Assets Management EGN 5622 Enterprise Systems Integration (MSEM, Professional) Fall, 2013

Assets Management Concepts & Theories

Asset Accounting Concerned with tracking the financial consequences associated with the entire lifecycle of an asset, from acquisition to disposal (retirement). Assets can be categorized as tangible, intangible, and financial

Asset Accounting Classification Tangible assets Fixed assets Leased assets Assets under construction Intangible assets Intellectual property Patents Trademarks Financial assets Securities Long term notes (debts) Mortgages Note: Current assets (cash, inventory, accounts receivable) are not included in asset accounting.

Asset Accounting Components Intangible assets Tangible assets Financial assets - Fixed assets Leased assets Assets under construction Intellectual property Patents Trademarks Securities Long term notes (debts) - Mortgages

Asset Accounting in corporate financial structure Chart of Accounts General Ledger Accounts Balance sheet accounts Income statement accounts Reconciliation accounts Subsidiary ledgers (sub ledgers) Accounts Receivable (customers) Accounts Payable (vendors) Assets

Asset Accounting Assets are assigned to company code Business area Accounting data of assets are maintained in asset sub-ledger accounts. E.g. Acquisition costs and depreciation Asset sub-ledger accounts are created when asset master record is created and associated with a reconciliation account in the general ledger Sub-ledger account and the master record share the same account number Companies maintain separate reconciliation accounts for different types of assets

Example of Asset Accounts in GL

Asset Accounts (AA) Structure Example

Asset Management (Lifecycle) Cost center Asset master creation (AA) Asset Report (AA) Business Area Vendor master Asset Acquisition (AA) External Plant/location Vendor invoice Asset Addition (AA) Depreciation Charge Outgoing payment Asset Retirement (AA) AA: asset accounts Asset Transfer (AA) Customer/Scraping Customer Master Customer Invoice Customer Payment Within/outside Company code

Major Activities in Asset Management (Lifecycle) Asset Acquisition Asset Depreciation Asset Retirement

Asset Acquisition Asset acquisition is concerned with acquiring assets via internal or external processes Internal: production process or project systems External: 3 external options for purchasing assets, Purchase from an established vendor using the purchasing process (different GL accounts) Purchase from an established vendor without using the purchasing process (manual entry in GL and sub-ledger; similar to AP accounting) Purchase from a one-time vendor or a vendor for whom master data are not maintained (via clearing account).

Asset Acquisition With a Clearing Account 5,000 3 Clearing: inventory (GR/IR). Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Asset Depreciation Asset depreciation is concerned with the decrease in the value of an asset over time Depreciation can be planned or unplanned Depreciation methods are used Straight line Double declining balance Useful life Residual value Book value Depreciation areas: parallel valuation Depreciation areas:? Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Straight Line Depreciation Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Double Declining Balance Depreciation What is (1080-80)? Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Financial Statements Based on Depreciation Areas (parallel valuation) Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Asset Retirement Concerned with the disposal or retirement of an asset after its useful life Retirement may be: Revenue generating (sold) Non-revenue generating (scrapped) Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Asset Explorer Asset explorer provides an overview of all activities related to the asset, including: Acquisition data Planned and posted depreciation Drill-down details for: Master data Transactions Documents Depreciation posting run (for an assumed useful life) Asset explorer?

Asset Explorer The asset explorer can: show all the values of a fixed asset display various forms of summarized information for decision making display connections from the Asset Explorer to the G/L accounts, vendor accounts, the cost center, and the Purchase Order of the Asset display planned values are, as well as values already posted for analyzing asset values

Asset Explorer Interface APC – Acquisition & Production Costs. Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Asset management linked to financial accounting Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Assets Management SAP Implementation

R/3 SAP Module View Integrated Solution Client / Server Open Systems Financial Accounting Sales & Distribution Materials Mgmt. Controlling Production Planning R/3 Fixed Assets Mgmt. Integrated Solution Quality Mgmt. Project System Client / Server Plant Maintenance Open Systems Workflow R: real time. 3: 3-tier client-server architecture (database, application, and presentation layers) Human Resources Industry Solutions

Create Asset Master

Create Asset Master

Purchasing an Asset

Purchasing an Asset Similar to purchase order process, except for the master data (sub ledger account) has been for each individual asset before placing an order. One way to skip the step of creating an Asset in the books is to directly go to the Purchase Order, and click the button pointed to.

Receiving an Asset

Invoicing an Asset

Asset Explorer (Comparison)

Asset Explorer (Parameters) Parameters include: (1) # of years of depreciation, (2) depreciation rule, and (3) country code.

Asset Explorer (Simulation)

Asset Explorer (Simulation)

Features of the Asset Explorer Header: where you enter the company code and asset number (Structure) Overview tree: allows you to navigate between the different depreciation options The features include: (1) company code, (2) business area, (3) asset type, (4) fiscal year, and (5) useful asset life

More Features of Asset Explorer Overview tree: displays objects that are related to the asset Tabs: allows you to analyze the planned values and posted values using different parameters, as well as compare fiscal years and depreciation areas It displays details of: (1) cost center, (2) purchase order, (3) G/L account, (4) book value, (5) comparing different options display with useful life and depreciation areas (tax vs. book value).

SAP IDES Client, Userid, Password Exercises for Assets Management: Client: 145 Application server: riga.cob.csuchico.edu System number: 76 System ID: RGA Userid: ides-025 to ides-047 Initial Password: SAP4US

HW Assignment (Due date 9/21/2013) Create appropriation request Create asset Create a vendor Create an information record to link the vendor and the asset Create a purchase order for the asset Check the asset and accounting records Make assets receipt against purchase order Enter incoming invoice Post outgoing payment Use asset explorer