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hariharkewat
Explorer
0 Kudos
950

Asset Retirement Obligation (ARO) is duty and responsibility of the company to fulfil after the end of contract for the asset use. Let's understand with one example - ABC Oil and Gas company took land from XYZ landlord to set up gas station or petrol pump for the 10 years. While company using the land/property, it will be damaged therefore company agreed that they will clean the land, remove the gas station and improvement the quality of land and bring back into original form and hand over the land/property to landlord after 10 years. The cost of cleaning/removal/improvement of the land is known as asset retirement obligation for the company and they will show in their balance sheet as ARO liabilities as per US GAAP. 

We need to implement below BC sets (refer OSS 2856996) that will provide full configuration. One can use t-code SCPR20 to activate BC sets.

BC Sets = 1. /SAI/BC_AIF 2. /FOM/ARO_OBLIGATION_USG_V2 3. /FOM/ARO_AP_USG_V2 4. ZFACE_FOM_ITEMS.ZIP

Whole ARO process can be bifurcate into five sections.

1. ARO configuration- Consultant primarily has to understand accounting integration between ARO and fixed asset accounting as well as value ID determination.

2. ARO creation and release - Once configuration is done, user need to create ARO from t-code /FOM/AM01 by providing asset class, cost objects, contract duration, costs etc. once ARO is created and released it will generate asset master, asset acquisition entry and one time posting automatically.

  ARO Asset acquisition entry = Asset a/c Dr // To Contra Account: Acquisition Value a/c, both of these GLs are picked from AO90 account determination.

Onetime Posting (OTP) = Contra Account: Acquisition Value a/c // To ARO Liability a/c, both of these GLs are picked from ARO BRF plus account determination setting.

3. Accretion Posting - This is monthly cashflow accrual posting from t-code /FOM/ACE_PERI_RUN. This will generate Accretion Expenses a/c Dr // To ARO Liability a/c, both of these GLs are picked from ARO BRF plus account determination setting. This will equal the present value of ARO with future value of ARO at the end of ARO contract.

4.Depreciation Charges - User need to follow straight line method as per US GAAP for depreciation calculation on ARO asset. Run depreciation monthly from t-code AFAB. Journal entry is Depreciation a/c Dr // To Accumulated Dep a/c, both of these GLs are picked from AO90 account determination. This will make ARO asset value and accumulated depreciation value equal at the end of ARO contract.

5.Settlement/Decommissioning ARO - At the end of the ARO contract, user need to pass settlement entry that is ARO Liabilities a/c Dr // To Cash a/c

In summary, Asset Retirement Obligation is beautiful concept provided in SAP S/4 HANA. This makes end to end ARO process easy and compliant.

4 Comments
SR218
Newcomer
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There are very rare documents on ARO, this is a nice document. Thank You for sharing the knowledge.

Is there any other documents that explains the different fields and uses of them from ARO master data?

hariharkewat
Explorer
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Sure but writing all the details here is tough. I would suggest you to follow youtube channel - "MY SAP FICO". I found this channel useful. 

NathanGenez
Advisor
Advisor
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This solution is no longer being sold by SAP and is most likely being deprecated.

https://serioconsulting.com/blog/category/aro/

https://serioconsulting.com/services/aro/

 

hariharkewat
Explorer
0 Kudos

Hi @NathanGenez , I am not sure about continuity/discontinuity of functionality, but I have implemented ARO in Oct/2024. Implementation is tricky but not found any GAP in the ARO solution.

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