Introduction

Process overview

This chapter deals with policies, procedures, controls, roles and responsibilities related to
accounting of receipt, capitalisation, transfer, retirement, depreciation, etc., of fixed assets.
Fixed assets capitalized in the books of the Company are classified into following broad
categories:

a) Land (leasehold and freehold);

b) Buildings and bunk houses;

c) Railway sidings

d) Plant & Machinery (P&M);

e) Vehicles, survey ships, crew boats and helicopters;

f) Furniture & Fixtures (F&F);

g) Intangibles (Application Software, Patent, trade mark, etc.)

Fixed asset accounting is carried out using Fixed Assets (FA) module in SAP where in
different asset classes have been defined based on broad categories of assets mentioned
above. For capitalization of any asset, an asset master is created in FA module. Asset master
record primarily consists of:

i. Asset number and sub number,

ii. Asset Class/GL account,
iii. Description of Asset.
iv. Inventory number,
v. Date of Capitalisation,
vi. Cost Centre/Internal order,
vii. Indenter Code,
viii. Census class,
ix. Custodian,
x. Origin of Asset i.e. WBS, GI number,
xi. Depreciation key, etc.
xii. Gross Value and accumulated depreciation
Each asset capitalised through GR and GI route has been assigned a 12 digits unique
inventory number. The first 4 digits of the inventory number represent ‘Plant Code’ next four
digits represent census classes and rest of the digits represent ‘running serial number’. Asset
master has a General Ledger (GL) account assignment based on the asset class for posting of
asset value to GL. For each capital item, a census class, which is mandatory for assigning a
depreciation key to the asset, has been mapped in SAP system. The census class consists of
four digits i.e. from the third digit to the sixth digit, of the material code for capital items in
the material master. Depreciation key determines the rate at which asset is depreciated. For
controlling purposes, indenter-wise asset details are maintained in FA module.

Process objectives

· All additions to/ deletions from/ movement of Fixed Assets are properly recorded in
the books of accounts.
· Depreciation is charged to Profit & Loss (P&L) account/capitalized in accordance
with the accounting policy of the Company.
· Intangibles are capitalized and amortized in accordance with the accounting policy of
the Company.
· Physical verification of fixed assets.
Accounting policies

Fixed assets (FA)

Fixed Assets are stated at historical cost less accumulated depreciation and impairment. Fixed
Assets received as donations/ gifts are capitalized at assessed values with corresponding
credit taken to Capital Reserve. All costs relating to acquisition of fixed assets till the time of
commissioning of such assets are capitalized.

Intangibles

Costs incurred on intangible assets, resulting in future economic benefits are capitalized
as intangible assets and amortized on Written down value (WDV) method beginning from the
date of capitalization.

Depreciation

• Depreciation o n Fixed Assets is provided for under the WDV method in accordance
with the rates specified in Schedule XIV to the Companies Act, 1956.

• Depreciation on additions/deletions during the year is provided on pro-rata basis with

reference to the date of additions/deletions except items of Plant and Machinery.

• (P&M) used in wells with 100% rate of depreciation and low value items not
exceeding Rs. Five Thousand which are fully depreciated at the time of addition.

• Leasehold land is amortized over the lease period.

• Depreciation on subsequent changes to Fixed Assets arising on account of capital

improvement, price variation or other factors is provided for prospectively.

• Depreciation on Fixed Assets (including support equipment and facilities) used for
exploration, drilling activities and on related equipments and facilities, is initially
capitalized as part of exploration cost, development cost or producing properties and
expensed/depleted as stated in policy on “Exploration, Development & Production
Costs”
Producing Properties

• Producing Properties (PP) are created in respect of an area/ field having proved
developed oil and gas reserves, when the well in the area/ field is ready to commence
commercial production.

• Cost of temporary occupation of land, successful exploratory wells, all development

wells, depreciation on related equipment, facilities and estimated future abandonment
costs are capitalised and reflected as Producing Properties.

