Best Practices in SAP FI-Asset Accounting

Global Best Practices for

Fixed Assets

Thomas Michael

Michael Management Corporation

www.michaelmanagement.com

• Global Fixed Asset System – Client Example

• Global Fixed Asset Vision & Goals

• Global Best Practices

• Global Challenges

• Elements of Success

• Wrap up / Q&A

Overview


• Several large multi-national, multi-year implementations covering North/South America, Europe, Asia

• Understand how a large Global Company approached the development of a single global solution set

• How to approach a Global AA Design template

• Explain the key elements for global best practices

Intro - Learning Objectives






• Wrap up / Q&A

What we’ll cover


• U.S. based Company doing business in more than 160 countries worldwide with over 300 consumer brands

• @ 80 countries worldwide with general offices and/or manufacturing plant sites

• Currently have 56 charts of depreciation in global SAP 4.5b client (increase of 22 COD’s since 2002)

Global Fixed Asset System – Client Example


• @ 1MM asset records in global SAP 4.5b client

• @ 135 asset-holding company codes in global SAP 4.5b client (increase of 55 since 2002)

• In fiscal year 2004, client had $2B in capital spending (AUC assets)

Global Fixed Asset System – Client Example (cont’d)


• Over 15,000 clients worldwide are live on Asset Management module

• Over 70 countries/languages supported

Global Fixed Asset System – SAP Statistics






• Wrap up / Q&A

What we’ll cover


• Define global chart of depreciation to satisfy both US and local requirements:

– US GAAP and local country GAAP rules/reporting

– US tax and local country tax rules/reporting

–Global Insurance valuation reporting

• One set of asset classes used across the globe

• Develop a standard set of work processes to be used across the globe

Global Fixed Assets Vision & Goals


• Minimize available options such as depreciation keys, transaction types, reports, etc.

• Implement a global standard for the integration between Fixed Assets and EC-PCA as well as EC-CS (business segment reporting)

• Secure a single client that houses all Capital Projects and Fixed Assets for all countries –global reporting from one place!

Global Fixed Assets Vision & Goals (cont’d)



• Global Fixed Assets Vision & Goals


– Local vs. Group requirements

– Global Chart of Depreciation

– Asset Class design

– Standard Business Processes

– Minimize Options

– Consolidations (AA and PCA / EC-CS)

• Elements of Success - Wrap up / Q&A

What we’ll cover


• Realize that you need to fulfill legal reporting requirements in each country

• Depreciation area 01 - LOCAL GAAP• Depreciation areas 30/31 are for GROUP GAAP

• Research local requirements and their consequences PRIOR to initial design– France’s area 05 for deferred gain/loss –RARUECK01

– Italy’s need for specific asset history sheet format

– Germany’s need for detailed asset class format– Etc. pp.

Global Best Practices – Local vs. Group requirements


CoD Germany

Chart of depreciationChart of depreciation

Germany

Depreciation areasDepreciation areas

01

02

03

10

15

20

30

31

32

41

51

99

Book depreciation

Special tax depreciation

Special depreciation reserve

Valuation of net assets

Balance sheet for tax purposes

Cost-accounting depreciation

Consolidated balance sheet (local curr.)

Consolidated balance sheet (group curr.)

Book depreciation in group currency

Investment support (reducing APC)

Investment support as a reserve

Insurance

CoD USA

Chart of depreciationChart of depreciation

USA

Depreciation areasDepreciation areas

01

10

11

12

13

20

30

31

32

33

99

Book depreciation

Federal tax ACRS/MACRS

Alternative Minimum Tax

Adjusted Current Earnings

Corporate Earnings & Profits

Cost depreciation

Consolidated balance sheet in local currency

Consolidated balance sheet in reporting curr.

Book depreciation in group currency

State modified ACRS

Insurance

Global Best Practices – Global Chart of Depreciation


• Create two depreciation areas per reporting requirement, one in local currency and one in USD. This captures historical exchange rate values rather than using translation methods.

