Capitalize Assets with Budget Monitoring Using Statistical Internal Orders

  • by Sivaprasad Ramachendruni, Solution Architect, SAP S/4 HANA, SAP (Financials)
  • June 15, 2008
See a method of direct capitalization with budgetary control that eliminates the need to post to the internal order and settle it. This method is best suited for simple budget monitoring of certain groups of assets — for example, lump sum budgets for furniture and fittings.
Key Concept
In an SAP system, assets are capitalized in the following ways:

Method 1. Direct capitalization.
You capitalize assets through posting to a final asset directly, or by posting to Assets under Construction (AuC) initially and then settling them to the final asset. You cannot use budgetary controls because the values do not flow to the Controlling area. (Budget controls means setting the budget and monitoring the actual results against the budget.)

Method 2. Capitalization through investment measures.
The actual value initially flows to the internal order (as the investment measure in the Investment Management component). You periodically settle the values to AuC. The system checks the availability of funds in the budget for the order with an availability control. Through budgeting and availability control, the system validates the flow of actual values against the internal order budget before settling to AuC.

SAP Asset Accounting (FI-AA) has multiple ways to capitalize assets. Two of the most frequently used methods are capitalizing the asset without any budget controls and capitalizing the costs through investment measures. However, both have limitations.

Capitalizing without using budget controls is simpler. Although you do not have to use the Investment Management (IM) component, this method requires manual processing. The IM option is more com-plex, but because it is automated, compan- ies implement it more often. It is generally better for large-scale capital investments.

I’ll show you an approach that combines the benefits of both methods. In this approach, you create statistical cost elements for asset reconciliation accounts. All FI postings to these assets flow to the internal orders through the cost elements for budgetary control. This method is best suited for simple budget monitoring of certain groups of assets such as lump sum budgets for furniture and fittings. My example includes screenprints and menu paths from an R/3 4.7 system, but is also applicable to SAP ERP Central Component (ECC) systems.

As you’re reading the approach, imagine the following business scenario. Your organization desires to exercise control over spending on furniture and fixtures. Accordingly, it has set up annual budgets and sanctioned amounts to be spent. You must design an effective and simple system of monitoring the actual spend with respect to budgetary limits. You require alerts at various levels of actual spending to ensure that actual spend is within control of the budget. Your SAP system is configured for FI and CO, and you have not implemented IM.

Sivaprasad Ramachendruni

Sivaprasad Ramachendruni is a solution architect (SAP Financials and SAP S4/HANA Finance) with SAP professional certification. He is currently working for a multinational corporation in the IT sector. He has more than 17 years of functional and SAP system experience spanning across several industries. He has expertise with various modules, including FI, Controlling (CO), Funds Management (FM), Flexible Real Estate Management (RE-FX), Financial Supply Chain Management (FSCM), and SAP S4/HANA Finance. He helps companies design, implement, deploy, and streamline business processes and gain efficiency. He is an Indian cost and management accountant and has a master’s degree in financial management. 

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