System Requirement

Specification

FI4010
Fixed Asset Accounting

Prepared For HG Manufacturing Limited

Prepared By Deepak Padgaonkar
Date of Document 14th December 2007
Release No: V1.0

The materials presented in this document shall not be disclosed. No part of this document may
be re-produced, in any form or by any means without permission from V3iT Consulting
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TABLE OF CONTENT
1 CHANGE HISTORY..................................................................................3
2 INTRODUCTION.......................................................................................4
3 ABBREVIATIONS.....................................................................................5
4 BUSINESS REQUIREMENTS..................................................................6
5 OTHER REMARKS.................................................................................16

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1 CHANGE HISTORY
Date of Update Updated By Version Change Description

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2 Introduction
2.1 Acceptance /Signatory of Specification
This document supersedes any previous document on the subject of the requirements of application and
software functionality for the project.

Signature on this System Requirement Specification document by authorized user representative

indicates satisfaction and acceptance of this document as a description of the complete functionality
required of the project. Any changes to the functional requirements described in this document will be
noted as change requests and this document will be amended to reflect these changes.

Business User Representative

Designation: Process Owner
Name:
Date:

Ledge Representative
Designation: FICO Consultant
Name:
Date:

2.2 Purpose of Document

The primary purpose of this document is to capture the functional requirements of the SAP Project. It
represents the project deliverable to the users. The requirements documented here are the results of the
requirements gathering phase. It represents the project deliverable to the users and also states the
assumptions used in the design and development of the system by V3iT Consulting.

2.3 Intended Audience

This document is intended for review by various user-groups within HG with vested interests in this
Project. These groups should check the validity of business assumptions, the accuracy of the business
functions, outputs and the flow of processing logic described in the document.

When accepted, it will form the basis for detailed design and development of the system. This document
is also meant for V3iT Consulting Pte Ltd in the design, development and testing phases of the system.

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3 ABBREVIATIONS

ABAP Advanced Business Application Programming

BOM Bill of Material
CC Cost Center
CO SAP R/3 Module Controlling
CoA Chart of Accounts
CoAr Controlling Area
CO-CCA SAP R/3 Controlling Sub module Cost Center Accounting
CoCo Company Code
CO-OPA SAP R/3 Controlling Sub module Order and Project Accounting
COS Cost of sales.
DC Distribution Channel
e.g. example given
FI SAP R/3 Module Finance
GI Goods Issue
GR Goods Receipt
i.e. id est (this is)
IV Invoice Verification
MM SAP R/3 Module Materials Management
MP Mass production (parts)
MPS Master Production Schedule
MRP Material Requirements Planning
P&L Profit and Loss
PA SAP R/3 Sub-module Profitability Analysis
PC Profit Center
PDO Production Order
PR Purchase Requisition
PO Purchase Order
PP SAP R/3 Production Planning Module
SAP Systems, Applications, Products (company name)
SD SAP R/3 Module Sales & Distribution
SIS Sales Information System
SO Sales Order
SOP Sales and Operations Plan

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4 Business Requirements
4.1 Scope of Requirement
This document describes system requirements specification in the Asset Accounting Module.

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4.2 SAP Conceptual Design

The Asset Accounting (FI-AA) component is used for managing and monitoring fixed assets in the SAP. It
serves as the subsidiary ledger to the FI General Ledger, providing detailed information on transactions
involving fixed assets.

As a result of the integration in the SAP, Asset Accounting (“AA”) transfers data directly to and from other
components. For example, it is possible to post from Material Management (MM) component directly to
AA. When an asset is purchased, it is possible to directly post the invoice receipt or goods receipt to
assets in the Asset Accounting component. At the same time, depreciation is also passed on directly to
the Financial Accounting and Controlling components.

4.2.1 Depreciation Area

Depreciation areas are used for calculating depreciation of the same assets in different ways and for
different purposes such as commercial and tax purposes. The following depreciation area will be defined
for HG:

Depreciation Area Description Currency

01 Book Depreciation SGD

4.2.2 Assets Class

Asset class is the main criteria for classifying assets. Each asset assigned to one and only one asset
class. Asset classes are created at the client level. The Asset class controls:

The Asset class controls:

 Account Determination i.e. G/L accounts for all asset-related postings

 Asset Master Numbering
 Default values on asset master creation for depreciation key and useful life

The following asset classes will be set up as follows:

Asset Class Useful Life Residual

(Years) Amount
161010 Leasehold Property 0
161020 Freehold Property 0
161030 Renovation 0
161040 Plant & Machinery 0
161050 Computers & Printers 0
161060 Furniture & Fittings 0
161070 Motor Vehicles variable

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Asset Class Useful Life Residual

(Years) Amount
161080 Office Equipments
161900 Asset under constructions 0

Number Range Interval

Number ranges are derived based on the asset class. The asset number clearly identifies a fixed asset
owned by the company. This numbering always consists of the main asset number and the asset sub-
number. The main asset numbers can have 8 digits while the sub-numbers have 4 digits. All asset
numbers will be assigned internally by the SAP system.

