asset accounting

Introduction

Process overview

This chapter deals with policies, procedures, controls, roles and responsibilities related to accounting of receipt, capitalisation, transfer, retirement, depreciation, etc., of fixed assets. Fixed assets capitalized in the books of the Company are classified into following broad categories:

a) Land (leasehold and freehold);

b) Buildings and bunk houses;

c) Railway sidings

d) Plant & Machinery (P&M);

e) Vehicles, survey ships, crew boats and helicopters;

f) Furniture & Fixtures (F&F);

g) Intangibles (Application Software, Patent, trade mark, etc.)

Fixed asset accounting is carried out using Fixed Assets (FA) module in SAP where in different asset classes have been defined based on broad categories of assets mentioned above. For capitalization of any asset, an asset master is created in FA module. Asset master record primarily consists of:

i. Asset number and sub number,

ii. Asset Class/GL account,

iii. Description of Asset.

iv. Inventory number,

v. Date of Capitalisation,

vi. Cost Centre/Internal order,

vii. Indenter Code,

viii. Census class,

ix. Custodian,

x. Origin of Asset i.e. WBS, GI number,

xi. Depreciation key, etc.

xii. Gross Value and accumulated depreciation

Each asset capitalised through GR and GI route has been assigned a 12 digits unique inventory number. The first 4 digits of the inventory number represent ‘Plant Code’ next four digits represent census classes and rest of the digits represent ‘running serial number’. Asset master has a General Ledger (GL) account assignment based on the asset class for posting of asset value to GL. For each capital item, a census class, which is mandatory for assigning a depreciation key to the asset, has been mapped in SAP system. The census class consists of four digits i.e. from the third digit to the sixth digit, of the material code for capital items in the material master. Depreciation key determines the rate at which asset is depreciated. For controlling purposes, indenter-wise asset details are maintained in FA module.

Process objectives

· All additions to/ deletions from/ movement of Fixed Assets are properly recorded in

the books of accounts.

· Depreciation is charged to Profit & Loss (P&L) account/capitalized in accordance

with the accounting policy of the Company.

· Intangibles are capitalized and amortized in accordance with the accounting policy of

the Company.

· Physical verification of fixed assets.

Accounting policies

Fixed assets (FA)

Fixed Assets are stated at historical cost less accumulated depreciation and impairment. Fixed Assets received as donations/ gifts are capitalized at assessed values with corresponding credit taken to Capital Reserve. All costs relating to acquisition of fixed assets till the time of commissioning of such assets are capitalized.

Intangibles

Costs incurred on intangible assets, resulting in future economic benefits are capitalized as intangible assets and amortized on Written down value (WDV) method beginning from the date of capitalization.

Depreciation

Depreciation o n Fixed Assets is provided for under the WDV method in accordance with the rates specified in Schedule XIV to the Companies Act, 1956.

Depreciation on additions/deletions during the year is provided on pro-rata basis with reference to the date of additions/deletions except items of Plant and Machinery.

(P&M) used in wells with 100% rate of depreciation and low value items not exceeding Rs. Five Thousand which are fully depreciated at the time of addition.

Leasehold land is amortized over the lease period.

Depreciation on subsequent changes to Fixed Assets arising on account of capital improvement, price variation or other factors is provided for prospectively.

Depreciation on Fixed Assets (including support equipment and facilities) used for exploration, drilling activities and on related equipments and facilities, is initially capitalized as part of exploration cost, development cost or producing properties and expensed/depleted as stated in policy on “Exploration, Development & Production Costs”

Producing Properties

Producing Properties (PP) are created in respect of an area/ field having proved developed oil and gas reserves, when the well in the area/ field is ready to commence commercial production.

Cost of temporary occupation of land, successful exploratory wells, all development wells, depreciation on related equipment, facilities and estimated future abandonment costs are capitalised and reflected as Producing Properties.

