Valuating Fixed Assets 

As already mentioned in the section Deviating Valuations it may be necessary to valuate fixed assets in the individual financial statement differently than in the consolidated financial statement. In principle, valuation differences can result due to four aspects listed below and must usually be portrayed separately:

The following sub-sections give more detail as to how the subsidiary ledger FI-AA handles these tasks and manages the separation of valuation differences for consolidation.

Deviating capitalization rule

The Asset Accounting System FI-AA manages so-called depreciation areas for the various (parallel) valuation requirements. The following areas are delivered in the standard system for the most complicated case of the differences mentioned above:

The business transactions are entered using asset transaction types, which update either all, one or selected areas. Thus, transactions are available that allow you to post the first two or the last two areas. Using this method, you can process an acquisition either locally or from the group’s point of view.

When managing in-house produced assets (see the Investment Management (IM) documentation), you can determine the portion of the production cost that is exempt from capitalization from the local book depreciation perspective and the deviating group perspective.

In a similar fashion, you can post retirements either proportionally or targeted for selected areas.

At first, the parallel valuation of the fixed assets resides exclusively in the subsidiary ledger. You can, however, post to General Ledger by periodically running a certain program using a corresponding account determination in Customizing. The program converts the asset transaction types and posts to special corporate-valuated accounts in the consolidation processing ledger with the right transaction types, storing in the ledger the corporate valuation of the fixed assets. From there, the values are transferred to the Consolidation system.

In this case, the local balance sheet accounts of the individual financial statement may, of course, not be assigned to consolidation items to prevent the values from being updated twice.

Further complication can arise when you must generate not only one, but an additional consolidated financial statement according to different accounting principles (e.g., EC and US statements simultaneously). For each additional consolidated financial statement, three additional depreciation areas with corresponding parallel accounts in FI are necessary.

Deviating depreciation method

The group valuations can use their own method - independent of the local valuations - and have their own value management. The depreciation posting program can post depreciation periodically onto separate accounts. These accounts are defined in Customizing and substitute the depreciation accounts of local jurisdiction when transferring to Consolidation.

Adjustments to net income due to depreciation differences are not automatically shown in Consolidation. Thus, deferred taxes can only be calculated and posted manually. For assistance, however, you can refer to a depreciation comparison report in FI-AA.

Translation differences due to historical currency translation

In the FI-AA System, you can store group valuation in local currency and in historical group currency, which means that every acquisition is also translated into group currency using the current spot rate; these values are the basis for computing and posting depreciation. Retirements are made proportionately, i.e., using a mixed exchange rate, if necessary, when varying exchange rates were used for the acquisitions.

During the periodic transfer of the values into General Ledger, both group valuations (see above) are transmitted and posted to the same accounts in both parallel currencies. This requires that the FI system is set up accordingly, whereby the valuations must be assigned to the corresponding currency types. Hence, the consolidation staging ledger also receives the group valuation in both local currency and historical group currency. Consolidation uses the local currency for an (internal) spot rate translation. The group currency along with its translation key remain unchanged in consolidation, and is only used for calculating the translation differences.

Basically, the above applies not only to periodic FI extracts from the consolidation staging ledger, but also to realtime updates.

Asset transfers with or without intercompany profit

Transfers of assets between company codes must presently be posted using two manual documents with applicable transaction types. The realization of cross-company code data entry with accompanying background processing is planned for the next release, since such transfers are often needed not only for a single asset but for many assets of a plant, regional office, etc.

As already mentioned in the beginning, in the individual financial statement of the acquiring company the capitalization at acquisition cost (and not at a retiring book value) must take place, at least if the acquiring company code represents an independent legal entity. This type of company code relationship cannot be portrayed in Customizing at this time.

For group valuations, acquisitions should be posted with the corporate value - thus, not at retirement book value - because the eliminatory measures of any intercompany profit must not be corporate-valuated, but instead, must result 'after' corporate valuations. Thus, a deviating group valuation must be entered manually for the transfer acquisition. The retirement document cannot currently be re-accessed in a central system.

In this regard, enhancements are planned after Release 3.0, which will enable the additional transfer of this information to Consolidation, where automatic eliminating entries can then take place. In Release 3.0, Consolidation only features non-integrated elimination of intercompany profit/loss in inventory, where the transfer data must be entered manually (as financial reporting data).

System start-up

Functions in the FI-AA system are available to accommodate the implementation of a deviating group valuation into an already up-and-running system. These functions subsequently open new depreciation areas, initialize the beginning values from already existing areas, and/or theoretically recalculate historically accumulated depreciation.