Post-Capitalization in Asset Accounting

Acquisition and Production costs (APC)

Acquisition means any asset which you may acquire/ purchase externally. It
includes invoice price and other related exp. Associated with it like customs,
octroi, freight which you add and arrive at total cost of acquisition for
capitalization of the asset.

**For ex Say a computer. The total cost which you incur for the acquisition
of the computer including installation will be your APC

Production cost means any asset which is created internally within the
organization. This is normally created by means of AUC and you go on adding
cost to the AUC as and when you incur exp. for the same.

**For ex. say addition to the office building. Therefore, APC incudes any
external acquisition or internal construction of expense which needs to be
capitalized.

In OADB under 01 deprn area Acquisition & prod Cost tick is activated.

Net Book Value (NBV) is the amount at which an organization records an asset in its
accounting records. Net book value is calculated as the original cost of an asset, minus
any accumulated depreciation, accumulated depletion, accumulated amortization, and
accumulated impairment

Background: 

It often happens that business has omitted to book APC values of Fixed Assets in past fiscal years.
This can happen for an entire asset or for part of the cost of an existing asset. There may be a
variety of business reasons for this like asset valuation not finalized etc. The challenge now is to
incorporate the APC value that was missed into the current fiscal period along with the accumulated
depreciation component for that asset so that the Net Book value is correctly reflected in the Fixed
Asset register.

Solution:
In S4 HANA cloud the Fiori App “Post Post-capitalization” enables subsequent additions/corrections
to Acquisition and Production Cost (APC) of fixed assets. For an entirely new asset that was omitted
to be booked in earlier fiscal years a new asset master data has to be created with the “Post
Capitalization” checkbox enabled and the capitalization date maintained. For cost additions required
to be made to existing asset from an earlier fiscal year a sub asset master with identical parameters
mentioned above may be created under the main asset master.

Through this process business can correct the fixed asset register in the current year, without having
to make postings and rerun the balance carry forward for previous years.

Example:

Company A has gone live with Asset legacy Transfer date of 31.12.2017. However, in December
2018, it realizes that it omitted to enter one of their Assets having APC Value of 760000 USD as a
legacy asset. The Asset has an initial capitalization date of 01.01.2016. It has an estimated useful
life of 8 years and should be depreciated fully over the same i.e. at the rate of 95000 USD every
year for 8 years (from 2016 to 2023).

The following perquisites need to be met before we can book the post capitalization amount:

        Create new Asset master record with the Post Capitalization checkbox enabled.

AS01

              

         The Capitalization date should be maintained in the General data tab:

          Depreciation area parameters should be set as below:

Now the capitalization amount can be posted onto this newly created asset master through the Fiori
app “Post Post-capitalization”.

For this example, the following parameters should be entered:

Tcode: ABZON
Posting date should be in the current month/period as we cannot post to previous months which are
now closed due to financial statements having been finalized.

The below Accounting document gets posted:

The posting updates the below Accounts:

a)   The APC Fixed Asset GL Account with the full APC cost of 760000 USD.

b)    The Accumulated Depreciation GL Account with the accumulated depreciation amount for 2016
and 2017 i.e. 95000*2 = 190000 USD.

c)      The Balance as income into a Profit and Loss GL Account called “Revenue from Post
Capitalization”

In this way the Fixed Asset Register is updated with the correct present net book value of the Fixed
Asset i.e. (760000-190000) = 570000 USD.

*Current NBV is 475,000 USD after monthly depreciation run for Period 12/2018

This amount is now expected to be depreciated fully in 6 years starting from 2018 till 2023. This is
also reflected in the parameters for the Asset in the “Asset Values” app.

Conclusion:

The Post post-capitalization functionality is a very useful application that enables fixed asset
accountants to update correct net book value of fixed assets and account for costs relating to earlier
years which have been missed out due to some business reason. This ensures accurate and up-to-
date maintenance of the Fixed Asset register. 

Details of this functionality can be found in the Scope Item J62 – Asset Accounting.