Construction of Fixed Assets

In Russia, the process for constructing fixed assets for your own use tracks:

Which materials and services go into the construction of assets for your own use
Whether you have paid the invoices
Whether you have capitalized the asset

This enables you to calculate and report the VAT on such materials and assets correctly.

The following example illustrates how you record the construction of assets in Russia.

Note Note

In addition to the basic process described below, you can also post costs first to WBS elements, networks, or CO (Controlling) orders, and then transfer the costs from there to assets. For more details about the exact cost settlement chains that are supported, see Cost Settlement Chains.

End of the note.

Prerequisites

You have:

Created an asset master record and an intermediate asset master record as described in Creation of Master Data for Asset Construction
Maintained your material master records as described in Creating Master Records for Materials Used in Asset Construction
Created a network or WBS element to track the costs of the construction project

Process

The buyer orders 20 steel girders and 40 hours of welding.

To do so, he creates two separate purchase orders, following the standard procedure. The first purchase order for the girders goes to TverSteel, and the second purchase order goes to Moscow Welders.
The warehouseman takes delivery of the girders.
In the system, he enters the goods receipt with reference to the original purchase order. The system automatically generates a batch number for the girders: The batch number enables the system to track the materials and make sure that they are used as an asset or in the construction of an asset.

You follow this process so that the batch, purchase order, and invoice are linked together for the purposes of tracking.
TverSteel sends the invoice for the girders, and the accounts clerk records it in the system, either in Logistics Invoice Verification (MM-LIV) following the standard procedure, or in Accounts Payable (FI-AP), following the standard procedure.
If he enters it in FI-AP, he also enters a reference to the purchase order and purchase order item.

No matter which component he uses, he selects the appropriate deferred tax code that indicates what the material will be used for (in the standard system, V2).

He also assigns the material item to a controlling object that is used to track the asset’s construction costs: a network, WBS element, or “intermediate” asset .

Note

The system stores the number of each invoice item, and the fiscal year in the asset document item text or in the controlling document item text as follows:

inv 1800000556 pos 001 yr 2006

These references will be processed by the Verification of Invoice Items Related to Capitalized Assets report.

End of the note.
The welders come to weld the girders together, and the warehouseman issues the girders from the warehouse to the builders.
To do so, he follows the standard procedure, using the goods movement type 241 (consumption for asset from warehouse).

Note

If the vendor sends a subsequent debit after you make a material issue, you have to reverse the material issue, post the subsequent debit, and then reissue the materials. The subsequent debit results in a change in the material’s value, and this is the only way of ensuring that the change in the value is reflected in the material issue.

End of the note.
The welders send in their invoice.
The warehouseman records the invoice in the system, following the standard procedure.
The accountant pays the invoices, following the standard procedure.

Result

Once the building is complete, you capitalize the asset (see Settlement of an Asset under Construction). You can then claim back the input VAT that you paid during its construction (see Closing for VAT on Assets).