New Fixed Assets Accounting in SAP S/4HANA

2.1 Organizational structure

The organizational structure in the SAP system is always the foundation for a module. For Asset Accounting, there are three important organizational objects (other organizational objects are also used but they are not all specific to Asset Accounting). These three objects already existed in the very first SAP releases and they still exist in SAP S/4HANA.

The organizational objects are: chart of depreciation, depreciation areas, and asset classes. When you define the organizational objects for Asset Accounting, other organizational objects such as company code, controlling area, etc. should already have been created.

2.1.1 Chart of depreciation

The chart of depreciation is basically just a list of depreciation areas. A depreciation area is designed to value an asset according a specific purpose, such as group accounting or tax accounting.

SAP provides sample charts of depreciation for many countries. You can use these samples as the basis for your own chart of depreciation. Based on your own requirements, you can add or remove depreciation areas.

You define a chart of depreciation for a country and then assign it to a company code within that country. You can use more than one chart of depreciation for each country. You can assign each company code in a country to exactly one chart of depreciation; normally that is the country chart of depreciation.

Figure 2.1 shows a couple of the sample charts of depreciation provided by SAP. This is in the IDES system; in production systems, many more country-specific charts of depreciation are available.

Figure 2.1: Sample charts of depreciation

You maintain the charts of depreciation in Customizing via the following path: Financial Accounting • Asset Accounting • Organizational Structures • Copy Reference Chart of Depreciation/Depreciation Areas.

2.1.2 Depreciation area

As stated before, depreciation areas are designed to value an asset according to a specific purpose. For example, you can value an asset for group accounting or tax accounting purposes. However, you can also use special depreciation areas to fulfil your own reporting requirements. For example, you can use a special depreciation area for investment support (for subsidies granted by the state).

Sometimes, a depreciation area is required for technical reasons. For example, you need to have a depreciation area for each local currency.

The way the accounting principles have been defined have an impact on the definition of depreciation areas. This is explained in more detail in Section 2.2 and also in the section on asset migration, Section 8.2.

Figure 2.2 shows the depreciation areas for example chart of depreciation 1010. For each depreciation area, you can see whether it is a real area or not, the target group, accounting principle, and how the deprecation area posts in the general ledger.

• A real depreciation area means that the valuation for this area is stored in the database. If an area is not a real area, the valuation is calculated every time it is reported. In the example, depreciation area 35 is not real, so its values will be derived (calculated).
• The target group shows the ledgers in which the values are posted. This can be combined with the accounting principles.
• The accounting principle indicates which reporting rules are to be applied during reporting. In the example, accounting principle (local) GAAP posts in target group ZL and accounting principle IFRS posts in target group 0L.
• The G/L column indicates whether or not posting takes place in real time. In the example, depreciation areas 1 and 32 post in real time. For the other areas, the values are stored in the database but there is no posting.

Figure 2.2: Depreciation areas

In addition to real depreciation areas, you can also have derived depreciation areas; the values for these areas are calculated from other depreciation areas. Figure 2.3 shows the details of the derived depreciation area 35. You can see that the values are not posted in the general ledger. The values for the area are calculated as the difference between area 33 and 1.

Figure 2.3: Derived depreciation area

You maintain the depreciation areas in the chart of depreciation in Customizing via the following path: Financial Accounting • Asset Accounting • Organizational Structures • Copy Reference Chart of Depreciation/Depreciation Areas.

You maintain details of the depreciation areas themselves in Customizing via the following path: Financial Accounting • Asset Accounting • General Valuation • Depreciation Areas.

2.1.3 Asset classes

Using asset classes allows you to group assets that have very similar characteristics—for example, the same screen layout (i.e., fields), same depreciation rules, same posting rules, etc.

Every asset must belong to an asset class.

An easy rule for determining how many asset classes you should use is to define an asset class for each individual asset balance sheet account. However, this would be only the bare minimum number of asset classes. For example, there can be only one balance sheet account for vehicles but for reporting, you may want to report on personal cars and trucks separately. Therefore, it might be a good idea to use two asset classes for vehicles.

There can be several reasons why you may have to use more asset classes than individual asset balance sheet accounts:

1. More details in reporting on certain assets, such as vehicles.

2. As asset classes have default values, you may want to use different default values for different types of assets. For example, the useful life of cars may be five years, whereas for trucks it may be eight years. By using two asset classes for vehicles, you can have two sets of default values.

3. To support different screen layouts—that is, different uses of asset master data fields. For example, for cars, you want the personnel number to be mandatory, whereas for trucks, the number is not even shown.

4. The use of separate asset numbers. All assets within an asset class use the same number range. By using two asset classes for vehicles, you will be able to use separate number ranges for cars and trucks.
On the other hand, different asset classes may use one common number range. If you use inventory numbers for your assets, you may decide to use the inventory number as the asset number. However, this is not recommended practice. If, for whatever reason, an asset receives a new inventory number, you have to create a new asset and transfer the old asset to the new asset. It is better to put the inventory number in the designated field in the asset master. This gives much more flexibility.

