Show TOC

Component documentationSAP Asset Retirement Obligation Management Locate this document in the navigation structure

 

The need for the recognition and reporting of asset retirement obligations (AROs) arises from requirements issued by FASB, IFRS/IAS, Securities and Exchange Commission (SEC) guidelines, Sarbanes-Oxley legislation, HGB, the German local GAAP, and other standard-setting entities.

FASB statement 143 provides guidance for when and how to recognize a liability for AROs with the goal to establish accounting standards for recognition and measurement of a liability for an asset retirement obligation and an associated asset retirement cost.

SAP Asset Retirement Obligation Management is an application that allows companies to manage their asset retirement obligations (AROs) from an accounting point of view. SAP Asset Retirement Obligation Management automates the recognition and reporting of AROs and is able to support different accounting principles (for example, IFRS, U.S. GAAP, and German HGB) while leveraging a tight integration with SAP ERP. The application supports relevant business transactions, such as cost estimation adjustments, interest and inflation rate adjustments, and termination or retirement. It triggers the necessary postings in the general ledger and Asset Accounting via the Lease Accounting Engine (LAE).

Integration

SAP Asset Retirement Obligation Management is seamlessly integrated with SAP ERP.

Architecture

SAP Asset Retirement Obligation Management consists of two main areas:

  • ARO Data Management

  • Accounting Integration into SAP ERP (via the Lease Accounting Engine)

This graphic is explained in the accompanying text.

SAP Asset Retirement Obligation Management Application Architecture

The ARO data management area is used to do the following:

  • Manage the parameters of an ARO

  • Manage the transactions that are necessary to change an ARO

  • Manage and execute calculations

  • Trigger the accounting of an ARO

The accounting integration area is used to trigger and control the necessary postings. The LAE, an SAP engine that is part of SAP ERP, is used to control and trigger postings in the following areas:

  • Asset accounting (FI-AA)

  • Accrual engine (ACE, accrual postings)

  • One-time posting (OTP)

Features

You can enter and adjust the key parameters of an ARO, for example, cost estimations, runtime, interest rates, and inflation rates.

The user interface also facilitates triggering and calculation of follow-up business processes to adjust and change the ARO. The defined business transactions, for example, an interest rate adjustment, can be processed throughout the life cycle of the ARO asset. You can create transactions, check the calculations and release transactions, thus triggering the postings via the LAE.

Based on the master data and transactions mentioned above, the system calculates accounting principle-related values like settlement value, present value, provisions, and interest costs.

You can analyze the history of changes, including business transactions, business transaction status, and calculations. The application supplies support in substantiating compliance by tracking the history of changes and providing adequate reports. The application also offers periodic programs to handle mass changes and periodic accruals.

The integration to accounting and postings are triggered via the LAE. Release of a business transaction, such as an interest rate adjustment, creates postings in Asset Accounting (FI-AA), accruals postings (ACE), and in the General Ledger (one-time postings (FI-GL)).

In Asset Accounting (FI-AA), separate asset master data is activated and asset values are adjusted in the case of ARO adjustments. When you maintain AROs, you can navigate directly to the LAE Explorer and Asset Explorer for detailed analysis of postings.

More Information

For more information on Asset Accounting, see SAP Library for SAP ERP under SAP ERP Central Component   Financial Accounting (FI)   Asset Accounting (FI-AA)  .

To get an overview of the main functions of the Lease Accounting Engine, see   Financial Accounting (FI)   Lease Accounting (FI-LA)  . The LAE is used for different applications, for example in supplying lease accounting with the contract data from SAP Customer Relationship Management.