Depletion of Producing Properties

Producing Properties are depleted using the ‘Unit of Production’ method. The rate of
depletion is computed with reference to an area covered by individual lease/ licence/ asset/
amortization base by considering the proved developed reserves and related capital costs
incurred including estimated future abandonment costs. In case of acquisition, cost of
producing properties is depleted by considering the Proved Reserves. These reserves are
estimated annually by the Reserve Estimates Committee of the company, which follows the
International Reservoir Engineering procedures.
Process narratives & flow charts

Additions to fixed assets

Fixed assets capitalized in the books of the Company are classified into land (leasehold and
freehold), buildings and bunk houses, P&M, F&F, vehicles, survey ships, crew boats,
helicopters, railway sidings and intangibles. This paragraph details the processes, by which
different types of fixed assets are capitalized in the books of accounts:

a) Capitalisation of ‘ready to use’ assets (other than land).

b) Assets that require installation and/or commissioning (other than those
c) Capitalised through WBS route in Project Systems module in SAP).
d) Fixed Assets capitalized through WBS route in PS module (for example PP,
e) Buildings and other capital projects).
f) Well materials (like casing pipes, production tubing’s, well heads etc)
g) Capitalization of land (leasehold and freehold).
h) Intangibles (software).
i) Capitalization of insurance spares.
j) Capitalization of asset fabricated in central workshop.
k) Creation of new capital item in SAP on first purchase.
l) Dry well assets.
m) Survey Asset.
n) DRE Assets.

‘Ready to use’ assets (excluding land)

‘Ready to use’ assets include F&F, vehicles, crew boats, helicopters and certain P&M that are
ready to use. These capital items are procured through Purchase Requisition (PR)/Purchase
Order (PO) route and received in main stores. Capitalization process commences when the
Indenter/ requisitioned creates a reservation in the system for issue of capital Item from
stores. The detailed process narrative is given below:
S. No Activities including control Responsibility

1 Authorised capital indenter creates the reservation in SAP Authorised

using T-Code ZMMCIOS for issue of a capital item and capital indenter
forwards signed copy of the reservation to Main Store/Site
store. Authorised capital indenters are LI/LII/LIII level
officers as per CRC and the officers nominated by ‘LI’
officers.

The indenter specifies the reason for movement and

movement type in the reservation created in SAP which
determines whether the capital item is issued to asset, cost
centre (in case of part replacement), WBS, Plant
Maintenance Order (PMO), etc.

After creating the reservation, these details automatically Asset Accounting

2 flow in report ‘pending reservations for asset allotment’ Section.
which can be executed using T-code – ZMMCIOS?

3 Asset Accounting section runs the report pending

reservations for asset and allots the asset number to the Asset Accounting
capital item by using the T-code – ZMMCIOS. The F&A section
Section checks the cost centre etc and then mentions the
asset number on the hard copy of the reservation and hands
it over to the indenter.

Main Store issues the capital item for which asset number is
created after receiving signed copy of the reservation and
posts goods issue in SAP by using T-Code – ZMMCIOS.
Refer accounting entry no. AE/AA/001 mentioned below:

GL code Account description Dr/Cr

10*** Fixed Assets Dr.
907/8** CIOS Cr.

Note: The capitalization of assets takes place on posting of

goods issue by Main Store.
Process flowchart
Asset under installation

Assets that require installation and/or commissioning before they are ready for use are capitalised
through Asset under Installation (AUI) route. For example air conditioning units. This does not
include fixed assets capitalized through WBS route in PS module in SAP. This process commences
before a Purchase Requisition (PR) for asset with installation/commissioning charges is created by
the indenter in SAP. The detailed process is given below.

Process Narrative
S.NO Activities including controls Responsibility

1 The indenter informs the Asset Accounting section, by SAP Indenter

mail, to create AUI in Fixed Assets module for capturing
installation/commissioning charges related to capital item(s)
proposed to be purchased.

2 Asset Accounting section creates an AUI in Fixed Assets

Asset Accounting
module by using T-Code – AS01 and intimates the AUI
Section.
number to the indenter by SAP mail
Note - For creation of AUI, indenter code, CC and asset
class to determine the GL account are specified.