The following number ranges will be assigned in the system:

Number Range
Asset Class
From To
161010 Leasehold Property 10100000 10109999
161020 Freehold Property 10200000 10209999
161030 Renovation 10300000 10309999
161040 Plant & Machinery 10400000 10409999
161050 Computers & Printers 10500000 10509999
161060 Furniture & Fittings 10600000 10609999
161070 Motor Vehicles 10700000 10709999
161080 Office Equipments 10800000 10809999
161900 Asset under constructions 19000000 19009999

Assets account determination

The account determination links an asset master record to the general ledger accounts to be posted for
an accounting transaction.

This definition is effective for each chart of accounts and for each depreciation area that is defined as an
automatic posting area in the respective chart of depreciation.

Account determination key need to be entered in every asset class. Doing so guarantees that the account
assignment will be the same for all assets in the given asset class.

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4.2.3 Asset Acquisition

The acquisition of an asset can be posted in several ways, using different application components:

 Acquisition with Purchase Order via Material Management

 Acquisition without reference to a Purchase Order

Asset Acquisition With Purchase Order

The acquisition of an asset will follow the procurement steps for standard purchasing procedure. Prior to
creation of PO, however, the asset master data should be created as this will be assigned at the point of
creating the PO.

The following steps are taken for asset acquisition:

 Creation of Asset Master Data

 Creation of Purchase Requisition (PR)
 Creation of Purchase Order (PO). In the PR and PO, special account assignment “A” should be
specified to identify that the transaction is for procurement of fixed assets. The corresponding
asset number will then have to be assigned.
 Posting of Goods Receipt
 Posting of Invoice Receipt

Assets will be capitalized during Goods Receipts with the following accounting entries:

Goods Receipts

Document Posting GL Account Posting

Type Key
WE 70 Asset Account (Acquisition) Debit
WE 96 GR/IR Clearing Account Credit

Invoice Receipts

Document Posting GL Account Posting

Type Key
WE 86 GR/IR Clearing Account Debit
WE 40 Input GST Account Debit
WE 31 Vendor Account Credit

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Asset Acquisition Without Purchase Order

This is entered via the Asset Accounting Module. The journal entry is:

Document Posting GL Account Posting

Type Key
KR 70 Asset Account Debit
KR 40 Input GST Account Debit
KR 31 Vendor Account Credit

4.2.4 Asset Under Construction

Asset Under Construction (AUC) is a special form of asset. These assets are usually displayed as a
separate item in the Balance Sheet and therefore require a separate asset class and corresponding
account determination. The AUC monitor costs incurred for a project. Costs are initially posted to Assets
Under Construction Account, which serves as cost collector. AUC are not subject to depreciation and in
order to ensure that depreciation is not calculated, depreciation key ‘Z000’ should be assigned in the
depreciation areas for the Balance Sheet.

Upon completion of the project, the AUC master will be transferred to a final asset, using the settlement
facility, based on a pre-defined settlement rules.

Distribution Rule

The distribution rule needs to be specified so that the settlement of the AUC to final asset is performed
correctly and accordingly. AUC settlement is carried out by using distribution rules which are asset-
specific.

Distribution rules consist of distribution key and a receiver. The distribution key can be equivalence
numbers or percentage rates. In this way, you can distribute any number of combinations of line items to
any number of combinations of receivers.

4.2.5 Asset Transfers within the Same Company

There are different types of intra-company asset transfers in Asset Accounting, depending on the reason
for the transfer:

 You split up an asset or move part of an asset (transfer from asset to asset)
 The location of the asset changes. As a result, you need to change the organizational
assignments in the asset master data (Cost Center or location)
 The asset class changes. To convert a non-operating to an operating asset or an operating to an
non-operating asset, asset transfer should be used to change assignment to asset class

Transfer posting from one fixed asset to another within the same company code can be carried out in one
step. The pre-requisites however, for an automatic transfer posting are that no values from the asset
being transferred are lost, and that every area of the receiving asset is supplied with values. If it is not
possible to use automatic transfer posting because of unmet pre-requisites, such as need to change

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depreciation areas / keys, you have to manually post a retirement and then an acquisition to carry out the
transfer.

4.2.6 Retirement of Fixed Assets

The disposal / retirement of fixed assets is the process of removing an asset or part of an asset (partial
retirement) from the asset portfolio. Asset disposal / retirement could be through sale or write-off
(Scrapping)

Asset retirement can refer to an entire fixed asset (complete retirement) or part of a fixed asset (partial
retirement). In both cases, the system automatically determines, using the asset retirement dates entered,
the amount to be charged off for each depreciation area. You can initiate the partial retirement of a fixed
asset by entering one of the following:

 Amount of the acquisition and production cost (APC) being retired;

 Percentage rate, or
 Quantity

When the amount of APC that is being retired is entered, the system determines the percentage to be
retired from the asset using the book depreciation area in which posting is to take place. It determines the
percentage amount of APC being retired in that area, and uses the same percentage of other areas. The
quantity of asset to be retired can be entered if the retirement amount or percentage rate has not been
specified/ The system interprets the quantity as a ratio to the total quantity of the asset and thereby
determines the asset retirement percentage rate.

