Use case/Problem Statement
Capital project expenditure (Capex) leads to build of assets of different asset classes. Depending on the asset class, Capex amount may not be allowed for 100% capitalization across all accounting principles. Capitalization policies vary for different cost categories (labor, material etc.) by accounting principle (and by country).
This document will show how such a business requirement can be accomplished in SAP S4 HANA digital core with an example. The example shows that ‘personal cost’ is partially capitalized in IFRS and 100% in US GAAP.
Project System (PS), Investment Management (IM), Asset Accounting (FI-AA) components are used.
‘US GAAP’ is considered leading ledger, while ‘IFRS’ is secondary ledger. Book depreciation area points to leading ledger (=leading accounting principle).
Configuration and Master Data:
Basic configurations like ‘project profile’, ‘settlement profile’ in PS, investment profile in IM, and ‘asset class’ in FI-AA are in place.
Non-operating expense G/L account is created.
Additionally, following configurations are completed:
Under—> IMG- Investment Management-Project as Investment Measure
Following configuration is only applicable for depreciation area(ledger/accounting principle) that requires partial capitalization of posted cost.
- Define Capitalization Versions
Tip: The version key (’32’) can be same as targeted depreciation area (’32’) for ease of reference.
- Assign Capitalization Version to Depreciation Area
Note: In this example, depreciation area 33 derives assignment automatically
- Maintain Capitalization Keys
Note: Capitalization key is another form of ‘Results Analysis (RA) Key’
- Define Capitalization Percentages (OKGK)
Define percentage for combination of company code, capitalization key, capitalization version and G/L Account (aka cost element). Keep other attributes global with ‘+++..’ values
Note: While more G/L accounts can be included, the example uses one G/L account to demonstrate the scalable feature
- Assign Capitalization Key to Asset Class
- Determine Accounts for Non-operating Expense
No setting for book depreciation area.
Capital Project with WBS Element is created.
Project is released. Asset Under Construction (AuC) is created automatically for the WBS Element.
Actual cost is posted either via (valuated) goods receipt for PO, personal time recording, journal entry, or manual cost allocation.
Period end settlement is executed for the project that settles cost to AuC.
Project actual cost line item report is executed. From the report, for the posted actual cost line item, drilldown to accounting documents. Alternately, the accounting documents can be accessed from result list of settlement transaction (CJ88) (as shown)
Open Asset transaction from the list of documents to review APC posting details to asset in leading ledger
Next, open accounting document for leading ledger from the list to review the financial accounting posting for ledger ‘0L’
Then open accounting document for secondary ledger from the list to review the financial accounting posting in ‘2L’ ledger
Tip: accounting principles (GAAP, IFRS etc.) are becoming ‘synonymous’ with ledgers in S4
Only 80% of ‘personnel time’ cost (80% of 6,500= 5,200USD) is capitalized. Reference cost element 50304000.
Other ‘labor/material’ cost is capitalized 100% (9,900). Reference CE 61103000
Total is 15,100USD (5,200+9,900)
Non capitalized cost (20% of 6,500= 1,300) is posted to the non-operating expense account
Results can also be reviewed for the AuC asset in Asset explorer (AW01N). Difference in the acquisition values between depreciation areas, as expected, is evident too.
Please note the resulting AuC Asset derives attributes like (requesting) cost center and profit center from the source WBS Element and GL account. They can be viewed on the Asset explorer.
From simple example above, it can be seen that requirement to ‘capitalize capex spend differently by accounting principle’ is accomplished S4 HANA digital core, as was the case with ECC (with ‘parallel ledger’), easily.
Similar outcome can be obtained for Final fixed asset too when its asset class is configured.