3 Indenter creates PR in SAP with separate line items for

Indenter
asset and installation/commissioning charges.
Relevant AUI number provided by Asset Accounting section
is assigned in PR to the line item for installation/
commissioning charges.
S. No Activities including controls Responsibility

4 The asset is received in Main Store as capital inventory and Capital indenter.
capital indenter creates the reservation in SAP using T-Code
ZMMCIOS for issue of Capital Item. The capital indenter
forwards signed copy of the reservation to Main Store/Site
store for issue of Capital item.

The indenter specifies the reason for movement and

movement type in the reservation created in SAP which
determines whether the Capital item is issued to Asset
(AUI), CC (in case of part replacement), WBS, PMO etc.

5 After creating the reservation, these details automatically Asset accounting

section.
flow in the report pending reservations for asset allotment
which can be run by T-code ZMMCIOS.

6 Asset Accounting Section executes the report pending Asset accounting

reservation for asset allotment and allots the AUI number to section.

the capital item by using T-code – ZMMCIOS and mentions

the AUI number on the hard copy of the reservations and
hands it over to the indenter.
Main Store issues the capital item after receiving signed
copy of the reservation having asset number and posts
goods issue in SAP by using T-Code – ZMMCIOS
Refer accounting entry no. AE/AA/001 mentioned below:
GL code Account description Dr/Cr
40*** Fixed Assets (AUI) Dr.
907/8** CIOS Cr.
S. No Activities including controls Responsibility

9 Asset Accounting section, based on the installation Asset accounting

certificate from the indenter, creates asset number, defines section

the settlement rule for AUI by using T-code – AIAB and

uses T-Code – AIBU for final settlement of
installation/commissioning charges to the asset.
Refer accounting entry no. AE/AA/003 mentioned below:

GL code Account description Dr/Cr

10*** Fixed Assets Dr.
40701 to
Relevant AUI Accounts Cr.
40854

Note:

At the time of settlement of AUI, the Asset accounting

section has to put the commissioning date as value date in
the settlement parameter. In case the value date falls in the
closed period the value date should be changed in the Asset
Master.
Process flowchart
Capitalisation by work breakdown structure route in Projects Systems module Fixed Assets
capitalized through WBS route in PS module include capitalization of PP, buildings and other
capital projects. Where a particular asset is ready for use, the process of capitalization
commences (before WBS settlement is done) with the creation of new asset master in Fixed
Assets module. The detailed process is given below:

S. No Activities including controls Responsibility

1 Asset Accounting section creates a new asset master by Asset accounting

Section.
using T-code - AS01 on receipt of
commissioning/completion
certificate from indenter (e.g. completion certificate is
received from engineering services in case of new
building/projects)
Note:
At the time of creation of asset master, Cost Centre,
Internal Order, indenter code and asset capitalisation date
are specified.

2 Asset Accounting section forwards the new asset number

Asset accounting
to the indenter and the Central Accounts Section by SAP section
mail.
S. No Activities including controls Responsibility

3 Central Accounts Section/Engineering Services enters the Central

accounts
Asset number in the settlement rule in the WBS element
section/
and carry out WBS settlement. Costs that need to be Engineering
services (F&A)
capitalized get settled to new asset, EWIP, DWIP, and
CWIP, as the case may be.
Refer accounting entry no. AE/AA/004 mentioned below:

GL code Account description Dr/Cr

70101 Producing Properties- Dr.
Gross-Expenditure

70102 Producing Properties- Dr.

Gross-Depreciation

70103 Producing Property – Dr.

Estimated Abandonment
Costs
10*** Relevant Fixed Assets Dr.
A/c
(like buildings)

50*** Capital work in progress Dr.

(in case of incomplete jobs)

209998/9 Allocation expense Cr

9/229998/ /depreciation
99/249998.

