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More Details on Asset Lifecycle Accounting (ALA)

Blog Series:

After introducing the Asset Lifecycle Accounting (ALA) solution earlier (link above), I wanted to start discussing some of the details of the solution.

Regulated industries tend to be extremely capital intensive.  They have a large capital base of assets and equipment records that need periodic maintenance.  This leads to a large number of jobs to install, remove, and/or repair pieces of equipment.  In the normal capital project management solutions of SAP, this activity can be scheduled and planned on either a project, a work order or an internal order.  The work can be budgeted, executed, and captured on one of these cost objects.  Once the job is done, the final costs can be settled to the appropriate asset record. All of this is done using standard SAP and doesn’t miss any basic requirements.

In a regulated industry, this basic process has some additional complexities because the work is really split into two phases.  I mentioned this in the earlier blog about how ALA provides a distinction between capital work that is planned versus finalized.  The industry, and SAP’s ALA solution, refers to this as planned vs. as-built work.

Asset Requests

SAP manages these requirements within ALA using an Asset Request Document (AR).  Each AR is comprised of multiple Asset Events that reflect the planned vs. as-built nature of the work being performed.


The image above is from the ALA Workbench which is where all of the processing of asset requests takes place. 

At the top are the basic parameters of the AR such as its status, description, company code assignment and the AR Type.  The AR Type serves a similar purpose as a project profile in PS or an order type in CO in that it provides a broad classification as to the type of work being performed.  In addition, it serves to distinguish the different processing variants.

In the regulated industries, there are many different types of jobs that get performed.  Some of the jobs cover the installation of new equipment and/or the removal of old equipment on simple singular work orders.  Others are more complex where the costs are tracked on a superior cost object but the work is executed and initially tracked on a subordinate object.

Other jobs that are performed such as preliminary work.  This is used if costs are incurred before an actual design or plan has been finalized or approved.  Preliminary Engineering work is similar.

There are also a series of manual AR types that represent changes that occur directly within the asset subledger but have to be reconciled with ALA as well.

Asset Events

Within each AR are Asset Events.  The events serve as a way to track each asset that is impacted by the job (the AR). The events track costs, quantities and cost allocations related to the asset involved and are used to represent the final settlement receiver.

The planned events, as the name implies, represent the planned activities, I.e., the design portion of the job.  The As-Built events represent the actual work performed are tied to the final asset.



If you look at the screenshots for the events, you’ll see several fields on the Asset Identification tab. The fields on this tab are used to identify the appropriate assets for this job based on the nature of the work being performed.  If no asset is found, then ALA with automatically create the necessary asset.

Let me explain what those fields are:

  • Industry Type – ALA is supported for a variety of specific industries but a common example is an electric, gas, water, or pipeline company.  The industry type is defined by the customer.  Both the PP&E Type and Retirement Unit are industry specific so it is possible for customers to define separate PP&E Types and Retirement Units per industry that they operate in.
  • PP&E Type – Common to the fixed assets area is the classification of assets based on their purpose and useful life.  This differs by company and industry but the general idea around the PP&E Type has been around for a long time.  In ALA, it usually is closely aligned with the FERC definition of property classes (or uniform system of accounts).
  • Retirement Unit – This is a physical unit of property
  • Depreciation Jurisdiction Code – It is common for assets to depreciate differently based on where they are located.  For instance, a pole will depreciate quicker in a humid coastal southern environment than it will in the Midwest.  The Depreciation Juristicion Code is used later on when it comes to determining how the associated asset will depreciate.
  • Vintage Year – This field identifies the year in which the asset was originally acquired though there are several types of vintage classification available.  ALA supports the concept of mass assets which is

This ALA ID is critical to all processing in ALA and fixed assets.  The ID is attached to every asset, ALA event and most all cost objects that are ALA relevant. By doing so, all of the data can be correctly classified for the purposes of reporting, depreciation calculation, and overall job processing.

In the next blog, I’ll talk about some initial changes that ALA causes on standard Asset Accounting.

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