Question: I would like to ask you experts out there, how do you link the SAP PM

and SAP Asset Management in terms of a Capitalizable Maintenance Order? My

client wants to utilize the Maintenance Order as a way to trigger a Capitalizable
Repair on an equipment (with posts and updates to the asset value of the
equipment). The equipment is also registered within the AM module (with an
asset number).

I am not familiar at all with the AM module.

Ans: First attach the asset number in the equipment record

second settle the order to the internal order number for that asset record

It is recommended that you create a special order type for capital repairs.

Q: his is with repsect to the plant maintenance integration with asset.

As we know that , we can maintain asset number in functional location & equipment master data
accounting tab.

My first question is , as we know that functional location containequipments also , what if we

maintain asset number in only functional location , will

it pass onto its equipments ?

And second question is , if we maintain asset number in equipments , will it override the asset
number which is ready maintained in superior functional

location ?

How it works ?

Ans:Refer below link for better understanding on the integration concepts between PM and Asset

Technical Structures for Plant Maintenance Purposes - Asset Accounting (FI-AA) - SAP Library

I dont think Asset Number will be transfered in Equipment, Unless you put the reference
Equipment to copy the data.

For functional location you will be able to transfer based on the setup of data orgin.

Do test yourself to understand the concept better.

How is maintenance related to asset management?
Asset management refers to a management system between all departments
involved in business processes, maintenance being one of these departments.
Maintenance arises from the need to keep equipment running, with maintenance
plans up to date, costs controlled, and within the organization's expectations.

Maintenance management is a key component of asset

management. It uses intelligent computer software to track
resources such as labor, material and equipment. This
information is used to make important decisions in improving
maintenance management processes.

When u say Equipment as an Asset...it is from finance point of View. In normal

practice, Finance sets a limit above which whatever they will buy, will be treated or
defined as an Asset. Similar is the case with equipments. To some of the
equipments, company define ASSET, as after sometime they want to check out that
spending amount on an asset is worth or not.

In Configuration, you can define whether the Equipment & Asset are integrated.

i.e. with the asset creation in SAP, corresponding Equipment no also gets generated.

Also, any changes in master data of asset will also be reflected in Equipment if
relevant setting in configuration.

For statistical reports along with the equipment number, the maintenance costs are
also reflected along with the asset number.

Hence u can make decisions at a later stage whether the asset needs to be repaired
further or replaced.

Q: How do you integrate equipment and asset in config? and

what is the tcode for asset creation?

Ans: The assets can create thro equipment creation and vice versa . Have the
look at SPROFIASSET ACCOUNTING--MASTER DATA -CREATION OF EQUIP.
But here u want to assign the asset class. Which has account determination, lay out
and depreciation. So, u should select the correct asset class. But i think not
advisable. Because u sud work more precious for equip category allocation, asset
class define.

The depreciation, custom value, taxes, insurances etc asset terms will vary each and
every equip accords to country valuation. we can assign manually at both master
records.

have the look at AS01 for creation.

FROM OLD BOOK:

Pieces of equipment may also be regarded as assets. There is no configuration

to be performed in the implementation guide to link Plant Maintenance and
Asset Management. To associate a piece of equipment Ian McMullan • 49 with
an asset in Asset Management, the asset number (and asset sub-number, if
required) is entered in those fields in the equipment master record.
Actually, the traditional SAP PM is an EAM software class within
the ECC ERP. The evolution to S/4 Hana brings the S/4 Asset
Manager which is the old SAP PM and thus the EAM in S/4 Hana.
Same features focus on execution of maintenance, planning,
scheduling and its integration with other ERP components.

Moreover, now you will find the SAP Intelligent Asset

Management which covers the EAM solution from SAP (the S/4
Asset Manager) and the solutions on the cloud for APM (Asset
Performance Management). Solutions like the ASPM, AIN and
PAI.

With the EAM and the APM features SAP covers all the Asset
Management requirements for the asset intensive industries.

Automatic Creation of
Asset/Equipment Master by
Synchronization – S/4HANA Plant
Maintenance(Asset Management)
496,974

This blog presents the required configuration for the auto generation of Asset Master
when an Equipment Master is created and vice versa.

In SPRO we will go to Asset accounting-> Master data-> Automatic creation of

equipment master records
We will choose asset class 2000 “machinery”.
In the next window of asset class, we will select the appropriate Equipment category.
For this demo I will select M ‘Machines’.

We well select direct synchronization after saving in both drop downs.

Now we will create an Equipment through IE01. Equipment category will be M.

