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Asset intra company transfer-

In this process, We transfer the asset within the company code. The target asset must be in the same
company code as the sending asset. Intracompany transfer may be necessary for one of the following

 An asset was created in the wrong asset class. Since you cannot change the asset class in the
asset master data, you have to transfer the asset to a new master record.
 You split up an asset or move part of an asset (transfer from asset to asset).

Asset Inter-company-

This process is used to move Fixed assets from one company code to another company code. For the
individual companies, an inter-company transfer represents a retirement for the one company and an
acquisition for the other. An inter-company asset transfer within a corporate group may be necessary
for one of the following reasons:

 Transfer of the asset from the books of one company code to another.
 Changes in Organizational Structure

For VAT process a STO will generated with non-valuated stock to generate VAT invoice.

Asset Impairment (IFRS)-

The state in which an asset has a market value less than its value listed on the company’s records,
especially when the value is unlikely to recover.

Impaired assets include bad debt, obsolete equipment and, most especially, goodwill. A company must
write off its asset impairment each year.

When impairment of a fixed asset occurs, the business has to decrease its value in the balance sheet and
recognize a loss in the income statement as per IFRS.

Factors affecting Asset Impairments-

How different values are calculated:

 Fair Value: FV = current market value – cost incurred in selling the asset (Example such
as commission, registration)
 Value in use: value in use is the present value of the future net cash flows expected to be
derived from the continuing use of the asset.
 Carrying cost: The term carrying amount is often used in place of book value. The
carrying amount refers to the amounts that the company has on its books for an asset or
a liability.
 Recoverable amount: Either by selling the asset or by using the asset
 Recoverable amount = higher {of Fair value – cost to sell (and value in use)}

How to Identify Asset Impairments:

 Calculate fair market value or value in use-Understand that fair value is the value that a
sale might bring on the market and Learn about value in use. Value in use is the future
cash flow the asset is expected to generate.
 Apply the fair market value and value in use to the carrying value to see which is
greater-It is impaired if the cost of holding an asset is greater than its sale or use values
so if the NBV is more than the Recoverable amount then we need to impair.
Asset Retirement-

Asset retirement is the removal of an asset or part of an asset from the asset portfolio. This removal of
an asset (or part of an asset) is posted from a bookkeeping perspective as an asset retirement. Asset
retirement process will remove the asset from asset register.

Following are different scenarios in case of Retirement of Asset:

 Sale of Asset with customer.

 Scrapping of Asset with no revenue earned (Write off).

Sale of Asset with customer-

Sale of Asset with customer will remove the asset from asset register at net asset value. Any
difference between sale value and net asset value will posted to profit/loss sale of asset account
Following entry gets generated after completing transactions F- 92. (Asset Retirement).

Asset Sale Clearing A/c. Dr.

Asset Disposal A/c. Dr.
Accumulated Depreciation A/c. Dr.
Loss on Disposal of Asset A/c. Dr.
To Asset (Gross Block) Cr.
To Asset Disposal A/c. Cr.
To Gain on Disposal of Asset Cr

To facilitate VAT, a non-valuated stock will be used for sale process to

generate VAT invoice. Below accounting entry will be created:
Customer A/c. Dr.
To Asset Sale Clearing A/c. Cr.
To VAT Payable Cr.

Scrapped (Retirement) of Asset with no revenue earned (Write-off):

A retirement of Asset without revenue is the removal of an asset from the asset register without any
revenue. Under this process the net asset value will be treated as Loss from an asset retirement.

Below accounting entry will be created:

Loss on retirement of Asset A/c. Dr.

Accumulated Depreciation A/c. Dr.
To Asset A/c. (Gross Block) Cr.