Note:

All progress payments are initially booked to WBS with

GL 24* in case of turnkey contracts. Initial/automatic
settlement of the WBS is done at period end for settling the
amount booked in WBS/GL 24* series to CWIP (GL 05*
series). Based on the commissioning certificates, final
settlement from CWIP to Fixed Assets (GL 010* series) is
done from CWIP (GL05* series).
Process flowchart
Capitalization of well materials like casing pipes, drill pipes, production
tubing’s, X- mas tree and well head etc.
There are various materials used for drilling of exploration or development wells like casing
pipes, production tubing’s, well heads, drill pipes, X-mas tree etc. These materials are
capitalized as P&M and depreciated at 100% (except for well heads & X-mas tree which are
depreciated at 30%- in case of on-shore). Depreciation on well materials is initially posted to
internal order type ‘1ZZ’ in system. From the internal order, it is finally posted to EWIP or
DWIP, as the case may be, through settlement.
Well materials are issued from stores on a daily basis to WBS element of wells and
capitalized at the month end. The process for capitalization of materials is given below:

Process narrative
S. No Activities including controls Responsibility
 1 Authorised indenter creates the reservation in SAP using Authorised
TCode MB21 for issue of well materials and forwards indenter
signed copy of the reservation to Main Store/Site Store for
issue of material.
The indenter specifies the WBS/CC through relevant
movement type in the reservation created in SAP.

S. No Activities including controls Responsibility

Main Store issues the well materials after receiving signed
copy of the reservation and posts goods issue in SAP by
using T-Code – MIGO.
Refer accounting entry no. AE/AA/005 mentioned below

GL code Account description Dr/Cr

210101 Mat Consumed-Stores- Dr.
Drill Pipes –Imported
210103 Mat Consumed-Stores- Dr
Drill Pipes –Indigenous

210105 Mat Consumed-Stores- Dr

Casing Pipes –Imported

210107 Mat Consumed-Stores- Dr.

Casing Pipes –Indig

210109 Mat Consumed-Stores- Dr.

Oth
Pipes &Pipe Fitting-
Import
210111 Mat Consumed-Stores- Dr.
Oth
Pipes & Pipe Fitting-Indig
210157 Mat Consumed-Stores-
Tubings- Import
210159 Mat Consumed-Stores- Dr
Tubings-Indg

20161 Mat Consumed-Stores- Dr

Well Heads –Imported

210163 Mat Consumed-Stores-

Well Heads

90201 CA-Stores-Drilling Pipes-

Imported new
90203 CA-Stores-Drilling Pipes-
Indigenous new
S. No Activities including controls Responsibility

GL code Account description Dr/Cr

90205 CA-Stores- Casing Pipes – Cr.

Imported new

90207 CA-Stores- Casing Pipes – Cr.

Indigenous new

90209 CA-Stores- Other Pipes & Cr.

Pipe Fittings- Import new

90211 CA-Stores- Other Pipes & Cr.

Pipe Fittings- Indig new

90257 CA-Stores- Tubings Cr.

Pipes & Fittings-Imp

90259 CA-Stores- Tubings Cr.

Pipes & Fittings-Indg

90261 CA-Stores- Well Head & Cr.

X'mas Tree –Imported new

90263 CA-Stores- Well Head & Cr.

X'mas Tree -Indig new

At the end of the month, Asset Accounting section downloads Asset accounting
3 consumption of casing pipes, tubular, X-mas trees, well heads Section.
booked during the month using T-code- FBL3N. Asset
Accounting section identifies the line items against which WBS
element is mentioned that specifies the amount of material used
in exploratory and development wells. Consumption details of
drill pipes, are downloaded with the line items having cost centre
of rigs.

S. No Activities including controls Responsibility

 Asset Accounting section creates new asset masters for Asset accounting
4 casing pipes, tubular and well heads etc by using internal Section.
order type ‘1ZZ’ in cost object [T-code AS01].
Asset Accounting section passes a direct Finance (FI) entry
5 for capitalization of casing pipes, tubular, well heads as using
T-Code F-90. Asset accounting
Section.
GL code Account description Dr/Cr
10405 F/A-P&M-Well Heads Dr.
10406 F/A-P&M-Casing Pipes Dr
10422 F/A-P&M-Production Dr.
Tubings
10404 F/A-P&M-Drill Strings Dr.
210101 Mat Consumed-Stores-Drill Cr
Pipes –Imported
210103 Mat Consumed-Stores-Drill Cr.
Pipes –Indigenous
210105 Mat Consumed-Stores- Cr
Casing Pipes – Imported
210107 Mat Consumed-Stores- Cr.
Casing Pipes Indig
210109 Mat Consumed-Stores-Oth Cr
Pipes &Pipe Fitting-Import
210111 Mat Consumed-Stores-Oth Cr
Pipes &Pipe Fitting-Indig
210157 Mat consumed -stores- Cr.
Tubings- Imp
210159 Mat consumed-stores- Cr.
Tubings- Indg
210161 Mat Consumed-Stores-Well Cr.
Heads –Imported
210163 Mat Consumed-Stores-Well Cr.
Heads