As we have selected category M which corresponds to the settings in customization,
thus the Asset field gets grayed out as it will be generated automatically.

As we saved the equipment the asset was automatically created and is shown in
display window AS03. We can also double check the link between Asset and
Equipment through the following path in ‘More’ dropdown.
Equipment master has generated Asset master and both of them have been linked.

Now we will try it from the opposite direction, by creating the Asset First through
AS01. We will use the asset class 2000 as the customization was done on this.
Enter the description and the cost center then Save. As we save, the Equipment
master is automatically generated.

We can also double check the link between Asset and Equipment through the
following path in ‘More’ dropdown.
Asset master has generated Equipment master and both of them have been linked.
Asset accounting in SAP ERP
Financials
In this SAP Press book chapter, learn the basics of asset accounting
in SAP ERP Financials, including implementation, integration, and
configuration.







Published: 09 Dec 2011

In this SAP Press book chapter, learn the basics of asset accounting in
SAP ERP Financials. Learn how to approach asset accounting
implementation and integration with other components of SAP ERP
Financials. Find out how to properly configure the AA submodule.

Asset Accounting
The objective of this chapter is to explain the functionality of the Asset
Accounting (from this point on referred to as AA) submodule (often referred
to as fixed assets). AA functionality is designed for the management and
supervision of an organization’s fixed assets and is a GL subledger. AA is
sometimes considered a specialist topic because many SAP professionals
do not understand the processes within this submodule from a company or
a statutory point of view. For this reason, this chapter provides a lot of
information to help explain this area to beginning users, including the
following topics:

 The link between the different organizational elements within AA

  Configuration of asset master records

 Configuration of depreciation methods and postings to the GL in

line with statutory requirements

 Asset acquisitions, transfers, and retirement transactions

processing

 Asset depreciation processing

 Substitutions and validations in asset master records

 Current asset valuation

This chapter’s order is important because it follows the IMG, which is

organized by type of activity. Following this order (which is also the order in
which steps are processed) ensures that you complete the configuration in
the order required by SAP ERP to take into account the dependencies
between the different objects. This also ensures that less experienced
users do not miss any steps or get confused with the different
dependencies.

This excerpt from SAP ERP Financials: Configuration and Design by

Naeem Arif and Sheikh Muhammad Tauseef is reprinted here with
permission from SAP Press, copyright 2011. Download a PDF of this
chapter.

The chapter begins by presenting the main concepts of AA. We then look
at the key points that should form part of your workshops with your
business partners when creating a design for your AA solution in your
business blueprint. After that, we take a detailed look at configuring AA.

7.1 Overview of Asset Accounting

Asset Accounting in SAP ERP covers the complete lifecycle of an asset,
which may start when the purchase order is created or when the asset is
capitalized, to its retirement at the end of its useful life. During this time, the
system calculates appropriate depreciation values and interest amounts
and presents this information in many different reports. The asset lifecycle
is shown in Figure 7.1.
Figure 7.1 Asset Lifecycle

7.1.1 Implementation Considerations

As with any submodule in SAP ERP Financials, you should always be clear
on what aspects of functionality you want to implement before you start the
configuration. This is certainly true for AA because this submodule is
designed to be used internationally. The changes in statutory requirements
in different countries require the submodule to be flexible enough to mold to
your country- or industry-specific requirements.

You should also ensure that no country-specific settings are hard-coded

when you configure your system. Where appropriate, the SAP system
delivers many country-specific settings that can be copied to reduce the
effort required in implementations.

7.1.2 Integration
AA is fully integrated with other components, as indicated in Figure 7.1. At
all times, postings to assets are integrated with the GL, so the value of your
assets is reflected correctly in your balance sheet.

7.2 Building Blocks of Asset Accounting

In Chapter 2, we defined the enterprise structure for your SAP solution
design, which outlined the basic building blocks needed to build your
solution. Let’s first refresh your memory of this diagram, shown in Figure
7.2, before we look at the AA-specific objects.

In Chapter 2, we decided not to include the AA elements because they

would be explained better in this chapter. You will see that the setup of AA
is based on its own mini-organizational structure, which is in turn influenced
by your organizational design as well as your statutory reporting
requirements. This section provides you with a basic definition of how AA is
built and structured, which you’ll need to design your AA blueprint.

Figure 7.2 Enterprise Structure

7.2.1 Chart of Depreciation

The chart of depreciation is the organizational element used to manage
various legal requirements for the depreciation and valuation of assets.
Like company codes, these are usually country-specific but do not need to
be aligned with any other organizational units. A chart of depreciation, for
example, can be used for all of the company codes in a given country.

