Leverage the country-specific functionality of your SAP system for efficient accounting and compliance with local Ukrainian laws and regulations.
Key Concept
Fixed asset repair costs are usually charged off when they are incurred. However, Ukraine law has a distinctive requirement to capitalize such costs if they exceed a certain limit. An SAP system provides a Ukraine-specific functionality (via program J_1UF_MAJOR_REPAIR) that helps support this legal requirement.
According to Ukrainian law on tax accounting, the repair costs of fixed assets are subject to the following regulations:
- The repair costs, which are less than or equal to 10 percent of the total book value of all assets, included into groups of assets, should be posted into expenses (FI posting to Tax Ledger only).
- The amount that exceeds this 10 percent limit should increase the net book value of each repaired asset in proportion to the repair cost for the corresponding repaired asset (Asset Accounting [AA] and FI posting to the Tax Ledger only).
Note You need to install the SAP Country Versions in Central and Eastern European (SAP C-CEE) add-on for Ukraine on your SAP system to view the programs listed in this article. SAP Note 574080 (Overview note SAP Core CEE add-on) provides more information on the country versions and specific components in them. Illustration of the functionality in this article is on SAP ERP Central Component enhancement package 4 using CEE add-on 110_604.
For more information on Ukraine fixed asset repairs regulation, see SAP Note 938743 — Ukraine: Fixed Asset Repairs, New rule 20.12.2005.
The process for fixed asset repairs accounting in Ukraine includes four steps:
- Step 1. Check the fiscal year start values of all fixed assets
- Step 2. Maintain or update the repair cost
- Step 3. Set the repair period
- Step 4. Process the repair cost
Step 1. Check the Fiscal Year Start Values of All Fixed Assets
For the purpose of determining whether the 10 percent limit of total book values mandated by the law is reached, you use the net book value of the asset class at the start of the fiscal year. For example, take an asset class such as 1001444 (computer hardware) and check the balances at start of fiscal year (01 Jan 2010) for a tax depreciation area (e.g., 15). Figure 1 shows this data.
Figure 1
Selection criteria for an asset balance report
The net book value of the asset class as of the start of the year in the tax depreciation area is 1,955.55 Ukrainian hryvnia (UAH) and has two assets (2000000000 and 2000000001) within it (Figure 2).
Figure 2
Output of an asset balance report
Step 2. Maintain or Update the Repair Cost
Enter the actual repair cost when it is incurred in the end-user maintenance window by using transaction code J1UFCUPREP or by following menu path Accounting > Financial Accounting > Asset Accounting > Periodic Processing > Ukraine > J1UFCUPREP (Asset Repairs Maintenance).
In the screen that appears (Figure 3) enter the company code (CoCd), Repair date, Asset number, sub number (SNo.), internal order number (Order), and the costs of repair (Costs on overhaul). For illustration, I maintain repair costs for asset 2000000001. I assume that there were no further acquisitions on either of these assets or on any new assets under this asset class for the current fiscal year (2010).
Figure 3
Maintain or update repair costs
For ease of illustration, I use transaction code KO03 to create a statistical internal order (without any settlement rule). In a real-world application, a real internal order would appear in the Order type field (Figure 4).
Figure 4
The master data view of a statistical internal order
Step 3. Set the Repair Period
It is required to set the period for the repair cost incurred. This setting can be at the group asset level or the individual asset level. To set the period in maintenance table J_1UFTASSGROUP use transaction code SM30. Local law requires repair costs to be accounted on a quarterly basis.
Enter the company code, the fiscal year, the quarter in which the cost was incurred, and the asset number in the maintenance window (Figure 5). I use the same asset choosing quarter 3 because the cost was incurred in September.
Figure 5
Maintenance view for table entry
Step 4. Process the Repair Cost
During the period-end close, use transaction code J1UFFAR to call the Fixed Asset Repairs program. Follow menu path Accounting > Financial Accounting > Asset Accounting > Periodic Processing > Ukraine > J1UFFAR [Fixed Asset Repairs]).
In the screen that appears (Figure 6) enter the company code, quarter (3), tax depreciation area (15), and expense and auxiliary accounts (for expensing of <=10 percent of cost). The expense posting period (30 09 2010) is always the quarter (period) end date. The revaluation movement type (Z00) posts to the tax depreciation area (15) only (for capitalizing cost greater than 10 percent of the cost).
Figure 6
Selection criteria for the fixed asset repairs program
Note
The choice of revaluation movement type (asset transaction type) depends on the configuration settings in under Financial Accounting > Asset Accounting > Integration with the General Ledger > Define How Depreciation Areas Post to General Ledger. If the tax depreciation area posts real time (Acquisition and Production Costs and Depreciation), the process I describe can be followed. Otherwise, an additional period-end processing step of transaction ASKB (Perform Periodic Reposting) has to be performed.
I expect the program to calculate repair costs as follows:
- The asset’s net book value (of all assets) at beginning of the fiscal year is 1,955.55 UAH (Figure 2). The repair cost incurred for quarter 3 is 400 UAH.
- The repair costs (which are less than or equal to 10 percent of the total book value of all assets) that should be posted into expenses (FI posting to SAP General Ledger) in the Tax Ledger are 195,55 UAH (10 percent of 1,955.55 UAH).
- The amount that exceeds this 10 percent limit, which is expected to increase the net book value of each repaired asset (AA posting and FI posting) in the Tax Ledger, is 204,44 UAH (400 UAH – 195,55 UAH).
Press F8 to execute the program (Figure 6) and see the repair cost calculations (Figure 7).
Figure 7
The log of the program
After you click the Create postings button, two postings appear. First, the repair costs that are less than or equal to 10 percent of the total book value of all assets are posted with an amount of 195,56 UAH (10 percent of 1,955.55 UAH) in the SAP General Ledger (Figure 8).
Figure 8
The accounting document for repair costs
You receive a screen with the following message: Asset transaction was posted with AA document number 49.
Second, the amount that exceeds this 10 percent limit is capitalized in AA and the SAP General Ledger (Figure 9) to the extent of 204,44 UAH (400 UAH – 195,55 UAH).
Figure 9
The accounting document for capitalization
Note
When previous posting amounts exceed the current posting amounts, the report reverses previously posted amounts and replaces them with new ones.
Figure 10 includes a summary of the postings of repair costs of 400 UAH in the Tax Ledger.
Figure 10
Postings of repair costs
The asset’s net book value (of all assets) at beginning of the fiscal year is 1,955.55 UAH (Figure 2). You can see that cost apportionment and accounting schema are in line with the UA legal requirement.
Note
According to SAP Note 1643903 (Major Repair Ukraine), an optional parameter of fiscal month is available on the selection screen of the program (J_1UF_MAJOR_REPAIR) to calculate the repair cost on a monthly basis. If the fiscal month field is left blank, then the report works on quarterly basis. According to SAP Note 1605844 (J_1UF_MAJOR_REPAIR), an optional parameter of repair limit is available on the selection screen of the program (J_1UF_MAJOR_REPAIR). Repair limit defines the amount that is used instead of calculated 10 percent from the total asset net book value. If the field repair limit is left blank, then the report works as before. SAP Note 1695110 (Documentation for FI Ukraine) provides the system documentation.
Karthik Tharkabhushanam
Karthik Tharkabhushanam is an SAP consultant at Infosys Technologies Limited with more than 11 years of consulting experience. As a certified SAP Financials consultant, he specializes in SAP implementations for the manufacturing industry domain. He has a bachelor’s degree in accounting and is a chartered accountant.
You may contact the author at karthikt9@yahoo.com.
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