Depletion of Producing Properties

Producing Properties are depleted using the ‘Unit of Production’ method. The rate of depletion is computed with reference to an area covered by individual lease/ licence/ asset/ amortization base by considering the proved developed reserves and related capital costs incurred including estimated future abandonment costs. In case of acquisition, cost of producing properties is depleted by considering the Proved Reserves. These reserves are estimated annually by the Reserve Estimates Committee of the company, which follows the International Reservoir Engineering procedures.

Process narratives & flow charts

Additions to fixed assets

Fixed assets capitalized in the books of the Company are classified into land (leasehold and freehold), buildings and bunk houses, P&M, F&F, vehicles, survey ships, crew boats, helicopters, railway sidings and intangibles. This paragraph details the processes, by which different types of fixed assets are capitalized in the books of accounts:

a) Capitalisation of ‘ready to use’ assets (other than land).

b) Assets that require installation and/or commissioning (other than those

c) Capitalised through WBS route in Project Systems module in SAP).

d) Fixed Assets capitalized through WBS route in PS module (for example PP,

e) Buildings and other capital projects).

f) Well materials (like casing pipes, production tubing’s, well heads etc)

g) Capitalization of land (leasehold and freehold).

h) Intangibles (software).

i) Capitalization of insurance spares.

j) Capitalization of asset fabricated in central workshop.

k) Creation of new capital item in SAP on first purchase.

l) Dry well assets.

m) Survey Asset.

n) DRE Assets.

‘Ready to use’ assets (excluding land)

‘Ready to use’ assets include F&F, vehicles, crew boats, helicopters and certain P&M that are ready to use. These capital items are procured through Purchase Requisition (PR)/Purchase Order (PO) route and received in main stores. Capitalization process commences when theIndenter/ requisitioned creates a reservation in the system for issue of capital Item from stores. The detailed process narrative is given below:

S. No

1

2

3

Activities including control

Authorised capital indenter creates the reservation in SAPusing T-Code ZMMCIOS for issue of a capital item andforwards signed copy of the reservation to Main Store/Sitestore. Authorised capital indenters are LI/LII/LIII level officers as per CRC and the officers nominated by ‘LI’ officers.

The indenter specifies the reason for movement andmovement type in the reservation created in SAP whichdetermines whether the capital item is issued to asset, costcentre (in case of part replacement), WBS, PlantMaintenance Order (PMO), etc.

After creating the reservation, these details automaticallyflow in report ‘pending reservations for asset allotment’which can be executed using T-code – ZMMCIOS?

Asset Accounting section runs the report pending reservations for asset and allots the asset number to thecapital item by using the T-code – ZMMCIOS. The F&ASection checks the cost centre etc and then mentions theasset number on the hard copy of the reservation and handsit over to the indenter.

Main Store issues the capital item for which asset number iscreated after receiving signed copy of the reservation andposts goods issue in SAP by using T-Code – ZMMCIOS.Refer accounting entry no. AE/AA/001 mentioned below: GL code Account description Dr/Cr10*** Fixed Assets Dr.907/8** CIOS Cr.

Note: The capitalization of assets takes place on posting of goods issue by Main Store.

Responsibility

Authorisedcapital indenter

Asset AccountingSection.

Asset Accountingsection

Process flowchart

Asset under installation

Assets that require installation and/or commissioning before they are ready for use are capitalised

through Asset under Installation (AUI) route. For example air conditioning units. This does not

include fixed assets capitalized through WBS route in PS module in SAP. This process commences

before a Purchase Requisition (PR) for asset with installation/commissioning charges is created by

the indenter in SAP. The detailed process is given below.

Process Narrative

S.NO Activities including controls Responsibility

1

2

3

The indenter informs the Asset Accounting section, by SAP

mail, to create AUI in Fixed Assets module for capturing

installation/commissioning charges related to capital item(s)

proposed to be purchased.

Asset Accounting section creates an AUI in Fixed Assets

module by using T-Code – AS01 and intimates the AUI

number to the indenter by SAP mail

Note - For creation of AUI, indenter code, CC and asset

class to determine the GL account are specified.