The asset accounting section executes the depreciation run Asset accounting
6 to charge the depreciation on well materials using T-Code- Section.
AFAB.

7 A7 Central Account section defines the WBS of the concerned

well/cost centre of the concerned Rig as settlement rule in CA
the internal order and executes the settlement of internal
orders to transfer the depreciation to the Wells/Rigs
CA

Process Flow Chart

Acquisition of land (leasehold and freehold)
Land acquisition costs include purchase cost, registration charges, legal charges etc. Land can
be acquired either directly from landowner/Local Authorities or through Special Land
Acquisition Officer (SPLAO). Land Acquisition section forwards a demand note to Pre-Audit
section for making the payment for land acquisition. Pre-Audit section forwards a request for
creation of an asset to Asset Accounting section (manual request giving the well name, area,
tax office number etc). Asset accounting section creates an asset in the Fixed Asset module
using T-code AS01 and forwards the asset number to Pre-Audit section. Pre-Audit section
makes the payment and passes a direct FI entry in SAP. Different accounting entries are
passed by Pre-Audit where land is purchased directly from land owner and where these are
acquired through SPLAO.

Refer accounting entry no. AE/AA/007 mentioned below, if land is acquired directly from
land owner. T-code used is F-90.

GL code Account description Dr/Cr

10101/ Freehold land/ Dr.

10102 Leasehold land

****** Vendor Cr.

Refer accounting entry no. AE/AA/008 mentioned below, if land is acquired through
SPLAO/Local Authority

a) At the time of making deposits with SPLAO (T-code – F-02)

GL code Account description Dr/Cr
101123 Deposits-Deposit With Dr.
SPLAO for Land
Acquisition
(if deposit is for permanent
acquisition
of land & use fund centre
where funds
are kept)
101120 Deposits-Deposit With Govt. Dr.
Authorities
19**** Vendor (SPLAO) Cr.

19**** Vendor (SPLAO) Dr.

09**** Bank clearing A/c Cr.

b) On adjustments of deposits (T-code – ABSO)

GL code Account description Dr/Cr

 10101/
10102 Freehold land/Leasehold land Dr.

101123 Deposits-Deposit With

SPLAO for Land Cr.
Acquisition
101120
Deposits-Deposit With Govt. Cr.
Authority

Capitalization of Intangible Assets

An intangible Asset is an identifiable non-monetary asset, without physical substance, held

for use in the production or supply of goods or services, for rental to others or for
administrative purposes. Cost incurred on Intangible assets resulting in future economic
benefits is capitalised as intangible assets. These are accounted for and amortised in
accordance with Accounting Standard 26 (AS 26) on intangible assets. As per para 1(c)
of this Standard, expenditure on exploration for or development and extraction of
minerals oil, natural gas and similar non-regenerative resources are out of the scope of
the Standard. Hence, this standard is not applicable in respect of expenditure on DRE
(like expenditure on dry docking, mobilization and demobilization charges, etc).
However, the standard is applicable in respect of Intangible Assets like application
software like SAP implementation and licence acquisition costs, data interpretation
software for Geological & Geophysical activities etc. Intangibles are capitalized in
accordance with the accounting policy of the Company. Software is capitalized through
following methods:

a) Capitalised by AUI route.

b) WBS route.