Country-Specific Charts of Depreciation

In a simple scenario, you may have one or more company codes in the
same country. These can be assigned to the same chart of depreciation
because they are all governed by the same legal requirements for asset
valuation. Within your chart of depreciation, you need to define the
following two settings, which are both discussed in more detail later in the
chapter:
  Depreciation areas: Your organization may be subject to
statutory reporting constraints that control the rules you must
obey. Your organization may be a multinational organization, so
you’ll also want to report your assets subject to your internal
conventions. For this reason, SAP allows you to define
depreciation areas, in which you can set up internal and external
depreciation rules to provide different analyses.

 Depreciation keys: A depreciation key is the convention under

which depreciation is calculated. Your depreciation key holds the
calculation method and the period control, which are defined at
the client level. You can change and add to the standard
calculation keys that are delivered with the system.

Note: SAP supplies a number of charts of depreciation relating to different

countries, which you can copy; however, you can’t use them directly. Be
sure to make a copy of the appropriate chart of depreciation for your
country because the chart contains all of your statutory requirements and
provides you with a good base from which to start.

Integration between Company Code and Chart of Depreciation

In AA, you are required to assign company codes to exactly one chart of
depreciation. For your company, you should keep the number of charts of
depreciation to a minimum to keep your asset values uniform. Country-
specific company codes with similar AA requirements use the same chart
of depreciation, and the same applies for industry-specific company codes.

Integration between Chart of Accounts and Chart of

Depreciation
The assignment of a company code to a chart of accounts is independent
from its assignment to a chart of depreciation. This means that several
company codes can use the same chart of accounts, although they have
different charts of depreciation (and vice versa). This link passes financial
information from AA to GL accounts. The GL account assignment is
controlled by means of the asset class in AA. You have to specify an
account determination in each asset class. In this account determination,
you specify the GL accounts in which automatic posting takes place for
different transactions.

7.2.2 Asset Assignment to Organizational Units

In AA, the asset master record serves as a basis for assignments of assets
to different organizational units. These assignments are not only important
from an AA point of view because they can be used in many reports but
also for other applications for detailed analysis. The following assignments
are possible:

 Assignment of company code: As already mentioned, you must

make assignments to company codes based on the information
provided regarding charts of depreciation.

 Assignment of business area: This assignment is necessary if

your design will deliver business area balance sheets. Assets can
be assigned to a business area directly during master record
creation, or they can be derived automatically from the cost center
that you entered. As long as a fixed asset is assigned to a
business area, the system makes account assignment of all
postings to this asset to this business area, including depreciation
and gain, or loss postings on asset retirement.

 Assignment to plant, location, and address: The definitions of

the plant and location organizational units are primarily specified
in the SAP logistics components. In AA, plant has no relevance,
but it can be used as a sort and selection criterion for reports. You
can assign an asset to one plant for a specific period of time in its
master record. This assignment can be changed directly in the
asset master record.

 Assignment to cost center and profit center: We have already

mentioned that GL postings are integrated by asset class. If you
think about the account assignment object, you will agree that an
asset may belong to a specific department. For this reason, the
 financial transactions related to an asset must also be assigned to
the department it belongs to, which could be a cost center entered
on its master record. An asset can only be assigned to one cost
center at a time. This assignment enables the following:

1. Assignment of all costs (depreciation and interest charges) related

to the asset to the correct cost center

2. Planning for future depreciation or interest for the asset

3. Assignment of gain or loss from the sale of the asset to the correct
cost center

You can assign fixed assets to a cost center from a specific point in time,
and if the assignment changes, the system is smart enough to distribute
the depreciation or interest amount to the subsequent cost center. Profit
center assignment is achieved through the cost center–profit center
assignment in the cost center master record.

Note: Assets are not directly assigned to profit centers.

7.2.3 Integration with the GL

From a high-level point of view, your AA solution needs to provide you with
two pieces of information:

 An asset register that provides an analysis of the assets you own,

along with their original cost and net book value

 An accurate financial position in terms of the current gross book

value of your assets

1. The real-time integration with the GL is straightforward because

AA is a subledger of the GL.
7.2.4 Structuring Your Fixed Assets Design
Different options are available concerning how you want to see figures
reported on your asset statements. You should consider the current
conventions in place at your organization before making a decision. The
following are common approaches:

 Balance sheet approach: If you want to structure assets

according to the structure of your balance sheets, you have three
options available in the standard system:

1. Use the financial statement version.

2. Use balance sheet items.

3. Use GL accounts.

 Asset class approach: Asset classes can represent the structure

of your assets. Every asset you create in the system is created
with reference to an asset class. You use the settings of account
determination in the asset class to assign each asset to an item in
the balance sheet.

