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Asset Accounting in Central Finance

Updated for SAP S/4HANA 2020

Objectives

SAP S/4HANA Central Finance evolved from a pure advanced financial reporting system to a central transformation platform where you can execute financial processes centrally.

In this blog post I will focus on processes in Asset Accounting and share key considerations about setting up Asset Accounting in a Central Finance landscape in SAP S/4HANA. I will discuss following topics and address some commonly asked questions:

  • Does Central Finance replicate into FI-AA (Asset Accounting)?
  • What are the options for Asset Accounting in Central Finance?
  • What are the limitations and challenges around Asset Accounting in Central Finance?

The blog post is based on S/4HANA 1909 but also applicable for lower releases, if not mentioned otherwise. For an introduction into Central Finance, you can start reading my article first: Different views on what is Central Finance.

In this blog post I will focus now on my view and project experiences on the options, limitations and challenges for Asset Accounting in Central Finance, because there is a special logic how asset related postings are replicated from source ERP system to the Central Finance system. At the end I will also summarize important frequently asked questions. Let me start with the main question:

Does Central Finance replicate into FI-AA (Asset Accounting)?

You find the answer in Central Finance FAQ note 2184567, question #7:

No, line items that post onto a fixed asset on the source system currently post into the General Ledger on the reconciliation account only. The reconciliation account either needs to be configured as a “normal” GL account or mapped accordingly.

Replicated FI documents which are originated from asset postings in the source system are not posted to Fixed Asset Accounting (FI-AA) in the Central Finance system. Instead they are only posted in the Universal Journal to General Ledger (FI-GL) in the Central Finance system using posting keys 40 and 50. In this scenario fixed assets are only kept in source ERP system. This scenario of decentral Asset Accounting is illustrated in the following simplified graphic:

What are the options for Asset Accounting in Central Finance? 

We have two basic options:

A) Asset Accounting in the source ERP system

The following graphic gives a simplified overview of the typical process in the current standard scenario where I only focus on the relevant process steps and facts:

  1. Asset accounts in the source system are defined as reconciliation accounts for fixed assets
  2. Asset postings (e.g. asset acquisitions) are done in source system with asset number on reconciliation account
  3. The financial document is replicated via SLT to Central Finance and asset information is deleted from asset-related fields (e.g. fields ANLN1 and ANLN2) of the FI documents in the Central Finance Accounting Interface
  4. [optional]: Asset information can be transferred to customer-defined fields in a BAdI implementation for reporting purpose if required
  5. Asset accounts in the Central Finance System are set up as non-reconciliation balance sheet accounts or mapped to a non-reconciliation balance sheet account

Challenges and implications

All asset related postings (like asset acquisitions, depreciation, transfer, retirement), reporting and period end closing must be done in source system. Information on single fixed assets is only available in source system. An exception would be some customer reports, if you have transferred the asset number into a customer field and replicated to the Central Finance system you will be able to see it. There are also limitations you must consider if Central Payment is activated (see FAQs below).

 

B) Asset Accounting in the Central Finance system

A step into a more centralized Finance system with more benefits would be to set up Asset Accounting in the Central Finance system as illustrated in the following simplified picture:

Some advantages of centralization of Asset Accounting are:

  • Benefit from New Asset Accounting (improved parallel valuations, new depreciation calculation logic, accelerated depreciation runs, integrated in Universal Journal)
  • Asset accountants can work in SAP S/4HANA with new UX / Fioris
  • Reduction of legacy systems for Asset Accounting
  • Reduction of number of postings in decentral systems
  • Harmonization of processes in Asset Accounting by centralizing them
  • Complete Financial reporting in Central Finance

As a consequence, you can do fixed asset related postings only in Central Finance. Thus, procurement for assets and also capitalization of investments would have to be done in the Central Finance system. I have illustrated such a scenario in the following picture:

Such a scenario would have an impact on logistics processes, and you would have to move related logistic processes to Central Finance. Many customers follow a minimal invasive approach for their source system when implementing Central Finance. This means that most of the logistics processes will not be changed in the source system. In this case procurement will be done locally in the source systems including asset acquisitions. Another important use case would be an investment process where material consumptions and activity confirmations are posted on an investment order in source system. This scenario is illustrated in the following picture:

The question is, how can you bring such asset related postings (e.g. for asset acquisitions or investment orders) from source system to Central Finance?