Indenter creates PR in SAP with separate line items for

asset and installation/commissioning charges.

Relevant AUI number provided by Asset Accounting section

is assigned in PR to the line item for installation/

commissioning charges.

Indenter

Asset Accounting

Section.

Indenter

S. No Activities including controls Responsibility

4

5

6

The asset is received in Main Store as capital inventory and

capital indenter creates the reservation in SAP using T-Code

ZMMCIOS for issue of Capital Item. The capital indenter

forwards signed copy of the reservation to Main Store/Site

store for issue of Capital item.

The indenter specifies the reason for movement and

movement type in the reservation created in SAP which

determines whether the Capital item is issued to Asset

(AUI), CC (in case of part replacement), WBS, PMO etc.

After creating the reservation, these details automatically

flow in the report pending reservations for asset allotment

which can be run by T-code ZMMCIOS.

Asset Accounting Section executes the report pending

reservation for asset allotment and allots the AUI number to

the capital item by using T-code – ZMMCIOS and mentions

the AUI number on the hard copy of the reservations and

hands it over to the indenter.

Main Store issues the capital item after receiving signed

copy of the reservation having asset number and posts

goods issue in SAP by using T-Code – ZMMCIOS

Refer accounting entry no. AE/AA/001 mentioned below:

Capital indenter.

Asset accountingsection.

Asset accountingsection.

GL code Account description Dr/Cr

40*** Fixed Assets (AUI) Dr.

907/8** CIOS Cr.


9 Asset Accounting section, based on the installation

certificate from the indenter, creates asset number, defines

the settlement rule for AUI by using T-code – AIAB and

uses T-Code – AIBU for final settlement of

installation/commissioning charges to the asset.


Asset accountingsection

GL code

10***

Account description

Fixed Assets

Dr/Cr

Dr.

40701 to

40854 Relevant AUI Accounts Cr.

Note:

At the time of settlement of AUI, the Asset accounting

section has to put the commissioning date as value date in

the settlement parameter. In case the value date falls in the

closed period the value date should be changed in the Asset

Master.

Process flowchart

Capitalisation by work breakdown structure route in Projects Systems module Fixed Assets

capitalized through WBS route in PS module include capitalization of PP, buildings and other

capital projects. Where a particular asset is ready for use, the process of capitalization

commences (before WBS settlement is done) with the creation of new asset master in Fixed

Assets module. The detailed process is given below:


1

2

Asset Accounting section creates a new asset master by

using T-code - AS01 on receipt of

commissioning/completion

certificate from indenter (e.g. completion certificate is

received from engineering services in case of new

building/projects)

Note:

At the time of creation of asset master, Cost Centre,

Internal Order, indenter code and asset capitalisation date

are specified.

Asset Accounting section forwards the new asset number

to the indenter and the Central Accounts Section by SAP

mail.

Asset accountingSection.

Asset accountingsection


3 Central Accounts Section/Engineering Services enters the

Asset number in the settlement rule in the WBS element

and carry out WBS settlement. Costs that need to be

capitalized get settled to new asset, EWIP, DWIP, and

CWIP, as the case may be.


Centralaccountssection/Engineeringservices (F&A)

GL code70101

Account descriptionProducing Properties-Gross-Expenditure

Dr/CrDr.

70102 Producing Properties-

Gross-DepreciationDr.

70103 Producing Property –Estimated AbandonmentCosts

Dr.

10*** Relevant Fixed Assets A/c(like buildings)

Dr.

50*** Capital work in progress(in case of incomplete jobs)

Dr.

209998/99/229998/99/249998.

Allocation expense/depreciation

Cr

Note:

All progress payments are initially booked to WBS with

GL 24* in case of turnkey contracts. Initial/automatic

settlement of the WBS is done at period end for settling the

amount booked in WBS/GL 24* series to CWIP (GL 05*

series). Based on the commissioning certificates, final

settlement from CWIP to Fixed Assets (GL 010* series) is

done from CWIP (GL05* series).

