Asset Investment Support Process

Overview:

This blog post will explain the End to End process for Posting, Depreciation & Write off (normal/Extraordinary) of Asset Investment Support Measure.

In some countries the Government provides grants under certain circumstances for investments made. Grant may be received by Consumer/Other authorities toward Capital Expenditure for the Project.

This Investment Support is treated either as a reduction of the acquisition and production costs of the asset, or as a value adjustment on the liabilities side of the balance sheet.

These investment support amounts are normally displayed and depreciated separately from the Asset Acquisition Costs. Separate Depreciation Area is created for posting the Grant & depreciation on it. Acquisition cost will be untouched in Main Dep. Area. This is called as Adjustment on Liabilities side.

If Separate Dep. area is not created, then grant is reduced from Acquisition cost. This is called as Support managed on Asset Side. In this method, system doesn’t support automatic assistance for certain transaction like retirement of Asset during retention period.

So Best Practice is to create Separate Dep. Area & post the grant in that area. SAP supplied the Dep. Area 51 in standard for this purpose but any other Area can be created as well by copying the existing one.

Configurations:

Following is the configuration for Dep. Area:

Activate this Dep. Area on each Asset Class level in OAYZ wherever is required.

Investment Measure to be created with following configuration:

Asset Accounting > Special Valuations > Investment Support

TCode – ANVEST

If Support Area is different than Book Depreciation Area, system automatically consider this as Liability side adjustment.

Maximum amount or % (of APC) can be defined for Grant Value.

Retention period derive the time period during which the asset with this investment support cannot be sold. System gives the error, if sold before that. This message can be converted into warning.

If Asset is sold before this period, system generate the repayment posting, according to specification given in ‘Repayment type for Premature Retirement’

There are options available under Investment Measure like Default values, time dependent data etc., can be used as per Client’s requirement.

GL Accounts are to be assigned against Dep. Area in AO88

Last node of Configuration is, Transaction Type creation in AO83:

These are created automatically when the Investment Support Measure Key is created, it is not possible to create new ones nor deletion of existing one.

System create the Transaction Type from I, J & K and then two character of Investment Measure Key.

If you want to create any New TT, use TCode – AO73_INV

Here new TT can be created by copying the existing TT & only Debit/Credit characteristic can be changed.

Asset Investment Support measure to be made optional on Asset Master data layout.

In case of India IT Depreciation, all Transaction Types are to be assigned against Transaction Group ‘Investment Support’

Asset Eligibility:

In AS01/AS02, Investment Key is maintained in the asset master record in Allocation Tab. Entering this key also activate/visible the required Depreciation Area for the Asset.

Appropriate Dep. Key will have to be assigned against this Dep. Area.

You can manage an indefinite number of support measures for each asset. However, if you manage more than one support measure for an asset, each one must be managed in a separate Depreciation Area.

Postings & Accounting:

Once the Acquisition is posted to Asset with the full amount of APC including Grant, value is updated in Book Depreciation Area.

Now Grant will be posted through Transaction ABIF.

Transaction Type I* will be used to post the same. Make this TT default against Investment Support process.

Following Accounting will be posted:

Grant receivable Account can be given at the time of transaction in Offsetting Account field, otherwise will be picked from AO88 config.

Now Book Dep. area has the Positive value of Acquisition & Inv.Support area has the Grant value in Credit side.

Grant will be amortized based on Dep. Key given against Inv.Support Dep. Area.

This way, you can clearly identify the Acquisition Value & Grant Value with Depreciation on both.

When Depreciation is run for these Assets (AFAB), following Accounting will be posted in Inv. Support Dep. Area in addition to Book Depreciation posting:

In nutshell, PL will be debited with the absolute amount of Depreciation after deducting the benefit of Depreciation on Grant portion.

At the end of Asset Life, full Grant will be transferred to P&L.

If Asset is retired/scrapped in the retention period of Grant, then following accounting would be posted:

*Proportional Adjustment is calculated based on configuration of ‘Repayment Type for Premature Retirement’ under Investment measure key.

First of all, Full Grant will be divided by retention period, in case of Proportional by Monthly, this value will be multiplied by Months till retirement dated & reduced from Grant value.

In case of yearly, this will be multiplied by Year till retirement date.

In case of Paid back completely, no adjustment is made & full grant is reversed.

In case of Amount entered by user option, no Grant will be refunded & full gain is posted with Net Grant.

If Asset is retired/scrapped after retention period, entry will be posted like ‘Amount entered by user’ scenario.

If any Extraordinary write-off to be posted, use TCode – ABSO & Transaction Type J*. Following Accounting entry will be posted:

There may be other transaction as well like Augmentation, Normal Retirement, Grant of prior year acquisition etc.

After getting the exact requirement from Client, specific Transaction type can be configured & used for posting.

Conclusion:

After reading the blog post, this process can be understood very easily & implemented quickly without any challenge.

Configuration & Accounting are described in detail.

This type of activity is very frequent in Electricity distribution companies where Consumer contribution is involved for Capital projects.

Hope you found this blog post useful, thanks for reading!!

Regards,

Hitesh