A possible solution would be to use an investment order in source system to carry asset related postings (from purchase orders, invoices, material consumption, activity confirmation and so on) and transfer them to Central Finance. In Central Finance the investment order is settled with standard transactions to asset under construction and/or fixed assets. This scenario is shown in the following graphic with the following process steps:

  1. Create an internal order in source without investment profile
  2. Replicate the internal order as investment order in Central Finance
  3. Asset under construction is automatically created for the investment order in Central Finance
  4. Do FI/CO postings and CO postings in source system on internal order
  5. Replicate FI/CO and CO documents from source system to Central Finance
  6. Maintain settlement parameters in Central Finance (if required)
  7. Settle investment order to asset under construction in Central Finance
  8. Settle asset under construction to final asset in Central Finance
  9. All other asset related postings and reporting are done in Central Finance only

The process steps in detail:

1. Create an internal order in source without investment profile

To create an internal order you can use the classical transactions KO01 in SAPGUI or the new Manage Internal Orders Fiori app, if source system is on SAP S/4HANA. Since release 1709 this app also supports investment orders to create asset under construction (AuC) master data directly. But in this scenario the Asset under Construction should not be created in source but in Central Finance only.

The internal order can be used as account assignment object in source system for all postings that should be capitalized in Central Finance: procurements with purchase orders, material consumptions, financial postings, activity recordings, …

You can also maintain a budget on the investment order and activate budget availability control in source ERP. Important: budgeting can only be done in source and there is currently no functionality like Central Budgeting in Central Finance. More information about planned functionalities you can find in the Road Map Explorer: Central budgeting and availability control (for internal orders),

Another option to create an internal order in a Central Finance scenario would be to use MDG for Financial data (MDG-F). I will focus on Central Finance in this blog and not further elaborate on this option as it is in scope of MDG and not of Central Finance. You can find more information in SAP Help Master Data Governance – Internal Orders.

2. Replicate the internal order as investment order in Central Finance

The replication of internal orders is supported in Central Finance with the cost object framework in Central Finance (see SAP Help Cost Object Mapping). Supported scenarios are described in SAP note 2180924 – Supported scenarios in cost object mapping framework.

Scenarios for Cost Object Mapping

You can find the customizing activity in the IMG menu:
Financial Accounting -> Central Finance -> Central Finance: Target System Settings -> Mapping -> Cost Object Mapping -> Cost Object Mapping -> Define Cost Object Mapping -> Define Scenarios for Cost Object Mapping

The standard delivered scenarios for cost object mapping are shown in the picture. You can create your own scenario similar like standard scenario SAP003 and adapt it to your needs. In a scenario for cost object mapping you define first:

  • How a cost object category in a source system is mapped to a cost object category in the Central Finance system:
    • Source Object Category = IO Internal Order
    • Central Object Category = IO Internal Order
  • Cardinality: 1:1 means for each internal order in source also an internal order is created in Central Finance

Source characteristics in Cost Object Mapping

As source characteristics you define which fields should be used for mapping based on the source characteristics. Some frequently used fields are added by default. You can adjust the fields according to your requirements. Usually the mapping can be defined based on the order type in source. When you set up the internal order in Central Finance you should pay special attention to the number ranges. Remember that number ranges for orders are client dependent and the number ranges in source systems may easily overlap.

Central Characteristics in Cost Object Mapping

The Central Characteristics are those fields from order master that are required in Central Finance. If derive from local flag is active, the system will bring data for this field from source and mapping will be applied whenever necessary. If flag is inactive, you must maintain logic for this field in “Define mapping rule” activity.

Think carefully which fields you need as source and central characteristics, because you cannot change a scenario if you have already replicated an order with it. A workaround would be to create a new scenario and reassign the replicated orders.

Investment Order / Investment Measure

The next step is to define the investment order in Central Finance and map the source internal order to it. Investment orders (aka investment measures) are basically internal orders with a special feature (see SAP Help – Investment Measures):

  • Investment orders have the data of an asset under construction for showing the capitalized portions of the measure in the balance sheet with data flow as illustrated in the following picture from SAP Help.