Capitalization of insurance spares

Determination of insurance spares happens at PR stage where user specifies whether the item
required to be procured is an insurance spare or not in the PR. Guidance is available vide
circular no.CA 268/2005 dated 07.11.2005 (Sri Sunder to provide the same) for identification
of particular item as insurance spares. It is also verified by F&A section during financial
concurrence to ensure appropriate accounting. The process for receipt of insurance spares in
stores and logistics invoice verification is same as other materials. There is specified storage
location defined in SAP for warehousing of insurance spares at each location. All insurance
spares are received in this storage location based on the assignment in PR/PO.

Indenter intimates Asset Accounting section about the requirement of creation of sub asset
numbers against identified assets for which insurance spares are purchased. The Asset
Accounting section creates sub-asset number by using T-code AS11 in SAP and intimates the
indenter. On such intimation, indenter creates the reservation for insurance spares through T-
Code MB21 using movement type X41, inputs the sub asset number in the following screen
and changes the valuation type to SPNO_ VALUE. Stores section executes ZMMCONV. The
system automatically issues the item to sub-asset number created by Asset Accounting
section when stores posts the goods issue (only value) in SAP by using T-Code MIGO.

Insurance spares stock quantity after capitalization are maintained in material master as
non-valued stock i.e. at nil value to have a physical control over them. They are tracked
based on material code assigned at the time of creation of GR by Main Store.

Refer accounting entry no. AE/AA/009 mentioned below:

GL code Account Dr/Cr

description
10*** Sub-asset number Dr.
(Insurance spare)
90*** Stores/spares Cr.
inventory

Adjustment for debit/credit memo issued to vendors

There could be situations where debit or credit memo is issued to the vendor (generated at the
time of LIV) on purchase of asset and asset purchased is already capitalized in the FI module.
In such cases the amount is adjusted in the price variation account.

Refer accounting entry AE/AA/010 mentioned below:

GL code Account description Dr/Cr

19**** Vendor account Dr/Cr

201451 Price variation Cr/Dr

The capitalized value has to be adjusted with the amount of debit/credit memo
in the fixed asset master.

For credit memo, Asset Accounting section makes the adjustment in SAP using T-code –
ABGL, where year of capitalization and debit/credit memo is same, and T-code – ABGF,
where assets were capitalised in prior years and debit/credit memo is raised in current year.
For debit memo same transaction code is to be used, with the check box for
reverse entry selected.

Refer accounting entry AE/AA/010 mentioned below:

GL code Account description Dr/Cr

10*** Relevant Fixed Asset A/c Dr/Cr.

201451 Price variation Cr/Dr.

Note:
Line item in Price variation account has to be displayed using T-Code FBL3Nand from the
material code for capital items, major amounts are to be tracked tothe asset number from the
movement of the material through T-Code MC.9/ME23N.

Creation of new capital item in SAP on first purchase

At the time of creation of Asset Master for Capital items against a reservation by indenter, the
relevant Census Class should be available in the standard list of capital item maintained in the
system. Standardized list of assets can be viewed using T-Code – ZFICENSUSCLASS.
Creation of new capital item for which census class is not available in the Asset Master,
requires creation of new census class, its linkage to Fixed Asset GL Code for appropriate
classification and depreciation key for the purpose of depreciation computation after
capitalization. Activities detailed herein result in creation of new Census Class in standard list
of capital items maintained in the asset master. The detailed process for creating a new census
class is given below:

Process narrative
S. No Activities including controls Responsibility

1 Asset accounting section (in association with the concerned Asset

accounting
indenter) requests CAS, DDN for depreciation rate and Section.
communicates the same to the ICE team.

2 ICE Team creates new census class and defines the GL ICE Team.
code and depreciation key and intimates the Asset
Accounting section

Dry well asset

Central Accounts Section determines the exploratory wells to be charged off based on the
information from exploration group and the accounting policy. Central Accounts Section
sends the details of dry wells to Asset accounting section of the unit. Dry well asset(s) is
created by Asset accounting section in Fixed Asset module using T-code AS01 by specifying
the relevant cost centre .Asset section intimates asset number(s) to the central accounts
section after its creation.

Central Accounts section settles (full settlement) the expenditure incurred on dry well to the
relevant asset created in asset module using T-code - CJ88 in SAP.

