Objects that no longer exist have no value. Therefore, the existence of fixed assets must be checked by means of an annual physical inventory. The individual objects in fixed assets must therefore be recorded such that they are identifiable.
In Chapter 1, we referred to the inventory—the record (directory) of the individual asset objects. This directory must report the asset objects present on a specified date. These objects must be determined by a physical check, also known as a physical inventory. The word “inventory” is derived from the Latin “invenire”, meaning to find something. In this chapter we will explain what you have to list in the fixed assets inventory and how to perform the physical check.
Our national tax and accounting laws regulate what information the inventory directory must contain. These laws also regulate how and at what time intervals a physical inventory must take place.
The verification that the individual assets listed in the inventory directory are actually present can be provided by a physical inventory, meaning that the assets should be viewed and counted individually—which can be a very time-consuming measure.
Accountants are often accused of being bean counters. Quite apart from the fact that this statement is not a compliment, it is also incorrect. The administrative effort involved in checking and reporting the value of fixed assets can and must be kept within reasonable limits. The principle of proportionality is also applicable here.
2.2 Quantity Management in Fixed Assets
Indeed, you can manage identical capital goods in the inventory as one single item, with specification of the quantity. In the sense of valuation, identical means the
For example, 50 personal computers could be managed under one asset number. However, this variant for the master asset (unfortunately frequently used) will certainly lead to considerably more effort later in the maintenance of asset balances: for example, these 50 personal computers will not leave the company all at the same time, meaning that time-consuming partial retirements are necessary; they will also not be used permanently in one cost center, thus requiring extensive partial repostings instead of simple cost center changes.
This type of inventory management causes the greatest problems for a physical asset inventory. How can you determine whether all 50 computers of this asset are still present? The individual PCs cannot be identified via asset accounting. However, annual evidence by means of a physical inventory is still required. This evidence would require additional individual inventory management outside or in addition to asset accounting. Thus the company still has the administrative effort and there is therefore no benefit.
We therefore strongly advise against this type of inventory management. SAP Asset Accounting offers very convenient functions for creating and posting this type of mass acquisition with the initial purchase. We will address these in Chapter 3, “Hierarchy of Asset Master Records.”
Quantity details are however still useful for certain capital goods, for example, for low-value assets that are presented as flat-rate assets. Figure 2.1 shows an asset with a quantity of 57 items; Figure 2.2 shows the movements for this asset.
Figure 2.1: Asset with quantity
Figure 2.2: Movements for this asset
For real estate, we recommend specifying the number of square meters, as shown in Figure 2.3.
Figure 2.3: Asset with square meters
The evidence of ownership for real estate is not provided by means of a physical inventory but by the entry in the register of deeds of the corresponding plot of land number.
Keep reading in SAP Fixed Assets Accounting (FI-AA) by Jörg Siebert.
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