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Author's profile photo Bret Strobo

Save time, gain accuracy, and automate asset retirement obligation accounting with SAP S/4HANA

Many companies, across many industries, need to manage asset retirement obligations.  However, most companies struggle to define or scale work processes and fall back to relying on manual activities and tasks. Utilizing office tools such as Excel may seem convenient, but this practice is often time consuming, prone to error, not integrated, leads to a broken audit trail, and places the accounting team in a pinch.

Bad math, transposition errors, and “fat finger” errors run rampant in companies of all sizes. Almost 90 percent of all spreadsheets have errors.  Even the most carefully developed, tried, and tested spreadsheets have errors in 1 percent of all formula cells. In larger spreadsheets with thousands of formulas (that, let’s face it, exist in every company), there are dozens of errors.

All of this culminates in a procedural “soup” that is inconsistent, unpredictable, unreliable and can lead to corrections that extend the financial close cycle and brings unwanted attention during audit engagements.

To help solve these challenges, SAP offers the add-on application SAP S/4HANA for Asset Retirement Obligation.  A powerful suite of features built to support the end-to-end accounting aspect of asset retirement obligations.

Save Time, and Gain Accuracy, with Greater Automation

As part of the SAP S/4HANA for Asset Retirement Obligation application, users can now utilize the new SAP Fiori App for managing asset retirement obligations.

 

This new feature allows user quick access to:

  • Check the overall obligation status
  • Sort and filter the list of obligation items
  • Initiate the creation of new obligations
  • Access existing obligations

 

 

With the new SAP Fiori App, significant user improvements have been made for creating and maintaining obligations, reducing the amount of inputs and ‘clicks’ required and increasing the visibility of the obligations most critical data.

 

But it doesn’t end there… With only one additional click, helpful links provide the user access to more details such as the; ARO calculation steps, statement of interest cash flows, access to accounting documents (not shown) and, in the case of US GAAP, the obligation layering details.

 

With SAP S/4HANA for Asset Retirement Obligation, and the newly available Fiori App, customers can:

  • Eliminate the use of disparate office tools and manual process that are time-consuming, not integrated and error prone
  • Increase the confidence and efficiency of the financial close by removing unnecessary batch uploads and maintenance
  • Realize “one source of truth” for ARO calculations, general ledger and asset postings, periodic accruals and reporting

For more information on this topic:

Go to help.sap.com; or, contact Bret Strobo.

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      4 Comments
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      Author's profile photo Steffen Mallwitz
      Steffen Mallwitz

      Well, I just wonder, you can do all of this as well in the RE-FX module using contract valuation with a retirement obligation condition?

      KR,

      Steffen

      Author's profile photo Bret Strobo
      Bret Strobo
      Blog Post Author

      Hello Steffen,

      Thank you for the comment.

      My understanding of the functionality in RE-FX is that it is focused on meeting the requirement of IFRS 16 / ASC 842.  Also, the functionality available in RE-FX does not calculate the ARO, that is completed manually offline.

      In regards to accounting for asset retirement obligation, the requirements here are codified in the accounting standards IFRS 37 / ASC 410.  The SAP S/4HANA for Asset Retirement Obligation application is built to help customer with these accounting requirements.

      BR,

      Bret Strobo

      Author's profile photo LUCIA DEL CORRAL
      LUCIA DEL CORRAL

      Hi Bret Strobo, I want to know if there is any specific SAP training for ARO.
      Could you give me some information? Thank you very much, Lucia.

      Author's profile photo Bret Strobo
      Bret Strobo
      Blog Post Author

      Hello Lucia, thank you for the message.

      At this time there is no formal training offered by SAP Education.

      You can review the application documentation available on help.sap.com.

      Best Regards,

      -Bret