Refer Accounting entry no. AE/AA/011 mentioned below:

GL code Account description Dr/Cr
70401 Dry Wells Gross Expenditure Dr
70402 Dry Wells-Gross Depreciation Dr
70301 EWIP-Expenditure Cr.
70302 EWIP-Depreciation Cr.

When depreciation run is done in the FA module, 100% of the amount transferred to dry well
asset is charged off to profit & loss account in the same year in which the asset is capitalised.

Refer Accounting entry no. AE/AA/012 mentioned below:

When the well is declared dry, the well material (except well head for onshore) capitalised
against the well is removed from the asset master using T-code-ABAVN. For detailed
process and accounting entries on deletion of fixed asset refer Para 3.2.1 mentioned below.
Well heads and X-mas tree can be reused in another well in which case the internal order of
that well is incorporated in the Asset Master of well head and X-Mas tree.

Survey Asset

T-code AS01 is used for creating Survey assets separately for expenditure and depreciation,
block wise under asset class 70501 and 70502 respectively .After creation of survey assets,
the expenditure and depreciation on survey are initially booked to field party cost centres and
allocated to survey WBS, for each block, through cost cycles. The survey WBS are settled to
survey assets through WBS settlement. On depreciation run, the survey assets are depreciated
at 100% and depicted as recouped cost in P&L account.

DRE Asset

As per the accounting policy of the company, Dry docking charges for Rigs, Multipurpose
survey vessels (MSVs), Geo Technical vessels(GTV), Rig/equipment mobilisation expenses
and other related expenditure are considered as deferred expenditure and amortised over the
period of use no exceeding five years.

DRE asset is created in asset master using T-code AS 01 for each such jobs under asset class
140111/140112. The expenditure is initially booked in the WBS created for this purpose and
settled to DRE assets through WBS settlement periodically.

Depending upon the period in which the DRE assets are to be charged off, the life of the asset
is maintained in the asset master with dep key ZDRE.The DRE is charged off to DRE written
off account when depreciation run is executed and allocated to the activities during cost cycle
run.
Deletions from Fixed Assets
Deletions of Fixed Assets is on account of:

a) Discarding (condemnation & disposal) of Fixed Assets and

b) Replacement of Fixed Assets.

Discarding (condemnation & disposal) of fixed assets

Fixed Assets can be discarded for different reasons that include retirement from use, damage
etc. Condemnation process commences when the indenter identifies a particular asset that
needs to be discarded and forwards a proposal to the Condemnation Committee. The detailed
process for condemnation of the asset and subsequent disposal is given below:

Process narrative

S.NO Activities including controls Responsibility

1 Capital Indenter identifies a particular asset that Capital Indenter

needs to be discarded and forwards a proposal to the
Condemnation Committee for further assessment.
The proposal specifies the reason for condemnation.

Condemnation Committee reviews the proposal and Condemnation

2 deliberates whether the asset is to be condemned or Committee
not. Condem Committee consists of representative
from MM section, Indenting section and F&A
section. Following factors are considered by the
Condemnation Committee before they recommend
the proposal:

a) Book value (WDV method);

b) Reason for condemnation;
c) Balance useful life of the asset; and
d) Alternative use of the asset.

Condemnation Committee forwards the

recommendation for the approval of the competent
authority and the copy of the approved note is
received by the indenter.
S.NO Activities including controls Responsibility

3 Indenter on receipt of the approval, prepares Asset Indenter

Condemnation Note (ACN) using T-Code ZFIATN in
SAP
and specifies the asset number, location and the
custodian
and forwards a copy, duly acknowledged by the disposal
cell, to the Asset Accounting section.

Note:
Hardcopy of original approval is maintained with the
indenter and the copy of the same duly acknowledging
receipt of the condemned item by the disposal cell is
forwarded to asset accounting section.
Asset accounting section shall generate report of ACNs
pending for accounting on periodic basis and follow with
concerned indenters for hard copy of ACN, duly
acknowledged by disposal cell.