– Both areas use same depreciation key and life

– Example: Area A (US GAAP) is set to local currency; area B (US GAAP) is set to USD



• Globally, reserve certain depreciation areas 01-20 for specific related reporting purposes (i.e. 01-20 GAAP, Tax, Insurance, etc. and 21-29 for local use (GAAP and Tax); regions can meet any additional local needs outside of this range



• In order to use an asset class across the globe, each country using the asset class must be able to use the same account determination for both U.S. GAAP and Local GAAP reporting (if other posting areas exist)

• Enables global reporting by asset class

Global Best Practices – Asset Class Design


• Enables easier asset life changes across the globe (via workflow), when needed

• Screen layout – use a set of global rules or the SAP delivered layout rule but a country can create their own as needed in order to meet local needs



• Globally defined fields:

– Eval. group 1 (i.e. California ADR reporting)

–Eval. group 2 (i.e. Insurance reporting)

–Property Indicator (Real vs. Personal property)

– Standard set of depreciation keys/lives for US GAAP, US tax, California ADR, and Insurance depreciation areas

• Use as many user fields (table ANLU) as necessary



Tips & Tricks• Realize the difference between the A- and B-segment (A-segments usually not company/country specific)

• Don’t set up asset classes by useful life (e.g. M&E 5yrs., M&E 7yrs, etc. – use more sophisticated tools such as substitutions)

• You will need more detailed asset classes for certain countries (e.g. Germany requires more detailed building asset classes, e.g. Buildings, Bldgs-Warehouses, Bldgs-Office/Retail, Bldgs-Sheds, etc.)



Standard Business Processes aka ‘The 80/20 rule’

• Fixed Assets core business processes are the same or very similar across the globe (only 3 core processes in AA)

– Master Data

– Transactions

– Periodic Processing

• 80% of your configuration should be transferable to other countries, 20% may be country-specific

Global Best Practices – Standard Business Processes


Standard set of work processes:

• Create/Change master records• Divestiture handling• Asset sales to third party• Handling of asset reserves• Reversals of asset retirements• Handling of assets traded-in• Handling of deferred charge assets • Asset transfers between companies & countries• Settlements of AUC assets• Standardization of asset reports

Global Best Practices – Standard Business Processes


• Over 700+ calculation keys…

• Over 2300+ depreciation keys…

• …yet many do the same thing:

– M150, NA0

– M200, DG20

– LINx – straight line

• Over 230+ transaction types…

• Over 200+ asset reports…

Global Best Practices – Minimize options


• Global configuration item -- make the time-dependent screen time-independent (transaction ORFA; ‘Master Data’) – automatic FI postings upon business segment changes

• All balance sheet postings must reflect a Consolidation transaction type

Global Best Practices – AA and PCA / EC-CS


• All postings (balance sheet and P&L) must reflect a profit center; 3KEH table reflects default profit center for each account – just in case!

• Link AA transaction type to EC-CS transaction type via TABW table

• Use areas 30/31 for consolidated Group reporting

Global Best Practices – AA and PCA / EC-CS







• Wrap up / Q&A

What we’ll cover


• Incorporating local needs into a US based company

• Supporting and communicating with multi language based SAP users

• Distribution of new work processes as well as training end user in several countries

• Time zone differences

Global Challenges







• Wrap up / Q&A

What we’ll cover


• Global Chart of Depreciation• Local vs. Group requirements• Asset class design• Standardize business processes - 80/20 rule

• Do your homework PRIOR to design• ‘Been there, done that’ resources

Elements of Success


• It is critical to involve key customers (Tax, Corporate Accounting) when developing global processes/configuration for new requirements

• Realize that local legal requirements have to be met

• Consider the integration of SAP with its other modules

Key Learnings


• Global standardization puts everyone on the same page – across the globe! This makes system support easier because everyone should be doing things the same way.

• Must have an excellent communication process to make it work.

• Documentation must be kept up to date and easily accessible by the end users

• Global standardization can be done successfully!

Key Learnings







• Wrap up / Q&A

What we’ll cover


• Comments

• Questions

• Contact Thomas Michael at [email protected]

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Best Practices in SAP FI-Asset Accounting

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