Learn Inventory and Physical Inventory in SAP Fixed Asset Accounting

Objects that no more exist have no value. Therefore, you should check the existence of fixed assets by means of a physical inventory. The individual Objects in Fixed Assets need to be recorded so they are recognizable.

The Inventory is the record (directory) of individual asset objects. This directory has to report the asset objects present on a defined date. These objects have to be determined by a physical check, also called a Physical Inventory. The word inventory is derived from the Latin invenire, meaning to find something. In this blog, I’ll discuss what you need to list in the fixed assets inventory and also exactly how to perform the physical check.

Basics

National Tax and Accounting laws regulate the information the inventory directory needs to contain. These laws also regulate how and at what time intervals a physical inventory should take place.

You verify that the individual assets listed in the inventory directory are present by a physical inventory, meaning the assets should be seen and counted separately which can be a very lengthy procedure.

Accountants are usually implicated in being bean counters. Aside from the reality that this statement is not a compliment, it is also incorrect. The effort involved in checking and reporting the value of fixed assets can, and should be kept within affordable restrictions. The concept of proportionality is also applicable.

Quantity Management in Fixed Assets

You can manage identical capital goods in the Inventory as one single thing, and specifying the quantity. In the sense of valuation, the identical means the following:

• Identical date of acquisition
• Identical acquisition and production costs
• Identical depreciation method

For instance, 50 personal computers could be handled under one asset number. This variant for the master asset (unfortunately regularly used) will lead to more effort later in the maintenance of asset balances. As an example, these 50 personal computers will not leave the company all at the same time. Time-consuming partial retirements are essential, as well as 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 issues for a physical asset inventory. How can you determine whether all 50 computer systems of this asset are still present? The individual Computers can not be recognized through asset accounting. Nevertheless, annual evidence through a physical inventory is still needed. This evidence would require added specific inventory management outside or in addition to asset accounting. Thus the company still has the administrative effort and there is consequently no advantage.

We advise against this sort of inventory management. SAP Asset Accounting provides convenient functions for creating and posting this type of mass acquisition with the initial purchase. You can address these with the Hierarchy of Asset Master Records.

Quantity details are however still helpful for certain capital goods, for instance, for low-value assets that existed as flat-rate assets. Figure 1 shows an asset with a quantity of 57 items, as well as Figure 2 shows the movements for this asset.

Figure 1: Asset with quantity

Figure 2: Movements for this asset

For real estate, we suggest specifying the number of square meters, as displayed in Figure 3.

Figure 3: Asset with square meters

The proof of possession for real estate is not provided through a physical inventory but by the entry in the register of deeds of the corresponding plot of land number.

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Bottomline

Without existing Objects that have no value. Therefore, you should check the existence of fixed assets by means of a physical inventory. The individual Objects in Fixed Assets need to be recorded so they are recognizable.

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