Because asset classes are global organizational objects, you must also take into consideration that local (legal) requirements may also impact the definition of asset classes. Thus, you may have to create special asset classes in order to support local legal requirements.

You maintain asset classes in Customizing via the following path: Financial Accounting • Asset Accounting • Organizational Structures • Asset Classes. This node contains several transactions for maintaining the asset classes.

In the SAP system, you can create asset classes for types of asset that sometimes have special functionality in SAP:

Leased assets

In 2016, the International Accounting Standards Board (IASB) issued IFRS 16, replacing the IAS 17 leasing rules (and in this context, also IFRIC 4, SIC 15, SIC 27) adopted in 2001. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. It can also apply earlier as long as IFRS 15 is also applied.

According to IFRS 16, financial and operational leases no longer have to be treated differently from an accounting perspective. These new lease accounting rules must increase transparency. The impact of an organization’s leases on the financial position and cash flow should be immediately visible from the balance sheet. To meet that objective, a lessee should be able to recognize assets and liabilities arising from a lease.

Because of the major difference to the previous accounting principles, the SAP Real Estate Management (RE-FX) module is a better place to register details of contracts and conditions. The module has much more functionality to support the complex processes. The module is integrated in SAP’s financial modules, including Asset Accounting.

Nevertheless, within Asset Accounting, you can also maintain leased assets directly. For example, IFRS 16 does not apply for assets costing less than USD 5,000.

Low-value assets

Low-value assets, often abbreviated as LVAs, are assets with a low acquisition value that are depreciated completely in the year they are acquired. The SAP system has a special depreciation key for these assets; alternatively, you can also set the useful life to one month/period.

Although LVAs may have little value, you may still want to keep track of them. You can do this for each asset individually or for assets collectively. In the asset class for LVA assets, you set maximum amounts for individual assets and for collective assets.

Even when they have been fully depreciated, you can still report on the LVA assets.

Assets under construction

One of the special asset class types most frequently used is the asset under construction (AuC) class. This type of asset is used during the construction phase of an asset to collect all the costs such as materials, services, external and internal hours, service fees, etc. The costs are collected until the asset is to be put into use. At that time, all the costs of the asset under construction are capitalized. You can capitalize several assets under construction into one final asset or capitalize one asset under construction into several final assets. For example, let us assume you are building three machines simultaneously. You cannot differentiate the person hours per machine. Therefore, you use only one asset under construction. Once the machines are ready, the asset under construction is settled to the three machines.

Examples of assets under construction are plant, machines, and buildings. For this type of asset, you first collect the costs and once the assets have been put into use, you capitalize the costs.

Assets under construction should not be depreciated. This is a legal requirement in most countries. However, it is sometimes a legal requirement to also depreciate the assets under construction. This may cause issues when settling to the final asset. Assume materials used for the asset under construction in January and December are to be depreciated for 10 years. When you settle the asset under construction to the final asset, it will not be possible to determine the correct useful life for the final asset. For example, you build a (big) house, starting with the bricks in year 1, and you finish the building in year 2 and settle the asset under construction to the final asset. The house is to be depreciated over 30 years, but the bricks should be depreciated over 29 years as they have already been depreciated for a year. Currently, SAP has no solution for this situation.

Tangible and intangible assets

Tangible fixed assets are physical objects which you can see, feel, and touch.

Intangible assets cannot be seen or touched. Examples are licenses, goodwill, and copyright. In an SAP system, tangible and intangible assets are handled in exactly the same way, except when it comes to retirement. Normally, intangible assets are not retired.

Technical assets

Technical assets are tangible assets that are also part of Plant Maintenance—for example, special, expensive tools and equipment that require a lot of technical details. For this purpose, Asset Accounting is integrated within the Plant Maintenance module of SAP. The financial details are maintained in Asset Accounting and the technical details are maintained within Plant Maintenance. Changes made to a technical fixed asset can automatically update the Plant Maintenance data.

2.1.4 Changing the organizational structure

You should define the organizational structure as carefully as possible. Once it has been defined, it is not easy to change it, especially once assets and/or postings have been created.

Once you have created assets, you cannot assign a different chart of depreciation to a company. Furthermore, you can no longer delete depreciation areas from the chart of depreciation. The setup of depreciation areas may have to be adapted for legal or business reasons; sometimes, a depreciation area is no longer needed or additional depreciation areas are required. Instead of deleting a depreciation area, you can deactivate it within (all) the asset classes. The effect will be that the depreciation area is no longer visible in new assets, but it will still appear in existing assets.

Adding a new depreciation area is not a problem but it can be a cumbersome process, even though SAP provides tools to support the addition of a depreciation area.

2.1.5 Changing/adding asset classes

Within a productive environment, it is easy and fairly simple to add new asset classes. If required, you can add a new asset class in the same way as you would do when setting up the system.

You can change asset classes, except for the account determination code. Therefore, if you are using specific posting schemes for an asset class, you cannot change the posting scheme by assigning a new account determination code to the asset class. However, you can change the settings of the account determination used by the asset class—but note that this will also impact other asset classes using that account determination code.