Post-Capitalization in Asset Accounting

Post-Capitalization in Asset Accounting

Background:

It often happens that business has omitted to book APC values of Fixed Assets in past fiscal years. This can happen for an entire asset or for part of the cost of an existing asset. There may be a variety of business reasons for this like asset valuation not finalized etc. The challenge now is to incorporate the APC value that was missed into the current fiscal period along with the accumulated depreciation component for that asset so that the Net Book value is correctly reflected in the Fixed Asset register.

Solution:

In S4 HANA cloud the Fiori App “Post Post-capitalization” enables subsequent additions/corrections to Acquisition and Production Cost (APC) of fixed assets. For an entirely new asset that was omitted to be booked in earlier fiscal years a new asset master data has to be created with the “Post Capitalization” checkbox enabled and the capitalization date maintained. For cost additions required to be made to existing asset from an earlier fiscal year a sub asset master with identical parameters mentioned above may be created under the main asset master.

Through this process business can correct the fixed asset register in the current year, without having to make postings and rerun the balance carry forward for previous years.

Example:

Company A has gone live with Asset legacy Transfer date of 31.12.2017. However, in December 2018, it realizes that it omitted to enter one of their Assets having APC Value of 760000 USD as a legacy asset. The Asset has an initial capitalization date of 01.01.2016. It has an estimated useful life of 8 years and should be depreciated fully over the same i.e. at the rate of 95000 USD every year for 8 years (from 2016 to 2023).

The following perquisites need to be met before we can book the post capitalization amount:

• Create new Asset master record with the Post Capitalization checkbox enabled.

• The Capitalization date should be maintained in the General data tab:

• Depreciation area parameters should be set as below:

Now the capitalization amount can be posted onto this newly created asset master through the Fiori app “Post Post-capitalization”.

For this example, the following parameters should be entered:

Posting date should be in the current month/period as we cannot post to previous months which are now closed due to financial statements having been finalized.

The below Accounting document gets posted:

The posting updates the below Accounts:

a) The APC Fixed Asset GL Account with the full APC cost of 760000 USD.

b) The Accumulated Depreciation GL Account with the accumulated depreciation amount for 2016 and 2017 i.e. 95000*2 = 190000 USD.

c) The Balance as income into a Profit and Loss GL Account called “Revenue from Post Capitalization”

In this way the Fixed Asset Register is updated with the correct present net book value of the Fixed Asset i.e. (760000-190000) = 570000 USD.

This amount is now expected to be depreciated fully in 6 years starting from 2018 till 2023. This is also reflected in the parameters for the Asset in the “Asset Values” app.

Conclusion :

The Post post-capitalization functionality is a very useful application that enables fixed asset accountants to update correct net book value of fixed assets and account for costs relating to earlier years which have been missed out due to some business reason. This ensures accurate and up-to-date maintenance of the Fixed Asset register.

Details of this functionality can be found in the Scope Item J62 – Asset Accounting.