Asset sale with customer

The system enables user to post the entry to Accounts Receivable, the revenue posting and the asset
retirement in one step. In this posting transaction, you have to post the revenue (debit A/R, credit revenue
from asset sale) first, and then post the asset retirement. The pre-requisite for this is that the sales
revenue account to which the revenue account should be posted, has a field status variant in its master
data in which the asset retirement field (category Asset Accounting) is defined as a required or optional
entry field.

The transaction will automatically create a customer open item – a debit posting to accounts receivable
and a credit posting to the asset account. Depending on the book value of the asset sold, corresponding
gain or loss will be calculated by the system and will automatically be posted to the gain / loss account
from asset disposal per automatic account assignment. The following accounting entries are generated:

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Document Posting GL Account Posting

Type Key
DR 01 Customer Account Debit
DR 70 Accumulated Depreciation * Debit
DR 75 Asset Cost Account * Credit
DR 50 Output GST Account * Credit
Gain or Loss on Asset Sale
DR 40 Loss on Asset Disposal * Debit
DR 50 Gain on Asset Disposal * Credit
Asset Clearing Account
DR 50 Asset Sale Clearing Account * Credit
DR 40 Asset Sale Clearing Account * Debit

Note : * These line items are automatically generated by the system.

Asset retirement without revenue – Scrapping

A retirement without revenue is used when fixed assets are being written off such as scrapping. If an
asset write-off transaction is identified, the Finance Department will be responsible to post the retirement
in SAP via transaction asset retirement without revenue.

This transaction will automatically create a debit posting to the losses from asset disposal G/L account for
the assets net book value and a credit posting to the asset account for the entire book value. The
following accounting entries will be created.

Document Posting GL Account Posting

Type Key
AA 40 Loss on Asset Disposal * Debit
AA 70 Accumulated Depreciation * Debit
AA 75 Asset Cost Account * Credit

Note : * These line items are automatically generated by the system.

4.2.7 Depreciation
The Depreciation component of FI-AA makes it possible to manage automatically the calculation and
posting of depreciation. Fixed Assets are depreciated depending on its depreciation areas which set out
the useful life and depreciation keys which dictate the depreciation methods such as straight-line method.
Depreciation is computed and posted on a monthly basis.

Depreciation of Assets in HG will be managed as such:

 Full month in the month of acquisition / capitalization of asset

 No depreciation in the month of disposal
 No depreciation for Asset Under Construction

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4.2.8 Year-End Closing

Year end closing in Asset Accounting consist of 2 parts:

 Fiscal Year Change

 Year End Closing

Fiscal Year Change

From the point of view of the system, a fiscal year change is the opening of new fiscal year for a company
code. At the fiscal year change, the asset values from the previous fiscal year are carried forward
cumulatively into the new fiscal year. Once the fiscal year change takes place, you can post to asst using
value dates in the new fiscal year. At the same time, user can continue to post in the previous fiscal year.

No business transactions can be posted in anew fiscal year before the fiscal year change. User can
continue to post in the old fiscal year as long as year end closing has not been done. The system
automatically corrects any value that is affected by postings in the past.

Year-End Closing

User will use the year-end closing program to close the fiscal year for the company codes from an
accounting perspective. Once the fiscal year is closed, user can no longer post or change values within
Asset Accounting (for example, by recalculating depreciation).

The system only closes a fiscal year in a company code if:

 The system found no errors during the calculation of depreciation such as incorrectly defined
depreciation keys
 Planned depreciation from automatic posting area has been completely posted to the general
ledger
 All assets acquired in the fiscal year have already been capitalized.

The system lists any asst that do not meet the above requirements in the log of the year-end closing
execution. The log also shows the cause of the errors.

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4.3 SAP Flow

Nil

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4.4 SAP Configuration

 Depreciation areas
 Asset classes
 G/L account assignment
 Screen Layout for Asset Master Data
 Asset Assignment Category for Asset Purchase Order
 Settlement Profile for Assets under construction
 Depreciation Key

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4.5 ABAP & Other Technical Requirements

Nil.

4.6 Data Migration

 Asset Master Data and balances for each depreciation area

Both asset master data and balance will be loaded in a single upload process. Asset balance will
be loaded at the sub-ledger level only. Before uploading fixed asset balance, acquisition cost,
accumulated depreciation as of the last fiscal year and current year depreciation cost and need to
be reconciled with the G/L balance. Once the balance is reconciled, asset master record and
balance will be loaded into SAP and the reconciliation account will be switch on .

5 Other Remarks
Nil.

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