Process flowchart

Capitalization of well materials like casing pipes, drill pipes, production

tubing’s, X- mas tree and well head etc. There are various materials used for drilling of exploration or development wells like casing

pipes, production tubing’s, well heads, drill pipes, X-mas tree etc. These materials are

capitalized as P&M and depreciated at 100% (except for well heads & X-mas tree which are

depreciated at 30%- in case of on-shore). Depreciation on well materials is initially posted to

internal order type ‘1ZZ’ in system. From the internal order, it is finally posted to EWIP or

DWIP, as the case may be, through settlement.

Well materials are issued from stores on a daily basis to WBS element of wells and

capitalized at the month end. The process for capitalization of materials is given below:

Process narrative


1 Authorised indenter creates the reservation in SAP using

TCode MB21 for issue of well materials and forwards

signed copy of the reservation to Main Store/Site Store for

issue of material.

The indenter specifies the WBS/CC through relevant

movement type in the reservation created in SAP.

Authorised

indenter


Main Store issues the well materials after receiving signed

copy of the reservation and posts goods issue in SAP by

using T-Code – MIGO.

Refer accounting entry no. AE/AA/005 mentioned below

GL code

210101

Account description

Mat Consumed-Stores-Drill Pipes –Imported

Dr/Cr

Dr.

210103 Mat Consumed-Stores-Drill Pipes –Indigenous

Dr

210105 Mat Consumed-Stores-Casing Pipes –Imported

Dr

210107 Mat Consumed-Stores-Casing Pipes –Indig

Dr.

210109 Mat Consumed-Stores-OthPipes &Pipe Fitting-Import

Dr.

210111 Mat Consumed-Stores-OthPipes & Pipe Fitting-Indig

Dr.

210157 Mat Consumed-Stores-Tubings- Import

210159 Mat Consumed-Stores-Tubings-Indg

Dr

20161 Mat Consumed-Stores-Well Heads –Imported

Dr

210163 Mat Consumed-Stores-Well Heads

90201 CA-Stores-Drilling Pipes-Imported new

90203 CA-Stores-Drilling Pipes- Indigenous new


GL code

90205

Account description

CA-Stores- Casing Pipes –Imported new

Dr/Cr

Cr.

90207 CA-Stores- Casing Pipes –Indigenous new

Cr.

90209 CA-Stores- Other Pipes &Pipe Fittings- Import new

Cr.

90211 CA-Stores- Other Pipes &Pipe Fittings- Indig new

Cr.

90257 CA-Stores- TubingsPipes & Fittings-Imp

Cr.

90259 CA-Stores- TubingsPipes & Fittings-Indg

Cr.

90261 CA-Stores- Well Head &X'mas Tree –Imported new

Cr.

90263 CA-Stores- Well Head &X'mas Tree -Indig new

Cr.

3At the end of the month, Asset Accounting section downloads consumption of casing pipes, tubular, X-mas trees, well heads booked during the month using T-code- FBL3N. Asset Accounting section identifies the line items against which WBS element is mentioned that specifies the amount of material used in exploratory and development wells. Consumption details of drill pipes, are downloaded with the line items having cost centre of rigs.



4

5

6

7

Asset Accounting section creates new asset masters forcasing pipes, tubular and well heads etc by using internalorder type ‘1ZZ’ in cost object [T-code AS01].

Asset Accounting section passes a direct Finance (FI) entry for capitalization of casing pipes, tubular, well heads as using T-Code F-90.

GL code Account description Dr/Cr10405 F/A-P&M-Well Heads Dr.10406 F/A-P&M-Casing Pipes Dr10422 F/A-P&M-Production

TubingsDr.

10404 F/A-P&M-Drill Strings Dr.210101 Mat Consumed-Stores-Drill

Pipes –ImportedCr

210103 Mat Consumed-Stores-Drill Pipes –Indigenous

Cr.