 Asset approach: This approach is more practical and may be

more relevant for organizations with many assets that can be
combined due to the size and nature of the assets. For instance, a
laboratory may be an asset as a whole that is made up of many
smaller assets. In this scenario, you have the following:

1. The asset “main number” represents the overall asset.

2. Below the main asset, you can use asset “subnumbers” to

represent the many component parts, and you can depreciate
them individually if their acquisition dates are different from the
original asset.

Note: You can use an asset main number to represent a fixed asset if your
requirements are simple.

In the next section, we’ll look at how to build an AA business model.

7.3 Building an Asset Accounting Business Model

After you understand the main concepts in AA, you should think about the
questions you need to ask your business partners as part of your
workshops to understand their requirements from an AA point of view. The
answers to these questions will help you build an AA model according to
the exact requirements of your business partners. Examples of the
questions could include:

 How many different types of assets do you have?

This will help you determine the number of asset classes you
need in the system to represent their current structure within the
SAP system.

 Do you want to represent different types of assets with

individual balance sheet accounts in your financial
statements?
This will determine if you need to create separate account
determinations for every type of asset and also for the same type
of assets with different useful lives, or if you can assign the same
account determination to an asset, for example, furniture and
fixtures, with different useful lives. This means you don’t have to
create a separate account determination for this asset with
different useful lives. Most companies prefer to use one account
determination for each type of asset and use the AA reports to
view more details about asset types with different useful lives.

 Do you want your different asset types to have unique

number ranges?
This will help you to determine if you need to add more number
ranges so they can be assigned to different types of assets using
their respective asset classes. Most of the time, companies want
to assign a different number range to different types of assets so
that they can be easily identified.

 How many different types of depreciation calculations are

required?
This will help you determine how many different depreciation
 areas are required within your chart of depreciation and which of
these will post to the GL and which will post, for example, only to
the Controlling component (CO) for cost accounting purposes.
Remember that the settings required for straight-line depreciation
as well as for declining methods and so on are also connected to
the depreciation area through the depreciation key. Settings such
as when to start or stop depreciating assets (when they are
acquired, transferred in or out, or retired) are also linked to the
depreciation key. These settings are also determined at this stage
so that the same can be reflected when the configuration of
depreciation keys are done.

We have now spent some time explaining the concepts of AA to provide

you with a solid understanding of the key elements involved. AA is
sometimes seen as a specialist subject that will start making sense as we
begin our configuration activities.

7.4 Asset Accounting Configuration

In this section, we’ll look at the important AA configuration steps, following
a logical sequence. This ensures that you don’t miss any important steps
while also making sure that after following these steps, your AA submodule
is fully functional. We’ll start by copying a reference chart of depreciation to
define your own chart of depreciation.

7.4.1 Copy Reference Chart of Depreciation

To define your chart of depreciation , you copy a reference chart of
depreciation, including all of the depreciation areas from the reference
chart. As already explained in the previous section, your chart of
depreciation is a directory of depreciation areas arranged according to your
business and legal requirements. You can use the chart of depreciation to
manage all different types of valuation rules for your assets in a specific
country or economic region.
If necessary, you can delete any depreciation areas that you do not need in
your copied chart of depreciation.

The IMG path for this configuration step is SPRO • Financial Accounting
(New) • Asset Accounting • Organizational Structure • Copy Reference
Chart of Depreciation/Depreciation Areas . A screen with activities,
including Copy Reference Chart of Depreciation, appears as shown in
Figure 7.3.

Figure 7.3 Copy Reference Chart of Depreciation

Next Steps
Read more about asset turnover ratio

The asset turnover ratio is a measurement that shows how efficiently a

company is using its owned resources to generate revenue or sales. The
ratio compares the company's gross revenue to the average total number
of assets to reveal how many sales were generated from every dollar of
company assets. The higher the asset ratio, the more efficient the use of
the company's assets.

The asset turnover ratio is typically used by third parties -- such as

investors and creditors -- to evaluate the efficiency of a business's
operations and learn how effectively each company uses their resources to
produce revenue. By comparing companies in similar sectors or groups,
investors and creditors can discover which companies are getting the most
out of their assets and what weaknesses others might be experiencing.
How to calculate the asset turnover ratio
Most companies calculate the asset turnover ratio on an annual basis, using balance
sheets from the beginning and end of the fiscal year. The ratio can be calculated by
dividing gross revenue by the average of total assets. It should look like this:

asset turnover ratio = gross revenue / average total assets

The average total assets can be found by adding the beginning assets to the ending
assets and dividing this sum by two. It should look like this:

average total assets = (beginning assets + ending assets) / 2

In this equation, the beginning assets are the total assets documented at the start of
the fiscal year, and the ending assets are the total assets documented at the end of
the fiscal year.

