Professional Documents
Culture Documents
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:
c) Railway sidings
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:
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 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.
• (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.
• 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.
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
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:
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:
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
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.
Note:
Note:
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.
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.
The asset accounting section executes the depreciation run Asset accounting
6 to charge the depreciation on well materials using T-Code- Section.
AFAB.
Refer accounting entry no. AE/AA/007 mentioned below, if land is acquired directly from
land owner. T-code used is F-90.
Refer accounting entry no. AE/AA/008 mentioned below, if land is acquired through
SPLAO/Local Authority
b) WBS route.
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.
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.
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.
Process narrative
S. No Activities including controls Responsibility
2 ICE Team creates new census class and defines the GL ICE Team.
code and depreciation key and intimates the Asset
Accounting section
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.
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.
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:
Process narrative
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.
Note:
Note
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.
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
22**** Depreciation Dr