210105 Mat Consumed-Stores-Casing Pipes – Imported

Cr

210107 Mat Consumed-Stores-Casing Pipes Indig

Cr.

210109 Mat Consumed-Stores-Oth Pipes &Pipe Fitting-Import

Cr

210111 Mat Consumed-Stores-Oth Pipes &Pipe Fitting-Indig

Cr

210157 Mat consumed -stores- Tubings- Imp

Cr.

210159 Mat consumed-stores- Tubings- Indg

Cr.

210161 Mat Consumed-Stores-Well Heads –Imported

Cr.

210163 Mat Consumed-Stores-Well Heads

Cr.

The asset accounting section executes the depreciation runto charge the depreciation on well materials using T-Code-AFAB.

A7 Central Account section defines the WBS of the concernedwell/cost centre of the concerned Rig as settlement rule inthe internal order and executes the settlement of internalorders to transfer the depreciation to the Wells/RigsCA




CA

Process Flow Chart

Acquisition of land (leasehold and freehold)

Land acquisition costs include purchase cost, registration charges, legal charges etc. Land can be acquired either directly from landowner/Local Authorities or through Special Land Acquisition Officer (SPLAO). Land Acquisition section forwards a demand note to Pre-Audit section for making the payment for land acquisition. Pre-Audit section forwards a request for creation of an asset to Asset Accounting section (manual request giving the well name, area, tax office number etc). Asset accounting section creates an asset in the Fixed Asset module using T-code AS01 and forwards the asset number to Pre-Audit section. Pre-Audit section makes the payment and passes a direct FI entry in SAP. Different accounting entries are passed by Pre-Audit where land is purchased directly from land owner and where these are acquired through SPLAO.

Refer accounting entry no. AE/AA/007 mentioned below, if land is acquired directly fromland owner. T-code used is F-90.


10101/10102

Freehold land/Leasehold land

Dr.

****** Vendor Cr.

Refer accounting entry no. AE/AA/008 mentioned below, if land is acquired throughSPLAO/Local Authority

a) At the time of making deposits with SPLAO (T-code – F-02)

GL code Account description Dr/Cr101123 Deposits-Deposit With

SPLAO for LandAcquisition(if deposit is for permanent acquisitionof land & use fund centre where fundsare kept)

Dr.

101120 Deposits-Deposit With Govt. Authorities

Dr.

19**** Vendor (SPLAO) Cr.

19**** Vendor (SPLAO) Dr.09**** Bank clearing A/c Cr.

b) On adjustments of deposits (T-code – ABSO)


10101/10102 Freehold land/Leasehold land Dr.

101123 Deposits-Deposit With SPLAO for LandAcquisition

Cr.

101120Deposits-Deposit With Govt. Authority

Cr.

Capitalization of Intangible Assets

An intangible Asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others or for administrative purposes. Cost incurred on Intangible assets resulting in future economicbenefits is capitalised as intangible assets. These are accounted for and amortised inaccordance with Accounting Standard 26 (AS 26) on intangible assets. As per para 1(c)of this Standard, expenditure on exploration for or development and extraction ofminerals oil, natural gas and similar non-regenerative resources are out of the scope ofthe Standard. Hence, this standard is not applicable in respect of expenditure on DRE(like expenditure on dry docking, mobilization and demobilization charges, etc).However, the standard is applicable in respect of Intangible Assets like applicationsoftware like SAP implementation and licence acquisition costs, data interpretationsoftware for Geological & Geophysical activities etc. Intangibles are capitalized inaccordance with the accounting policy of the Company. Software is capitalized throughfollowing methods:

a) Capitalised by AUI route.

b) WBS route.

Capitalization of insurance spares

Determination of insurance spares happens at PR stage where user specifies whether the item required to be procured is an insurance spare or not in the PR. Guidance is available vide circular no.CA 268/2005 dated 07.11.2005 (Sri Sunder to provide the same) for identification of particular item as insurance spares. It is also verified by F&A section during financial concurrence to ensure appropriate accounting. The process for receipt of insurance spares in stores and logistics invoice verification is same as other materials. There is specified storage location defined in SAP for warehousing of insurance spares at each location. All insurance spares are received in this storage location based on the assignment in PR/PO.