Technically an investment order is defined by assigning an investment profile to an internal order. Therefore, in the cost object framework you must add the investment measure profile (field AUFK-IVPRO) to the central characteristics.

In the picture you see an own created scenario called ZINVORDER where I added order type and investment profile as central characteristic. The company code will be derived from source in this example:

Define Mapping Rules for Cost Object Mapping Scenarios

Then you can define mapping rules for the cost object mapping scenario. In the picture you can see an example where order type 0100 from source system LOCAL100 is mapped to order type 0600 and investment profile 000003 in Central Finance.

You can find this customizing activity in the IMG menu:
Financial Accounting -> Central Finance -> Central Finance: Target System Settings -> Mapping -> Cost Object Mapping -> Cost Object Mapping -> Define Cost Object Mapping -> Define Mapping Rules for Cost Object Mapping Scenarios

Any order with order type 0100 created in source system will now be replicated to Central Finance and created with order type 0600 and investment profile 000003.

Another option would be to assign the investment profile to a model order and assign this model order to the order type for the investment measure in Central Finance. In this case you must not add the field IVPRO as central characteristic in the cost object framework, because it will cause an error when a change of the internal order master data is replicated.

3. Asset under construction is automatically created for the investment order in Central Finance

The investment profile controls the creation of an asset under construction when the investment order is released. Remember that a replicated order is automatically released in Central Finance. In the investment profile you can define the asset class to be used when the accompanying asset under construction is created and other parameters (details see SAP Help Control Functions of the Investment Profile):

4. Do FI/CO postings and CO postings in source system on internal order

After the creation and release of the order you can do all FI and CO postings on the internal order in source system that should be capitalized in Central Finance. For this process step and the following replication to Central Finance there are no specific asset accounting related settings required in Central Finance. That is why I did not document it in more details in this blog post. The replication of financial posting just requires the standard CFIN settings.

5. Replicate FI/CO and CO documents from source system to Central Finance

FI and CO postings on the internal order are automatically replicated via SLT to Central Finance. The order number is mapped based on the information from the cost object mapping.

6. Maintain settlement parameters in Central Finance (if required)

In Central Finance you can maintain additional settlement parameters and settlement rules on the investment order as you need. You can also already create a final asset for the later full settlement directly from master data maintenance for orders. The system then automatically creates a full settlement rule with the newly created asset as the receiver.

7. Settle investment order to asset under construction in Central Finance

If you do not maintain additional settlement receivers, the periodic settlement (transactions KO88 or KO8G) settles and capitalizes all costs to the asset under construction that belongs to the investment measure.

8. Settle asset under construction to final asset in Central Finance

Finally, when the investment measure is completed you do the full settlement. During full settlement the amounts are usually settled from asset under construction to one or more fixed assets.

Another option would be to do the final settlement from asset under Construction to fixed assets not via order settlement in CO but in asset accounting only with transactions AIBU and AIAB.

Beginning from the settlement these steps are not specific to Central Finance. Basically, these are the standard processes for investment measures and assets under construction in FI-AA and you can find further information in the SAP-Help:

9. Asset postings

After the asset acquisition and/or production costs are capitalized to the final asset, you can do further asset related postings like depreciation, retirement and so on in the Central Finance system.

Challenges and implications

As soon as you start to do any posting (like central payments or settlements) in a Central Finance system for a company code that also receives Financials documents from another source system, you must check all related dependent processes and reporting:

  • Single source of truth will be only in Central Finance!

Therefore, you maybe have to move legal and tax reporting from the source system to Central Finance. Another topic would be to think about the consequences in Controlling. As you do the depreciation postings in the Central Finance system, you will only have a complete view on your costs of your cost centers in the Central Finance system. This could be a challenge if you require all cost center costs in source system e.g. for actual costing in the source system. Another issue could be an integration to Plant Maintenance (PM). PM and equipment master data are maybe only available in source system and asset master data are available in the Central Finance system only.