How to interpret the asset turnover ratio

As mentioned before, a high asset turnover ratio means a company is performing
efficiently, as the ratio means they are generating more revenue per dollar of
assets. A low asset turnover ratio indicates the opposite -- that a company is not
using its resources productively and may be experiencing internal struggles.

Investors and creditors often look for companies with higher asset turnover ratios
because it shows that the business can operate with fewer assets than its less
efficient competitors, therefore demanding less debt and equity to operate. This
should result in a reduced amount of risk and an increased return on
investment (ROI) for all stakeholders.

When analyzing the asset turnover ratio, it is best to find trends over time in a
company. This can be done by plotting the data points on a trend line, allowing any
patterns or gradual increases and decreases to be observed. However, in order to
gain the best understanding of how a company is using its resources, its asset
turnover ratio must be compared to other similar companies in its industry.
It is important to note that the asset turnover ratio will be higher in some sectors
than in others. For example, retail organizations generally have smaller asset bases
but high sale volumes, creating high asset turnover ratios. On the other hand,
businesses in sectors such as utilities and real estate often have large asset bases
but low sale volumes, often generating much lower asset turnover ratios.

Example
Consider a company, Company A, with a gross revenue of $20 billion at the end of
its fiscal year. The assets documented at the start of the year totaled $5 billion and
the total assets at the end of the year were documented at $7 billion. Therefore, the
average total assets for the fiscal year are $6 billion, thus making the asset turnover
ratio for the fiscal year 3.33.

Another company, Company B, has a gross revenue of $15 billion at the end of its
fiscal year. Its beginning assets are $4 billion, and its ending assets are $2 billion.
The average total assets will be calculated at $3 billion, thus making the asset
turnover ratio 5.

In this situation, it can be seen that Company B makes better use of its assets and
generates revenue more efficiently than Company A. Therefore, stakeholders
would find more benefits and less risk investing in Company B since its is more
likely to produce a greater ROI.

How to improve the asset turnover ratio

Companies can attempt to raise their asset turnover ratio in various ways, including
the following:

 Increasing revenue

 Improving inventory management

 Selling assets

 Leasing instead of buying assets

 Accelerating the collection of accounts receivables

 Improving efficiency
  Computerizing inventory and order systems

It is important for businesses to manage their fixed assets and other resources in
order to maintain their optimal operational infrastructure and ensure that
regulations are followed and production continues without interruption and without
the loss of money during avoidable downtimes or other disruptions. Therefore,
maintenance management within the company must concern itself with controlling
costs, scheduling work appropriately and efficiently and confirming regulatory
compliance.

Limitations of the asset turnover ratio

While the asset turnover ratio is a beneficial tool for determining the efficiency of a
company's asset use, it does not provide all the detail that would be helpful for a
full stock analysis.

Various other factors also limit the use of and reliance on the asset turnover ratio,
such as the following:

 Artificial deflation can be caused by a company buying large amounts of

assets, such as new technologies, in anticipation of growth.

 On the other side, selling assets to prepare for declining growth will
result in an artificial inflation of the ratio.

 The outsourcing of production facilities will result in a much higher asset

turnover ratio because the company will have a much lower asset base,
thus making it appear more efficient than its competitors even if it is no
more profitable.

 Seasonality greatly affects the ratio since the numbers drastically change
throughout the year.

 A high turnover ratio does not necessarily mean high profits, and the true
measure of a company's performance is its ability to generate profit from
its revenue.
  A company's ratio can greatly differ each year, making it especially
important to look at trends in the company's ratio data to find if it is
increasing or decreasing.
Difference between the asset turnover ratio and the fixed asset
ratio
While both the asset turnover ratio and the fixed asset ratio reveal how efficiently
and effectively a company is using their assets to generate revenue, they go about it
in different ways.

While the asset turnover ratio focuses on gross revenue and how much money is
generated from every dollar of a company's total average assets throughout the
fiscal year, the fixed asset ratio focuses on gross revenue and how much is
generated for every dollar of fixed assets. In other words, while the asset turnover
ratio looks at all of the company's assets, the fixed asset ratio only looks at the
fixed assets. A fixed asset is a resource that has been purchased by the company
with the intent of long-term use, such as land, buildings and equipment.