SAP Japan Customer Innovation Center Solutions August 9th, 2010

Accounting Standard for Asset Retirement Obligation
Version 1.6
SAP Japan
Customer Innovation center
Solutions
August 9th, 2010
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© SAP AG 2009. All rights reserved. / Page 2

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Introduction 4
On March 31st, 2008, Accounting Standard Board of Japan released “ASBJ Statement No.18 Accounting Standard for
Asset Retirement Obligations” and “Guidance No.21 Guidance on Accounting Standard for Asset Retirement
Obligations”.
Based on the information, SAP Japan prepared for the documentation to show the solution example by the use of new
features delivered from SAP ERP 6.0 SP12.
This documentation comprises three parts.
Chapter 1 shows SAP’s understanding of the accounting procedures on Asset Retirement Obligation.
Chapter 2 shows how to set standard FI-GL parameters as examples, in order to make possible this accounting
standard.
We hope this documentation will help you to implement the function.
*IFRS requires companies to post provisions for the discounted amount, therefore SAP delivered the new program
F107_START from the following version (described in Note.1021142).
SAP ERP 6.0 SP12(SAPKH60012), SAP ERP 6.0 EhP2 SP02(SAPKH60202), SAP ERP 6.0 EhP3 SP01(SAPKH60301)
In case of the lower version, please be kindly informed that the solution is delivered as a chargeable consulting service.

Attention 5
This documentation shows you, as an example, how to set FI-GL parameters to

implement the new accounting procedure on Asset Retirement Obligation, based on
“ASBJ Statement No.18 Accounting Standard for Asset Retirement Obligations” and
“Guidance No.21 Guidance on Accounting Standard for Asset Retirement Obligations”,
publicly announced on March 31st, 2008.
Please be informed that you can confirm the standard system behavior of program
F107_START and F107_PROVISIONS (Discounting Provision) by their program documentation.
Screen shots in this documentation are taken from SAP ERP 6.0 SP14(SAP_APPL
SAPKH60014) and where SAP Note.1331293 was applied.
This documentation shows you the solution as an example based on the general
requirements (non-industry-specific requirements and non-customer-specific
requirements). If you have your own specific requirements, this material will not cover all
of your requirements.
If you have any questions regarding this documentation, please contact SAP Japan
Consulting Service or an account executive.

Agenda 6
1. Accounting Standard for Asset Retirement Obligation p.4

2. Solution Example of SAP ERP 6.0 p.22
3. Frequently Asked Questions p.60

Agenda 7


1. Accounting Standard for Asset Retirement Obligation 8
GAAP related on asset retirement obligation
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities
IAS 16 Property, Plant and Equipment
ASBJ Statement No.18 Accounting Standard for Asset Retirement Obligations
Guidance No.21 Guidance on Accounting Standard for Asset Retirement Obligations

(JGAAP) Basic concept of posting the retirement cost as
an asset and allocating cost in the following years
Retirement cost which is equal to asset retirement obligation should be added to NBV of the related assets
when an asset retirement obligation is posted as liabilities. Retirement cost which is posted as assets, and
corresponding to asset retirement obligation, is allocated through the depreciation over the remaining useful
lifes of fixed assets (Paragraph 7).
If the estimation of the future cash flow before the discount is significantly changed, the adjusting amount due
to the significant change of the estimation must be added/subtracted to/from both NBV of the asset retirement
obligation and NBV of fixed assets. If an additional asset retirement obligation occurs due to the legal changes,
it must be processed as same as the case of the estimation changes (Paragraph 10).
The way to post the retirement cost to other assets was discussed, however, the retirement cost is
indispensable for the work of fixed asset, thus, finally, the retirement cost is processed as fixed assets, which
is as same as additional costs on the acquisition of fixed assets (Paragraph 42).
After this accounting standard is applied, if the accounting standard for asset impairment is also applied and
the asset retirement obligation is already posted as liabilities, in order not to doubly realize the affect on the
retirement cost, the retirement cost must not be considered for the estimation of the future cash flow
(Paragraph 44).
The adjusting amount of asset retirement obligation because of the time-passed is posted as expense. This
adjusting amount is calculated by the formula, “NBV of liabilities at year-start * Discount rate at the time when
liabilities was posted” (Paragraph 9). According to IFRS, the discount rate of asset retirement obligation must
be re-estimated and revised every year, however, Japanese accounting standard requires companies to
continuously use the discount rate at the time when liabilities are originally posted. This is the result by
considering the consistency with the treatment of other liabilities or the consistency with allocating the
retirement cost to related fixed assets through the depreciation (Paragraph 49).
Note: Translated by SAP Japan