If you are going to implement Asset Accounting in the Central Finance system, be aware that Classic Asset Accounting has been replaced by New Asset Accounting in SAP S/4HANA. Make yourself familiar with the changes in Asset Accounting in SAP S/4HANA and important notes:

I have highlighted challenges that I am aware of but maybe there are some more for specific use cases and depending on specific additional requirements. As usually customers need to understand the possibilities but also be aware of the restrictions and check dependencies and do adequate testing on the business processes before going live. Another topic you must consider is the transition and legacy data transfer. I have summarized some important FAQs that can be helpful here.

 

FAQs

SAP note 2184567 – Central Finance: Frequently Asked Questions (FAQ)

In this note you will find answers to following questions (and many more):

  • Is it allowed to configure additional FI currencies in the CFIN system which are not available in the source system?
  • Does Central Finance support source system side FI transactions involving “post late” documents such as postings from or involving New Asset Management?
  • Are settlement rules replicated that are assigned to cost objects?
  • What kind of cost objects can get replicated with the Central Finance Scenario?
  • Can projects/WBS elements be replicated?

 

Are Internal Orders still supported in SAP S/4HANA?

See SAP note 2865342 – Internal Orders in SAP S/4HANA on-premise edition.

 

Is it possible to execute central processes such as settlements on replicated work breakdown structure (WBS) elements in Central Finance?

Currently for projects (WBS elements) only the reporting scenario is supported. Roadmap see below. Projects replicated by ALE/IDOC can only be changed in the master system. Thus, a settlement rule cannot be maintained in Central Finance for replicated projects and a settlement is not possible. Further restrictions see SAP Help – ALE Business Processes: Work Breakdown Structure or Internal Order Distribution.

 

What are the restrictions around Asset Accounting with Central Payment?

See SAP Note 2346233 – Central Payment for SAP Central Finance: Pilot Note for Activating Central Payment: Central Payment for SAP Central Finance allows you to make centralized payments and perform centralized clearing activities in the Central Finance system instead of each source system. Since S/4HANA 1709, customers need to be aware of and accepting restrictions and pass comprehensive customer testing on productive data and processes before Central Payment going live for productive usage: […]

  • Decentral Asset Accounting:
    Central Payment is only released for those company codes in which no re-activation of assets is necessary after cash discount is taken or no cash discounts are used at all.
  • Central Asset Accounting:
    No restrictions in regards of re-activation of assets in central payment scenario.

 

Can I run Asset Accounting for some company codes in source system and for other company codes in Central Finance?

This would mean a mixed approach of variant A and B. Technically it would be possible to run Asset Accounting for some company codes locally in a source system and for other company codes centrally in Central Finance. I even discussed a business case with a customer that wanted to split Asset Accounting within one company code. Technically it would be possible to create some asset classes in source system and some in Central Finance system. But of course, this will raise many questions you have to consider and to test. For example, how to do a cross-system reporting or transfer of assets between systems.

 

Is there a migration tool available for Asset Accounting in Central Finance?

You can use the legacy data transfer tools that are available in Asset Accounting in SAP S/4HANA (SAP Help: Legacy Data Transfer in Asset Accounting). Currently there is not any migration or transition tool specific for Asset Accounting in Central Finance available.

 

Is there a migration guide available for Asset Accounting in Central Finance?

There is a migration guide available, if you do a system conversion to SAP S/4HANA: Migration to New Asset Accounting (FI-AA (New)). But this migration guide is only for a system conversion and it is not applicable for Central Finance. Currently there is not any similar migration or transition guide specific for Asset Accounting in Central Finance available. A migration and cutover plan must be designed customer specific depending on the specific situation.

 

What’s New in SAP S/4HANA 2020

  • Central Budgeting for Internal Orders: With Central Budgeting a remote budget check from a source system to a Central Finance system will be active during the posting process where the budget is consumed.

 

You can find the roadmap on SAP Innovation Discovery or in SAP Road Map Explorer:

 

Conclusion

This blog addressed some common questions surrounding Asset Accounting in a Central Finance scenario. With the help of an investment order you can do asset related postings in source while doing the capitalization in Central Finance and keeping asset accounting in Central Finance only.

If you have other ideas or solutions for asset accounting in Central Finance please share your experiences, challenges, tips and considerations.

 

Brought to you by the S/4HANA RIG

Christian Rainer
Product Expert
SAP S/4HANA Regional Implementation Group

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