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An asset retirement obligation (ARO) is an obligation to retire an asset or changes to assets according to contractual stipulation, for example, a leasing contract that gives the temporary right to use and change the leased object and requires that any changes are retired at the end of the lease.

When you, for example, create or change an ARO, the data that you use to manage the processing of the ARO can be classified into the following three areas:

  • General Data

    This basic ARO data is divided into accounting principle-neutral data and accounting principle-specific data.

    You enter general ARO data in a header section. This section has the following accounting principle-neutral tabs:

    • General Tab

      There is a general tab on which you can enter accounting principal–independent ARO data, for example, company code, ARO start date, and ARO asset class. Additionally, you can create a reference to the underlying object.

    • Assignment Tab

      To enable you to handle, for example, management accounting, you can handle some of the most important accounting data at ARO header level.

      The application offers a predefined set of possible assignment data. During the implementation of the application, you can specify which fields you want to appear on the Assignment tab of General Data in the ARO assignment screen. You do so in Customizing for SAP Asset Retirement Obligation Management under   Financial Obligations   Object Assignment Scenarios.  

  • Transactions and Cost Estimation Plans

    The transaction data for your ARO is displayed in a tabular form in the transaction area. Each transaction refers to the current or to a new cost estimation plan (CEP).

    The CEP is one of the most important parameter of an ARO. You use the CEP to enter the CEP items, each of which defines the cost estimation for a specific and unique settlement date for the ARO you are processing. To enter the CEP, you use the transaction Create or Adjust Cost Estimation.

  • Transactions and Calculation Details

    The detailed data of the transaction, which you select in the transaction area, is displayed in the detail area. You can track the ARO valuation in the accounting principle-specific tabs in this section.

    Because the valuation of an ARO and the corresponding calculations could be different for different accounting principles, calculation details are separated by accounting principle. Per accounting principle, the system calculates a cash flow showing you the periodic (monthly) provisions, interest costs, and other costs (if relevant).

    As well as the cash flow, and depending on the accounting principle, the application also provides you with the totals of the provisions, interest costs, and other costs, which are valid at the transaction processing key date, before and after an adjustment was done.

    Finally, the application provides additional functions which enable you to display and analyze further calculation details, for example, calculation steps or layers.

    Calculations steps enable you to track some of the basic calculations. In most cases, calculation steps show compounding and discounting of a base amount for a given period (defined via the base date and the target date).

    Not all fields are populated in a calculation step. For example, if the interest rate is not relevant, the Percentage Rate is set to zero.

ARO Status

SAP Asset Retirement Obligation Management provides status handling at the ARO level. The status of an ARO transaction is used for the following activities:

  • To display and track the status of the ARO

  • In plausibility checks

SAP Asset Retirement Obligation Management differentiates between the following ARO statuses:

  • Created

  • Active

  • Terminated

  • Canceled

Structure

General ARO Data

The following table lists the most important general ARO data:

Field Name

Explanation

ARO Setup Date

Date of ARO origin

ARO Current End Date

Actual latest settlement date of CEP (for example, after adjustment of CEP)

ARO First End Date

Initial, that is, originally planned latest settlement date of CEP

ARO Termination Date

Termination date, if the ARO has been terminated

Underlying Object

Number of the object for which the ARO has been created

ARO Asset Class

Asset class in which the ARO asset is to be created

Valuation Parameters

For example, currency, inflation rate key, interest rate key

Assignment Data

Assignments, for example, accounting data such as cost center, internal order, profit center

The following table lists the most important accounting principle-specific header data:

Field Name

Explanation

Inflation Rate Key

Key representing the inflation rates that are used for discounting

Interest Rate Key

Key representing the interest rates that are used for discounting

Calculation Method

U.S. GAAP-specific calculation method

Transactions and Cost Estimation Plans

The following table lists the most important ARO transaction data:

Field Name

Explanation

Number of the Transaction

Number for specifying the sequence of the transactions

Current Transaction Status

For example, created, released, or reversed.

Cost Estimation Plan Number

Button to display the cost estimation plan

ARO End Date

Latest settlement date of CEP (for example, new ARO end date after adjustment of CEP)

New Provision Level Valid at Transaction Processing Key Date

One field per accounting principle

Old Provision Level Valid at Transaction Processing Key Date

One field per accounting principle

Provision Difference

The difference between the old and new provision levels

Provision Level at ARO End of Obligation Date

One field per accounting principle – only if calculation is possible

Provisions Consumption

The amount of provision that is consumed by the costs of retirement of the underlying object of the ARO (if relevant)

Provisions Dissolution

The amount of provision that is not consumed by the costs of retirement of the underlying object of the ARO and can be dissolved (if relevant)

Interest Cost up to Transaction Processing Key Date

One field per accounting principle

Interest Cost Difference

The difference between the old and new interest costs. The value is usually zero. Only in the case of retrospective changes can the value not be equal to zero.

Total of Interest Cost up to ARO End of Obligation Date

One field per accounting principle

Transactions and Calculation Details

The following table lists the data stored for each calculation step:

Field Name

Explanation

Number of Calculation Step

Sequence number of the calculation step

Calculation Step Key

For identifying the calculation step

Description of Calculation Step

For example, inflation, discounting, interest cost, provision level new, provision level old

Base Date

Start date of calculation period

Target Date

End date of calculation period

Base Amount

Value at the start date

Target Amount

Value at the end date

Difference

Difference between target amount and base amount

Percentage Rate

Percentage rate that is used in the calculation step