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
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
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 |
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 |
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 |