Indenter intimates Asset Accounting section about the requirement of creation of sub asset numbers against identified assets for which insurance spares are purchased. The Asset Accounting section creates sub-asset number by using T-code AS11 in SAP and intimates the indenter. On such intimation, indenter creates the reservation for insurance spares through T-Code MB21 using movement type X41, inputs the sub asset number in the following screen and changes the valuation type to SPNO_ VALUE. Stores section executes ZMMCONV. The system automatically issues the item to sub-asset number created by Asset Accounting section when stores posts the goods issue (only value) in SAP by using T-Code MIGO.

Insurance spares stock quantity after capitalization are maintained in material master asnon-valued stock i.e. at nil value to have a physical control over them. They are trackedbased on material code assigned at the time of creation of GR by Main Store.


Adjustment for debit/credit memo issued to vendors

GL code Account description

Dr/Cr

10*** Sub-asset number (Insurance spare)

Dr.

90*** Stores/spares inventory

Cr.

There could be situations where debit or credit memo is issued to the vendor (generated at the time of LIV) on purchase of asset and asset purchased is already capitalized in the FI module. In such cases the amount is adjusted in the price variation account.

Refer accounting entry AE/AA/010 mentioned below:

GL code Account description Dr/Cr19**** Vendor account Dr/Cr

201451 Price variation Cr/Dr

The capitalized value has to be adjusted with the amount of debit/credit memoin the fixed asset master.

For credit memo, Asset Accounting section makes the adjustment in SAP using T-code – ABGL, where year of capitalization and debit/credit memo is same, and T-code – ABGF, where assets were capitalised in prior years and debit/credit memo is raised in current year.For debit memo same transaction code is to be used, with the check box forreverse entry selected.

Refer accounting entry AE/AA/010 mentioned below:


10*** Relevant Fixed Asset A/c Dr/Cr.

201451 Price variation Cr/Dr.

Note:Line item in Price variation account has to be displayed using T-Code FBL3Nand from the material code for capital items, major amounts are to be tracked tothe asset number from the movement of the material through T-Code MC.9/ME23N.

Creation of new capital item in SAP on first purchase

At the time of creation of Asset Master for Capital items against a reservation by indenter, the relevant Census Class should be available in the standard list of capital item maintained in the system. Standardized list of assets can be viewed using T-Code – ZFICENSUSCLASS. Creation of new capital item for which census class is not available in the Asset Master, requires creation of new census class, its linkage to Fixed Asset GL Code for appropriateclassification and depreciation key for the purpose of depreciation computation after capitalization. Activities detailed herein result in creation of new Census Class in standard list of capital items maintained in the asset master. The detailed process for creating a new census class is given below:

Process narrativeS. No Activities including controls Responsibility

1

2

Asset accounting section (in association with the concernedindenter) requests CAS, DDN for depreciation rate andcommunicates the same to the ICE team.

ICE Team creates new census class and defines the GLcode and depreciation key and intimates the AssetAccounting section

AssetaccountingSection.

ICE Team.

Dry well assetCentral Accounts Section determines the exploratory wells to be charged off based on the information from exploration group and the accounting policy. Central Accounts Section sends the details of dry wells to Asset accounting section of the unit. Dry well asset(s) is created by Asset accounting section in Fixed Asset module using T-code AS01 by specifying the relevant cost centre .Asset section intimates asset number(s) to the central accounts section after its creation.

Central Accounts section settles (full settlement) the expenditure incurred on dry well to the relevant asset created in asset module using T-code - CJ88 in SAP.

Refer Accounting entry no. AE/AA/011 mentioned below:

GL code Account description Dr/Cr70401 Dry Wells Gross Expenditure Dr70402 Dry Wells-Gross Depreciation Dr70301 EWIP-Expenditure Cr.70302 EWIP-Depreciation Cr.

