without revenue
• Depreciation and appreciation

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Asset Transactions

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Asset Transactions
• A company typically acquires an asset and keeps it for a certain
amount of time, after which it is no longer useful
• A variety of activities or transactions are associated with the asset
during its lifecycle
• The most common transactions types are acquisition, depreciation,
and retirement
• Asset transactions (acquisitions, retirements) can be posted in
various ways to meet the organizational and business requirements
of the company

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Asset Transactions (Cont.)
• In Assets Accounting, user can post in the following ways:
• Without a vendor or a purchase order; the offsetting entry is made to a
G/L clearing account
• To a vendor, but without reference to a purchase order
• Via materials management using the functions purchase order, goods
receipt, and invoice receipt
• When posting to accounts of two subsidiary ledgers, that is, to the
asset and to the vendor, the reconciliation accounts of both
subsidiary ledgers are updated in the general ledger

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Document Entry Screen for Asset
Acquisition

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Assets Under Construction

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Assets Under Construction
• The expenses for assets under construction can be managed in
two ways:
• In the application component Investment Management, user can create,
post, and manage investment orders or investment management projects
• These orders or projects are then reconciled with the asset under construction
• The Investment Management provides extensive functions for supporting
investment procedures
• If the Investment Management is not used, the asset under construction
can be posted to directly in asset accounting
• Once the asset is complete:
• Master data must be created (if it does not already exist) for the asset the
AUC will be settled to
• The values from the asset under construction account have to be settled
to one or more completed assets
• The costs are distributed to one or more assets with the help of a settlement rule
• This rule specifies which percentage of the AUC is settled with which asset

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Asset Explorer

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Asset Explorer
• The data associated with assets is complex and includes
information concerning acquisition, depreciation, and retirement
• The simple reporting capabilities are not adequate for asset
accounting
• Consequently, companies rely on a reporting tool known as the asset
explorer
• The asset explorer provides an overview of all the activities
related to the asset, including acquisition data, planned and
posted depreciation for different depreciation areas, and
comparisons of data across multiple years
• It also enables companies to drill down for details regarding master data,
transactions, and documents

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Asset Explorer (Cont.)
• User can see transactions that have been posted to the asset plus
planned and posted depreciation per depreciation area, per
period, for each fiscal year
• User can see the details of accounting transactions
• Also, user can conveniently switch to view another asset without leaving
the screen
• The asset explorer distinguishes between planned values –
depreciation amounts that have not yet been posted to the general
ledger accounts – and posted values, which have been posted
• Planned values must be periodically posted to the general ledger
• Companies accomplish this task by executing a depreciation posting run,
which posts the planned values for the specified time period for all
depreciation areas to the appropriate general ledger accounts
• In addition, it charges the appropriate cost centers with the depreciation
expenses incurred

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Asset Explorer

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Asset Explorer (Example)
• The top part of the asset explorer identifies the asset and the fiscal year
for which the data are displayed (asset #100002, office furniture, and
2010, respectively)
• The top left part lists available depreciation areas
• In the figure, two areas are available: book depreciation and tax depreciation
• Book depreciation has been selected
• The tabs in the middle part of the figure indicate the types of data that
are maintained in the asset explorer
• Note that the posted values tab is selected
• This tab displays the acquisition value of the asset and depreciation values
that were posted by the depreciation run
• The planned values tab includes planned depreciation values for all the
depreciation areas
• The comparisons tab displays data for multiple years, and the parameters tab
displays current settings for the parameters associated with the asset, such as
the useful life and the depreciation method

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Asset Explorer (Example)

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Lesson Summary
You should now be able to:
• Post various asset transactions

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Closing Procedures in Asset
Accounting
Lesson Overview
• Study some of the closing operations in asset accounting
• Perform the activities of creating an inventory list and an asset
history sheet in mySAP ERP Financials

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Lesson Objectives
After completing this lesson, you’ll be able to:
• Print inventory lists
• Create asset history sheets

