Periodic Settlement to an Asset under Construction 

Use

When you carry out periodic settlement to CO receivers, the system automatically settles any remaining debits to the asset under construction that belongs to the investment measure . However, the transfer price of in-house produced goods and the price of warehouse material often includes indirect costs that cannot be capitalized according to commercial or tax law. From the point of view of management accounting and product cost planning, however, it is desirable to completely capitalize the debits on investment measures, in order to achieve leveling of large blocks of costs via depreciation.

Features

Therefore, the Investment Management component enables you to capitalize portions of certain cost elements or cost element groups only in certain depreciation areas of the asset under construction (such as, book depreciation, tax depreciation, group depreciation).

You specify the percentages to be capitalized in a capitalization key. The system filters out the amounts (valuation differences between depreciation areas) that do not require capitalization as nonoperating expense.

 

Differing Capitalization per Depreciation Area

However, you are not required to use capitalization keys. If you do not enter a capitalization key in the investment measure, the system settles all no n- assigned , remaining debits to CO receivers (see Periodic Settlement to CO Receivers ) to the asset under construction during the periodic settlement. The same amount is settled to all depreciation areas.

Definition of the Capitalization Key

You define capitalization keys at company code level. You can specify the percentages to be capitalized for cost elements and activity types in the capitalization key. You can enter a capitalization key in the master data of the asset under construction belonging to an investment measure. You can enter a capitalization key in the asset class for the automatic creation of the asset under construction for the investment measure as a default value (refer to Master Data Maintenance ). You enter this asset class in the investment profile.

Capitalization Versions

It is often necessary to capitalize different percentages of certain cost elements in the individual depreciation areas in Asset Accounting, depending on the capitalization rule and the purpose of the calculation. For example, in many companies, different capitalization rules are used for tax depreciation than for book depreciation. Therefore, it is possible to have different capitalization percentage rates in a capitalization key both by capitalization version as well as by cost element.

You define the capitalization version in Customizing for Investment Management (refer to Activities below). Then you assign the capitalization versions to individual depreciation areas in Asset Accounting. The system posts costs which do not require capitalization to the account for nonoperating expense, treating them as capitalization differences specific to a depreciation area. You need to enter this account for each depreciation area in the account allocations of the asset under construction in question.

The account cannot be a cost element. This ensures that debits are not registered twice in cost accounting (once as a capitalization difference, and once as a result of later cost-accounting depreciation of the completed asset). As a prerequisite for the posting to nonoperating expense, the depreciation area must post automatically to the FI General Ledger.

The following graphic provides an overview of the Customizing settings for a capitalization key:

Customizing for Capitalization Key

Capitalization key IM1 capitalizes only 90% of cost element XXX in the Asset Accounting book depreciation area (version 01).

Capitalization in the Cost-Accounting Area

In order to guarantee that all debits that do not require capitalization arrive in cost accounting, the system capitalizes 100%, in to the depreciation area defined for cost accounting, of the amounts that still remain on the asset under construction after the periodic settlement to CO receivers. This means that you cannot create nonoperating expense (difference between capitalization in this and another area) in the cost accounting depreciation area. This is necessary, since the account for nonoperating expense is not permitted to have relevance for CO (see above). Therefore, any amounts charged to this account would be lost in cost accounting. However, you still have the option of settling from this depreciation area using settlement to CO that is not dependent on depreciation areas, within the framework of the periodic settlement to CO receivers (refer to Periodic Settlement to CO Receivers).

You specify the depreciation area to be used for cost accounting in Customizing for Asset Accounting. If you do not make any specification of this kind, the system uses the book depreciation area.

You may have certain overhead that you do not want to capitalize in the cost accounting depreciation area, but in other special depreciation areas. In this case, you have to define negative overhead in the overhead structure for the same amount as the original overhead, with a different cost element. You then capitalize the cost element for the positive overhead in all depreciation areas. You capitalize the negative overhead in all depreciation areas, except the areas desired for the capitalization.

Asset under Construction per Source Structure

It is possible for an investment measure to have more than one asset under construction. It can have an asset under construction for each source assignment in the source structure used. You make this specification in the investment profile for the investment measure (refer to Control Functions of the Investment Profile). When the you capitalize to an asset under construction, the system settles all cost elements of a source assignment to its own asset under construction. For more information on the source structure, see Settlement Rules.

Activities

You maintain determination of capitalization value in Customizing for Investment Management. Choose Internal Orders as Investment Measures or Projects as Investment Measures ® Capitalization Areas per Depreciation Area.

Enter the capitalization key in the master record of the asset under construction. From the investment measure master data, choose Extras ® Asset under construction. On the master data screen of the asset under construction, enter the capitalization key on the General data tab page.

To specify that a depreciation area automatically posts to the FI General Ledger, choose Integration with the General Ledger ® Define How Depreciation Areas Post to General Ledger in Customizing for Asset Accounting.

For more detailed information on the functions of depreciation areas in Asset Accounting, see FI-AA - Asset Accounting.

See also:

The following steps in the Implementation Guide (IMG)

Capitalization Values per Depreciation Area

Define Capitalization Versions

Define Capitalization Keys

Determine Accounts for Nonoperating Expense