4 Asset Accounting section processes the ACN using the Asset

accounting
TCode ZFIATN wherein a Batch Data Conversion
section
(BDC) is executed.
Refer accounting entry no. AE/AA/013 mentioned
below:
GL code Account description Dr/Cr
30*** Accumulated Dr.
depreciation on asset
(Till the date of
discard)
22**** Depreciation Dr.
(From last
depreciation run till
the date
of discard)
201525 Asset written off Dr.
10*** Relevant Fixed Asset Cr.
A/c
30*** Accumulated Cr.
depreciation on asset
S. No Activities including controls Responsibility

Note:

Hardcopy of original approval is maintained with the

indenter and the copy of the same duly
acknowledging receipt of the condemned item by the
disposal cell is forwarded to asset accounting
section.

Asset accounting section shall generate report of

ACNs pending for accounting on periodic basis and
follow with concerned indenters for hard copy of
ACN, duly acknowledged by disposal cell.

Asset Accounting section processes the ACN using

the TCode ZFIATN wherein a Batch Data
Conversion (BDC) is executed.

Refer accounting entry no. AE/AA/013 mentioned

below:
GL code Account Dr/Cr
description
30*** Accumulated Dr
depreciation
on asset
(Till the date
of discard)
22**** Depreciation Dr
(From last
depreciation
run till the date
of discard)
201525 Asset written Dr
off
10*** Relevant Fixed Cr.
Asset A/c
30*** Accumulated Cr.
depreciation
on asset
(run
till the date of
discard)
S.NO Activities including controls Responsibility

Note

i. With the execution of BDC, Asset master will be

removed from the system and will be displayed as
discarded asset in schedule A.

Main Stores creates the disposable inventory in the Main stores

5 SAP. There is special material codes assigned to asset
held for disposal.
Process flowchart
Replacement of Fixed Asset

Replacement of complete Asset having census number would involve discarding of original
asset as a first step and then creation of new asset. For detailed process on discarding of Fixed
Assets and for addition of new asset mentioned above. Replacement of a part of Fixed Assets
is charged as repairs and maintenance to relevant cost centre. In this connection reference is
invited to Circular number 314/2008 issued by CAS.

Transfer of Fixed Assets

This section details the process of transfer of Fixed Assets

a) From one Company Code to another; and

b) Transfer within the same Company Code i.e. inters - indenter transfers. Transfers
between two indenters would include change in Indenter-wise asset records, change in
cost centre and reclassification of assets, if required. Indenter wise Fixed Assets
registers are maintained in the system for controlling purposes. Indenter wise list can
be viewed and edited with T- codeZFISTRV. Indenters should keep the details such
as custodian name, location etc updated whenever there is any change in the location,
custodian etc.

Transfer from one unit to the other unit (cross company code transaction)

The process commences with identification of asset to be transferred between the sending and
receiving units. The detailed process narrative is given below:

Process narrative
S. No Activities including controls Responsibility

1 Indenter in sending unit creates Asset Transfer Note (ATN) Indenter in

in SAP using T-Code – ZFIATN sending unit.

2 Asset Accounting section reviews pending ATNs on Asset

Accounting
periodical basis by using T-Code – ZFIATN and posts the section
transaction by using T-Code – ABT1N.
Refer accounting entry AE/AA/014 mentioned below:
Sending company code

GL code Account description Dr/Cr

30*** Accumulated depreciation on
asset
(Till the date of transfer) Dr.

22**** Depreciation Dr

Activities including controls

From the last dep Dr

till date of transfer
.
120104 IUT Receivable/ Dr.
Payable-Asset
Transfer (ICE-ICE
10*** Accumulated dep Cr.
on asset.
Depreciation from
last depreciation
run
till the date of
transfer at the time
of dep run
30*** Accumulated Cr.
depreciation on
asset Depreciation
from last
depreciation run
till the date of
transfer at the time
of dep run
Note:
i. Depreciation till the date of transfer is posted in the
books of the transferring unit
ii. IUT entry is generated on posting of transaction
In receiving company code, simultaneously, new asset
number is created with the original inventory number with
the status as Fixed Asset in transit.
Refer accounting entry no. AE/AA/015 mentioned below:

GL code Account description Dr/Cr

10*** Relevant Fixed Asset A/c
Dr.
S.NO