When depreciation run is done in the FA module, 100% of the amount transferred to dry well asset is charged off to profit & loss account in the same year in which the asset is capitalised.

Refer Accounting entry no. AE/AA/012 mentioned below:

When the well is declared dry, the well material (except well head for onshore) capitalised against the well is removed from the asset master using T-code-ABAVN. For detailed process and accounting entries on deletion of fixed asset refer Para 3.2.1 mentioned below. Well heads and X-mas tree can be reused in another well in which case the internal order of that well is incorporated in the Asset Master of well head and X-Mas tree.

Survey Asset

T-code AS01 is used for creating Survey assets separately for expenditure and depreciation, block wise under asset class 70501 and 70502 respectively .After creation of survey assets, the expenditure and depreciation on survey are initially booked to field party cost centres and allocated to survey WBS, for each block, through cost cycles. The survey WBS are settled to survey assets through WBS settlement. On depreciation run, the survey assets are depreciated at 100% and depicted as recouped cost in P&L account.

DRE Asset

As per the accounting policy of the company, Dry docking charges for Rigs, Multipurpose survey vessels (MSVs), Geo Technical vessels(GTV), Rig/equipment mobilisation expenses and other related expenditure are considered as deferred expenditure and amortised over the period of use no exceeding five years.

DRE asset is created in asset master using T-code AS 01 for each such jobs under asset class 140111/140112. The expenditure is initially booked in the WBS created for this purpose and settled to DRE assets through WBS settlement periodically.

Depending upon the period in which the DRE assets are to be charged off, the life of the asset is maintained in the asset master with dep key ZDRE.The DRE is charged off to DRE written off account when depreciation run is executed and allocated to the activities during cost cycle run.Deletions from Fixed Assets

Deletions of Fixed Assets is on account of:

a) Discarding (condemnation & disposal) of Fixed Assets and

b) Replacement of Fixed Assets.

Discarding (condemnation & disposal) of fixed assetsFixed Assets can be discarded for different reasons that include retirement from use, damage etc. Condemnation process commences when the indenter identifies a particular asset that needs to be discarded and forwards a proposal to the Condemnation Committee. The detailed process for condemnation of the asset and subsequent disposal is given below:

Process narrative


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2

Capital Indenter identifies a particular asset that needs to be discarded and forwards a proposal to the Condemnation Committee for further assessment. The proposal specifies the reason for condemnation.

Condemnation Committee reviews the proposal and deliberates whether the asset is to be condemned or not. Condem Committee consists of representative from MM section, Indenting section and F&A section. Following factors are considered by the Condemnation Committee before they recommend the proposal:

a) Book value (WDV method);b) Reason for condemnation;c) Balance useful life of the asset; andd) Alternative use of the asset.

Condemnation Committee forwards the recommendation for the approval of the competent authority and the copy of the approved note is received by the indenter.

Capital Indenter

CondemnationCommittee


3

4

Indenter on receipt of the approval, prepares AssetCondemnation Note (ACN) using T-Code ZFIATN in SAPand specifies the asset number, location and the custodianand forwards a copy, duly acknowledged by the disposalcell, to the Asset Accounting section.

Note:Hardcopy of original approval is maintained with the indenter and the copy of the same duly acknowledging receipt of the condemned item by the disposal cell is forwarded to asset accounting section.Asset accounting section shall generate report of ACNspending for accounting on periodic basis and follow withconcerned indenters for hard copy of ACN, dulyacknowledged by disposal cell.

Asset Accounting section processes the ACN using the TCode ZFIATN wherein a Batch Data Conversion (BDC) is executed.Refer accounting entry no. AE/AA/013 mentioned below:GL code Account description Dr/Cr30*** Accumulated

depreciation on asset(Till the date of discard)

Dr.

22**** Depreciation(From last depreciation run till the dateof discard)

Dr.

201525 Asset written off Dr.10*** Relevant Fixed Asset

A/cCr.

