Openbravo QuickStart 2User Manual

Chapter 12 – Asset Acquisitionto Disposev2.0.1

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Introduction ....................................................................................... 1Abstract Business Process .................................................................. 2Roles Involved .................................................................................... 2Configuration ...................................................................................... 2

Asset Categories ................................................................................ 3Step-by-Step....................................................................................... 3

Procuring an Asset.............................................................................. 3Registering an Asset ........................................................................... 3Defining Depreciation.......................................................................... 4

Time vs Percentage Depreciation ....................................................... 5Amortizing the Asset........................................................................... 5

Calculating Amortization ................................................................... 6Posting Amortization ........................................................................ 6

Disposing of an Asset.......................................................................... 8Disposing with no Residual Value ....................................................... 8Disposing with Remaining Residual Value ............................................ 9

Accounting........................................................................................ 10Defining Default Accounts for New Asset Categories ...............................10Defining Accounts for an Asset ............................................................. 0

Introduction

This workflow manages the whole life-cycle of an asset:• requesting an asset

◦ purchasing a product• defining the product as an asset• defining depreciation/appreciation of an asset• accounting for depreciation/appreciation on a yearly or monthly basis• disposing an asset

Keep in mind that not all processes are explained here since other processes are tied in,such as Procure-to-Pay.

Abstract Business Process

The abstract asset acquisition to dispose is defined by the following business processdiagram:

The following sub-processes form it:• Procuring an asset• Registering an asset• Defining depreciation/appreciation rule• Amortizing the asset• Disposing of an asset

Roles Involved

The following roles are involved with this process:• For Procure-to-Pay, see the corresponding chapter• Finance - this roles manages assets in all aspects• Company Admin - used for configuration of certain elements

Configuration

Before this process can be used, the following elements need to be configured first:• Asset Categories with accounting

Asset Categories

Best way to define accounting for different asset types is through definition of assetcategories. To create asset categories and configure their accounting properties, please usethe Financial Management || Assets || Asset Group window:

Accounting is automatically inherited from the defaults configured within the [Defaults] ofthe Accounting Schema window (using the Company Admin role). However, you can andshould change it within the [Accounting] tab. See Accounting section for more details.

Step-by-Step

Procuring an Asset

Please refer to the Procure-to-Pay chapter for information on how to request and procure aproduct that will become an asset. Keep in mind that this step is optional. Assets can alsobe registered without having to purchase them first. However, if you want to tie an asset toa purchased product, make sure a product is first defined within Master DataManagement.

Registering an Asset

Switch to Finance role. To register an asset, use the Financial Management || Assets ||Assets window and create a new record:

Items to note:• Product - If a relation to a product definition (usually the one that was used to

purchase the asset) is required, use this product selector to select it.• Asset Category - by selecting a mandatory Asset Category, this new asset will

inherit the accounting properties of the underlying category. This accounting willautomatically be entered into [Accounting] tab and can later be manually changedif required.

• Depreciate - this checkbox will be used later to define the actual amortizationparameters

• [Asset Amortization] - tab where proposed amortization installments will be listed• [Accounting] - tab where specific accounting settings are for an asset, see section

Accounting for more information

Defining Depreciation

Again, using the Finance role navigate to the Financial Management || Assets || Assetswindow and edit the asset previously created. Then, check the Depreciate checkbox toreveal a set of parameters required to define the depreciation:

Fields to note:• Depreciation Type - currently, Openbravo ERP only supports Linear depreciation• Calculate Type - choice between Time and Percentage depreciation type• Amortize - if Calculate Type is Time, this field gives us a choice of monthly or

yearly depreciation calculation.

• Usable Life - Years (or Months in case of Monthly amortization) - the number ofyears (or months) to depreciate the asset over

• Purchase Date - the date of purchase of the asset (optional field)• Depreciation Start Date - this date must be entered in order for the Create

Amortization process to calculate the depreciation postings. (mandatory field!)• Asset Value - initial value of an asset (mandatory field!)• Residual Asset Value - value of the asset at the end of the depreciation period (if

this value is entered, the Depreciation Amt. will be automatically calculated)• Depreciation Amt. - the amount of the initial value to depreciate (if this field is

entered, the Residual Asset Value) will be calculated automatically• Depreciated Value - a read only field indicating how much of the depreciation

value has already been posted to the general ledger.• Depreciated Plan - a read only field indicating how much value of the asset will be

depreciated until the end of asset life.• Previously Depreciated Amt. - the amount that has already been amortized

before the asset was entered into the system. It will be deducted from the full assetvalue upon the calculation of the amortization plan.

Time vs Percentage Depreciation

The Linear depreciation type supports calculation over time or percentage.

As shown within the screenshot above, Time calculation enables us to enter the number ofmonth or years over which the full Depreciation Amt. will be depreciated. The system willthen calculate yearly or monthly postings and enter them into [Asset Amortization] tab.