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Asset Closing

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Asset Closing
• Closing can roughly be divided into two types of work:
• Legal requirements (mandates required by the government)
• Technical and organizational tasks (preparatory steps that are necessary
technically or that support the accounting organization)
• With the Fiscal Year (FY) Change Program program, the new year
is opened
• This allows user to post to assets in the new fiscal year
• The Year‐End Closing Program checks whether:
• depreciation and asset values are posted in full
• assets contain errors or are incomplete
• If the program finds no errors, it updates the last closed fiscal year
for each depreciation area and it blocks posting in Asset
Accounting for the closed fiscal year

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Asset Closing (Cont.)
• These two programs are generally not executed at the same time
• The year‐end closing program is generally executed just after the auditors
have finished their work and before the G/L is ready to close for the year
• On a calendar year, the fiscal year change program is executed on or
before January first and the year‐end closing program is typically
executed in late March, before the books are presented for external
purposes
• At the beginning of the new fiscal year, a technical reconciliation is
performed, which compares the transaction figures in asset
accounting with the corresponding figures in the G/L accounts
• Afterward, inventory is taken and adjustment postings are made,
should any corrections be needed

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Asset Closing (Cont.)
• The depreciation posting run posts the depreciation to the general
ledger
• Since only one depreciation area can post its asset postings to the general
ledger in real time (typically book depreciation), the additional, relevant
depreciation areas are posted to the general ledger using periodic asset
account postings program
• These additional depreciation postings are necessary only in some
countries
• User can now create the asset history sheet, which is a required
report in Germany
• It is a useful report in all countries, as it shows the beginning and ending
book values of the assets and the transactions involved

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Inventory

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Inventory
• User can create one or more inventory lists with the SAP system
for the inventory process
• The lists are given to employees who perform the inventory
• These employees note all deviations in the list and forward these
to the Accounting department
• The employees in Accounting enter the necessary corrections in
the system

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Depreciation Posting Run

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Depreciation Posting Run
• In financial accounting, an enterprise maintains a variety of depreciation
areas simultaneously
• As a consequence, the enterprise requires different types of financial
statements – for example, one type for external reporting and another
type for filing taxes
• For this reason, it maintains different financial statement versions, each of
which includes the appropriate depreciation related accounts
• All depreciation (normal depreciation, special depreciation, and
unplanned depreciation) is initially kept in the form of planned values in
asset accounting
• Only after the depreciation posting run has been completed is the
depreciation actually posted in asset accounting and in the general ledger
• The depreciation is posted to the corresponding depreciation accounts in
the general ledger and to the assigned Management Accounting object
assigned to the asset master record

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Depreciation Posting Run
(Example)
• Figure below shows a company that uses two depreciation areas
to provide data to different financial statements intended for
different audiences
• Specifically, the company includes book depreciation data in the financial
statements presented to shareholders and tax depreciation data in the
statements intended for tax authorities

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Depreciation Posting Run
(Example)

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Asset History Sheet

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Asset History Sheet
• The asset history sheet is the most important and most complete
evaluation available for closing
• As with financial statements, the structure of the asset history
sheet is based heavily on country‐specific requirements
• It is thus possible to create many asset history sheet versions
• Each asset history sheet version contains various history sheet
groupings, such as the following:
• Book values at the beginning of the fiscal year
• Acquisitions
• Retirements
• Adjustment postings
• Depreciation
• Book values at the end of the fiscal year

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Lesson Summary
You should now be able to:
• Print inventory lists
• Create asset history sheets

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Unit Summary
You should now be able to:
• Maintain an asset master record
• Describe the role of an asset class
• Describe the role of depreciation areas in asset accounting
• Post various asset transactions
• Print inventory lists
• Create asset history sheets

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Test Your Knowledge
1. When creating an asset master record, how is the asset
number assigned?
2. What does the account determination key do for the asset?
3. Every asset belongs to a _____________________.
4. What must we use to post to an asset in conjunction with the
posting key?
5. A transaction type tells us where the posting is placed on the
_____________________.
6. What are the various methods with which acquisitions and
retirements can be posted in Asset Accounting?
7. What is the purpose of the asset explorer?
8. Depreciation is actually posted in asset accounting only after
we do a _____________________.
9. The asset history sheet gives us what type of information?

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Question & Answers