30*** Accumulated depreciation on asset

Cr.

Indenter

Assetaccounting

section


Note:

Hardcopy of original approval is maintained with the indenter and the copy of the same duly acknowledging receipt of the condemned item by the disposal cell is forwarded to asset accounting section.

Asset accounting section shall generate report of ACNs pending for accounting on periodic basis and follow with concerned indenters for hard copy of ACN, duly acknowledged by disposal cell.

Asset Accounting section processes the ACN using the TCode ZFIATN wherein a Batch Data Conversion (BDC) is executed.

Refer accounting entry no. AE/AA/013 mentioned below:GL code Account

descriptionDr/Cr

30*** Accumulated depreciation on asset(Till the date of discard)

Dr

22**** Depreciation(From last depreciation run till the dateof discard)

Dr

201525 Asset written off

Dr

10*** Relevant Fixed Asset A/c

Cr.

30*** Accumulated depreciation on asset(runtill the date of discard)

Cr.


5

Note

i. With the execution of BDC, Asset master will beremoved from the system and will be displayed asdiscarded asset in schedule A.

Main Stores creates the disposable inventory in the SAP. There is special material codes assigned to asset held for disposal.

Main stores

Process flowchart

Replacement of Fixed Asset

Replacement of complete Asset having census number would involve discarding of original asset as a first step and then creation of new asset. For detailed process on discarding of Fixed Assets and for addition of new asset mentioned above. Replacement of a part of Fixed Assets is charged as repairs and maintenance to relevant cost centre. In this connection reference is invited to Circular number 314/2008 issued by CAS.

Transfer of Fixed AssetsThis section details the process of transfer of Fixed Assets

a) From one Company Code to another; and

b) Transfer within the same Company Code i.e. inters - indenter transfers. Transfers between two indenters would include change in Indenter-wise asset records, change in cost centre and reclassification of assets, if required. Indenter wise Fixed Assets registers are maintained in the system for controlling purposes. Indenter wise list can be viewed and edited with T- codeZFISTRV. Indenters should keep the details such as custodian name, location etc updated whenever there is any change in the location, custodian etc.

Transfer from one unit to the other unit (cross company code transaction)

The process commences with identification of asset to be transferred between the sending and receiving units. The detailed process narrative is given below:

Process narrativeS. No

1

2

Activities including controls

Indenter in sending unit creates Asset Transfer Note (ATN)in SAP using T-Code – ZFIATN

Asset Accounting section reviews pending ATNs onperiodical basis by using T-Code – ZFIATN and posts thetransaction by using T-Code – ABT1N.Refer accounting entry AE/AA/014 mentioned below:Sending company code

GL code Account description Dr/Cr30*** Accumulated depreciation on

asset(Till the date of transfer) Dr.

22**** Depreciation Dr.

Activities including controls

Responsibility

Indenter insending unit.

AssetAccountingsection

From the last dep till date of transfer .

Dr

120104 IUT Receivable/Payable-AssetTransfer (ICE-ICE

Dr.

10*** Accumulated dep on asset.Depreciation from last depreciation runtill the date of transfer at the time of dep run

Cr.

30*** Accumulated depreciation on asset Depreciation from last depreciation runtill the date of transfer at the time of dep run

Cr.

Note:i. Depreciation till the date of transfer is posted in thebooks of the transferring unitii. IUT entry is generated on posting of transactionIn receiving company code, simultaneously, new assetnumber is created with the original inventory number withthe status as Fixed Asset in transit.Refer accounting entry no. AE/AA/015 mentioned below:

GL code10***

30***

120104

Account descriptionRelevant Fixed Asset A/c

Accumulated depreciation on asset

IUT- Receivable/Payable asset

Dr/Cr

Dr.

Cr.

Cr.

asset accounting

Documents

fixed assets fixed assets

asset number

fixed asset accounting

acquisition of fixed

movement of fixed assets

asset value

intangible assets

fixed assets fa module