The second option is Percentage calculation. The example above could also be depreciatedthis way:

Fields to note:• Annual Depreciation % - the percentage of the Depreciation Amt. to amortize

each year.

Amortizing the Asset

Once the asset has been defined and the depreciation parameters entered it is time tocalculate the depreciation postings and post these to the ledger at the end of an accountingperiod (month or year).

Calculating Amortization

To calculate the amortization, use the Create Amortization button within the FinancialManagement || Assets || Assets window. Once the process completes, navigate to the[Asset Amortization] tab to see the suggestion of amortization postings. For example, ifwe had selected amortization over time, specifically over 3 years, this would be theproposal:

If you are not satisfied with the proposal, you can delete all rows suggested (click on thefirst row, press shift and select the last row, press the Delete key and confirm) and click theRecalculate Amortization back inside the [Assets] tab.

Posting Amortization

Imagine you have defined several assets, each with their own amortization rules.Amortization needs to be posted for each accounting period (year or month, depending onthe definition and requirements). To do so, navigate to the Financial Management ||Assets || Amortization window where all periods with at least one asset to be posted inare listed:

Select the desired period by double clicking on it. The editing screen opens with thefollowing options:

Fields to note:• Description - enter any notes related to posting amortization of selected period• Accounting Date - date used to determine which period this posting belongs to

within the general ledger• Starting Date - determine which starting date the amortization is calculated for• Total Amortization - field that will be automatically calculated with the total

amortization amount posted for a selected period

To see and doublecheck all the assets whose amortization will be posted within the currentlyselected period, click on the [Lines] tab.

And finally, to post the amortization to the general ledger:1. Click the Process button to complete the amortization posting document2. If background accounting is enabled, the document will automatically also be posted

to the general ledger within minutes. However, you can always click the Post buttonand manually post it and then see the resulting GL entry:

Disposing of an Asset

An asset is disposed of once its depreciation plan is over. There are several different casesto end the lifecycle of an asset.

Disposing with no Residual Value

Once the final amortization installment is processed and posted to the General Ledger,Openbravo automatically checks off the "Fully Depreciated" field:

This field is read-only to the user so only the automatic process can change it upon the finalamortization installment.

Disposing with Remaining Residual Value

If an asset will be completely amortized but still hold a value, the Residual Asset Valuefield should be filled out with the remaining value. Upon calculating the plan of amortizationfor an asset, Openbravo will then automatically calculate and consider only the actualDepreciation Amt. :

There are various reasons for remaining residual value being greater than zero:1. Irreversible loss of asset value - once an amortization is defined and in

progress, a manual correction can be done by using the [Asset Amortization] taband changing the Amortization Amount field for the next pending installment(find the next record that has not been amortized yet). There, change the amountto reflect the loss of the asset value:

If there are other installments pending (more pending records within the [AssetAmortization]) delete the remaining lines (lines after the one just editedpreviously) manually:

Afterwards, go to the Financial Management || Assets || Amortization window

and process and post the customized amortization record (first click the Processbutton and then the Post button).Once the last line has been processed and posted, the asset's amortization plan iscomplete and the Fully Depreciated field is now checked off automatically by theapplication.

What is left now is to account for the loss of value which is done by G/L Journal (seeuser manual for financial processes).

2. The sale of an asset - the process of selling an asset that is still being amortized isalmost identical to the one just described above. It only differs within the last stepwhere the revenue of the asset needs to be accounted for as opposed to the loss ofvalue. To do this, a sales invoice needs to be entered for this asset (see Order toCash user manual).

Accounting

When posting amortization it is of utmost importance that it is posted to the correct accountwithin CoA (Chart of Accounts) depending on the asset type.

Defining Default Accounts for New Asset Categories

When defining new asset categories, the accounting for it is automatically inherited from thedefault accounts set for assets within the Financial Management || Accounting || Setup|| Accounting Schema window, the [Defaults] tab:

The following two accounts are defined here:

• Depreciation - Account present in the Profit & Loss statement that contains theexpense incurred due to loss of value of the asset. This loss of value originates fromthe amortization plan defined for an asset.

• Accumulated Depreciation - Figura en el activo del balance, minorando lainversión. Es la minoración del valor del activo consecuencia de la depreciación delinmovilizado material o inmaterial realizada de acuerdo al Plan de Amortización.

Once configured according to the regulations of the specific country, the general ledgerentry that is created as part of posting the amortization will look like:

If you would like to change the accounts that are set by default for newly defined assetcategories, change them within this window.

Defining Accounts for an Asset

When a new asset is created, it will inherit its accounting from the asset category selectedfor it (which is a mandatory field). This is the best practice that should be followed. To seewhat accounts have been assigned for the accounting of a particular asset, see the[Accounting] tab within the Financial Management || Assets || Asset window:

The user has the freedom to change them to whichever account required but shouldconsider twice before doing so. Generally, accounting should be defined on the level of assetcategories and not altered within each individual asset.

When amortization of this asset is posted to the General Ledger, it is posted to the accountsdefined here.