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As a company in an asset-intensive industry, your organization likely struggles to perform financial accounting and reporting of asset retirement obligations in a timely, compliant, and auditable manner – one that satisfies relevant accounting principles.  Have you ever asked yourself the following questions:

 

  • How can we handle changes during the lifetime of an ARO like changes of term, cost estimations, interest and inflation rates?
  • How can we automate the necessary financial and asset postings?

 

It is difficult to handle the variety of necessary calculations, and, if you rely on manual computations housed within spreadsheets, it’s challenging to trigger related financial postings. Moreover, you increase the risk of data errors. 

 

SAP Asset Retirement Obligation Management, a cross industry application targeted to large enterprise and upper mid-market companies in asset intensive industries including, but not limited to Utilities, Telecommunication, Oil and Gas, Mining, and Retail, can help your company monitor and automate asset retirement obligations along with the necessary evaluation, accounting, and reporting tasks, in accordance with accounting rules.  These accounting requirements apply to the legal obligations associated with the dismantling, removal, and disposal of the underlying tangible assets and, where necessary, the restoration of the related property to its original status. These assets can result from acquisition, construction or development and may include such assets as pipelines, antennas, nuclear plants, electrical poles and transformers, oil wells and platforms, and mines.

 

Because the software is fully integrated with the SAP ERP Financials solution, it automatically handles postings to the general ledger, accruals, and onetime postings, referring to accounting principles where applicable. Throughout the lifecycle of an asset, you can enter and adjust terms, cost estimates, interest, and inflation rates. When you adjust any of these, the software automatically triggers the necessary postings in accounting.  At any time, you can access a single view into all postings related to a single obligation.  Plus, with a history of changes and the ability to generate reports, you can prove compliance with regulations.   In summary, the key product elements include:

 

  • Automated valuation, accounting and reporting: The solution is able to support accounting principles defined in US-GAAP (FASB/FAS143), IFRS (IASB/IAS37) and/or by the German accounting principle HGB
  • End-to-end process support: Terms, cost estimates, interest and inflation rates can be flexibly entered and adjusted over the life-cycle of the ARO asset. Any adjustments to these variables and relevant business transactions trigger the necessary postings in accounting
  • Integrated with SAP ERP Accounting: The solution is seamlessly integrated into the relevant accounting components of standard SAP Financial and Management Accounting without the necessity for changing parts of the solution, which are already in use
  • Compliance: The solution helps in substantiating compliance by tracking history of changes and providing improved and adequate reporting

 

To begin the process of better managing your long-lived assets, join us at the newly-released, one-day virtual ARO01 – SAP Asset Retirement Obligation Management course.   The course should help your company start to realize the wide range of benefits of implementing ARO including:

 

  • Reduce the effort to recognize and report on asset retirement obligations;
  • Decommission point solutions used to manually manage asset retirement obligations;
  • Increase productivity by eliminating the need for spreadsheets;
  • Satisfy compliance with U.S. GAAP, IFRS, and other regulatory reporting requirements;
  • Maximize the value of your SAP ERP application investment by covering the full financial lifecycle of asset retirement obligations; and
  • Manage and flexibly report on all relevant data out of one software system.
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  1. Nathan Genez
    For any SCN members that are looking for some more information, I have an ongoing blog series on AROM functionality here:  http://www.sdn.sap.com/irj/scn/weblogs?blog=/pub/u/251739612. [original link is broken] [original link is broken]

    The first two blogs are already out:
    Can an Asset also be a Liability?  An Introduction to SAP Asset Retirement Obligation Management (AROM) (Part 1)
    Taking a Peak at how AROs work in SAP Asset Retirement Obligation Management (AROM) (Part 2)

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