- To capitalize fixed assets like Plant & machinery, buildings, Furniture & fixtures, IT assets etc. by routing through CWIP with a budget availability check
- To capitalize assets which are constructed internally.
- To capitalize all associated costs related to procurement of assets.
- To account for any exchange gain/loss.
This method is used for capitalizing assets that are constructed and / or procured like Plant and Machinery, Building, Land Development etc. under any project or otherwise.
To be process flow for capitalizing the assets under this method:
- In CO-IO an internal order under IM Node is created for such activity with investment profile of Auto creation of AuC and budget is allocated to such IO from the IM Node based on individual capex sanctions.
- A CWIP Fixed asset for Capital Work-in-Progress (CWIP) type is also created automatically with following details:
- Description of Assets
- Business Area
- In MM Module a PO/SO (with account assignment type ‘0’) is raised against the internal order which is detailed in the MM Module specific scenario. Commitment item will be generated against the internal order.
- In MM Module GR/Service acceptance is made which is detailed in the MM Module specific scenario. All values are posted to the specific AUC Account (which by nature is a P&L Account). In this step AUC account will be debited with budget availability check from IO and GR/IR account will be credited.
- In MM Module, Invoice is posted and the difference if any from the GR is posted to the assigned AUC Account.
- Debit/Credit Notes stating foreign exchange interest gains or losses received from Corporate is posted against the internal order. However any gain/loss arising out of forward cover taken by Corporate shall not be capitalized.
- In case budget availability check fails, no posting can be made to the account.
- In case additional budget is required budget supplement can be provided to IO from Head Office.
- In the month end these internal orders are settled to Capital Work–in-Progress (CWIP) asset which is already assigned in the settlement rule of the internal order.
- Whenever the asset is put to use for commercial purposes and a certificate obtained for the same, the Fixed asset master is created with the following information
- Asset Class
- Description of Assets
- Personnel number (In case of Household Assets provided to employees)
- Business Area
- Cost Centers
- Internal order
- Relevant Insurance data
- Depreciation data for the relevant depreciation areas
- Depreciation keys
- Settlement rule is modified in the internal order with recipient being the fixed asset(s) created above. In case of multiple assets, the fixed value for each asset or the ratio of distribution of the values needs to be indicated against each recipient.
- Any cost or expense which is identified as the integral part of asset can be capitalised also and can be maintained as sub-number in the original asset.
- Amount accumulated in CWIP is settled through line item settlement to the specific fixed asset(s)
- After the entire process as stated above is completed and IO does not have any commitment item and confirmation is obtained from the originator that the capitalization process is complete, the status of the IO is changed to “COMP”. This indicates that asset procurement process is complete.
- Any unutilized budget is not returned, but reported as a variance in the capex reportback.
- CWIP Asset Master is created
- Accounting entries are posted at month-end to CWIP
- Balance in AUC accounts to be zeroised for each month for each business area, except for amounts appearing in certain AUC accounts, which shall be negated by an equivalent offsetting amount appearing in ‘Transfer to Fixed Assets’ account
- Asset Master is created
- Final settlement is posted and capitalization of Asset takes place
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