Fixed Assets is a serious part in the balance sheet and is an object of check for auditors and tax authorities.
That is why we need to be sure that all transactions with fixed assets are transparent and clear. In this article I want to describe the most popular fixed assets transactions in SAP Business One. Under the most popular transactions I mean the fixed assets that are depreciated during some years with straight-line depreciation on net booking value dividing on the remaining useful life. In case nothing dramatic is caused with the asset like modernization or scrapping the depreciation amount is the same as for the straight-line depreciation on acquisition value dividing on total useful life.
-What can be the other case that fixed asset needs to be revaluated?
-Yes, exactly: when its net booking value does not correspond to the real market price.
The actual market price can be higher or lower than your asset net booking value (NBV).
To reflect the real market, you can create an Asset Revaluation document.
So, let’s look how it looks like and how journal entry transaction (JE) is when the actual market price is higher.
Here is example of the revaluation document in SAP Business One (B1):
Asset was capitalized with price 12,000 and the accumulated depreciation to the revaluation date is 1,332, so net booking value is 12,000 – 1,1132 = 10,668. New value 15,000 is the real market price. B1 calculates the difference 4,332 as the revaluation gain. The simple JE looks like:
Please, note that Revaluation Account was added recently, see Note https://launchpad.support.sap.com/#/notes/3083952. Note In the installed data bases this account was filled automatically with Balance Sheet account.
However, for the transparent view of the asset cost the values should be renewed. Before you add the Asset Revaluation document tick on IFRS Posting check box:
What do these amounts mean and how do they affect fixed assets values?
Let’s now look for the case that real market price is lower than asset new booking value.
Here is example of the revaluation document in SAP Business One again:
Asset was capitalized with price 12,000 and the accumulated depreciation to the revaluation date is 1,332, like in the first case. But now we enter new value 9,000 as the real market price. The revaluation difference is booked as unplanned depreciation:
However, we have already said that for the transparent view of the asset cost the values should be renewed . So, before you add the Asset Revaluation document tick on IFRS Posting check box:
And as the result the JE dramatically changes to:
However, if you compare that with the previous transaction IFRS Revaluation gain you see that transaction is the same. The difference is only that result of revaluation (gain or loss) is booked to the different account. So, again, the accumulated Depreciation balance is zeroed, Asset balance sheet account balance shows the new cost.
Please, note that new transactions with IFRS postings are relevant only when the Posting of Depreciation is set as Indirect Posting in the Depreciation Areas – Setup:
IFRS postings transaction for fixed asset revaluation are possible since FP2202 of SAP Business One, SAP Business One version for SAP HANA, see details in SAP Note https://launchpad.support.sap.com/#/notes/3135917 .
That is why we need to be sure that all transactions with fixed assets are transparent and clear. In this article I want to describe the most popular fixed assets transactions in SAP Business One. Under the most popular transactions I mean the fixed assets that are depreciated during some years with straight-line depreciation on net booking value dividing on the remaining useful life. In case nothing dramatic is caused with the asset like modernization or scrapping the depreciation amount is the same as for the straight-line depreciation on acquisition value dividing on total useful life.
-What can be the other case that fixed asset needs to be revaluated?
-Yes, exactly: when its net booking value does not correspond to the real market price.
The actual market price can be higher or lower than your asset net booking value (NBV).
To reflect the real market, you can create an Asset Revaluation document.
So, let’s look how it looks like and how journal entry transaction (JE) is when the actual market price is higher.
Here is example of the revaluation document in SAP Business One (B1):
Asset was capitalized with price 12,000 and the accumulated depreciation to the revaluation date is 1,332, so net booking value is 12,000 – 1,1132 = 10,668. New value 15,000 is the real market price. B1 calculates the difference 4,332 as the revaluation gain. The simple JE looks like:
Please, note that Revaluation Account was added recently, see Note https://launchpad.support.sap.com/#/notes/3083952. Note In the installed data bases this account was filled automatically with Balance Sheet account.
However, for the transparent view of the asset cost the values should be renewed. Before you add the Asset Revaluation document tick on IFRS Posting check box:
What do these amounts mean and how do they affect fixed assets values?
- Accumulated Depreciation will have balance 0.00.
- Asset Balance Sheet Account 15,000 – new booking value, so 3,000 (New Booking Value 15,000 – Asset balance account 12,000 = 3,000) is booked to the debit of this account. In case the result (NBV – Asset Balance Sheet Act) is negative, then it will be booked to the credit of this account.
- Revaluation gain remained the same.
Let’s now look for the case that real market price is lower than asset new booking value.
Here is example of the revaluation document in SAP Business One again:
Asset was capitalized with price 12,000 and the accumulated depreciation to the revaluation date is 1,332, like in the first case. But now we enter new value 9,000 as the real market price. The revaluation difference is booked as unplanned depreciation:
However, we have already said that for the transparent view of the asset cost the values should be renewed . So, before you add the Asset Revaluation document tick on IFRS Posting check box:
And as the result the JE dramatically changes to:
However, if you compare that with the previous transaction IFRS Revaluation gain you see that transaction is the same. The difference is only that result of revaluation (gain or loss) is booked to the different account. So, again, the accumulated Depreciation balance is zeroed, Asset balance sheet account balance shows the new cost.
Please, note that new transactions with IFRS postings are relevant only when the Posting of Depreciation is set as Indirect Posting in the Depreciation Areas – Setup:
IFRS postings transaction for fixed asset revaluation are possible since FP2202 of SAP Business One, SAP Business One version for SAP HANA, see details in SAP Note https://launchpad.support.sap.com/#/notes/3135917 .
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