Comparison between IFRS and JGAAP
IFRS JGAAP
Provision must be tested in every year, and Re-measurement of liabilities sue to the change of
modified if necessary based on the latest and best the discount rate must NOT be executed.
estimation (IAS37, 59)
On asset retirement obligation, if the change of the The discount rate to be used when the estimated
estimated cash flow and the discount rate occurs, cash flow is changed is as follows:
according to IFRIC 1, it must be added/subtracted
to/from NBV of related assets and the adjusting (1) In case of Increasing the estimated cash flow
amount must be realized as gain/loss (IFRIC1, 5)
 Discount rate at that time
(2) In case of decreasing the estimated cash flow
 Discount rate when liabilities are originally posted

(if the discount rate of the decreasing part cannot
be specified, average rate is used.)
The adjusting amount must be added/subtracted

to/from NBV of asset retirement obligation and NBV
of related fixed assets.
Increasing amount of the provision due to the The adjusting amount due to the time-passed is
discount must be realizes as interest cost (IAS37, posted as interest cost in every year.
61).

Case 1 Accounting procedure on ARO(1/4)
X Company acquired Plant A on April 1st, 20X1 and started using it. APC of Plant A was 10,000, its useful life is 5 years, and
the legal obligation to remove Plant A when its useful life expires. The estimated cash flow to remove Plant A is 1,000.
Plant A is removed on March 31st, 20X6. The expenditure on the remove of Plant A is 1,050.
Asset retirement obligation occurs only at the acquisition time, and X Company depreciates Plant A by the straight-line method
and the cut-off value is zero. The discount rate is 3.0%. Balance sheet date of X Company is March 31 st.
Source: Guidance No.21 on Accounting Standard for Asset Retirement Obligation (Heisei 20, March 31st, ASBJ) [Case 1]
April 1st,:20X1, Acquisition of Plant A and post asset retirement obligation

Dr)Fixed asset(Plant A) 10,863 Cr)Cash 10,000
Cr)Asset retirement obligation 863 (*1)
(*1)Estimated cash flow 1,000 / (1.03)^5 = 863
March 31st, 20X2,:because the time passed, asset retirement obligation is Increased
Dr)Cost(Interest cost) 26 Cr)Asset retirement obligation 26 (*2)
(*2)Asset retirement obligation on April 1st, 20X1 863 * 3.0% = 26
March 31st,:20X2 Depreciation of Plant A and the retirement cost posted as an asset
Dr)Cost(Depreciation cost)(*3) 2,173 Cr)Accumulated dep. 2,173
(*3)Depreciation of Plant A 10,000 / 5years + Depreciation of the retirement cost 863 / 5years = 2,173

March 31st,:20X3 Because the time passed, asset retirement obligation is Increased
(*4)Asset retirement obligation on March 31st, 20X2 (863+26) * 3.0% = 27
(*6)Asset retirement obligation on March 31st, 20X3 (863+26+27) * 3.0% = 27

(*8)Asset retirement obligation on March 31st, 20X4 (863+26+27+27) * 3.0% = 28
(*10)Asset retirement obligation on March 31st, 20X5 (863+26+27+27+28) * 3.0% = 29
(*11)Depreciation of Plant A 10,000 / 5years + Depreciation of the retirement cost 863 – 173 * 4 = 2,171

March 31st,:20X6 Remove Plant A and asset retirement obligation is discharged

Plant A should be removed because its useful life expires. The expenditure exceeds the estimated cash flow, therefore the
difference is posted as loss.
Dr)Accumulated dep. 10,863 Cr)Fixed asset(PlantA) 10,863

Dr)Asset retirement obligation(*12) 1,000 Cr)Cash 1,050
Dr)Loss(discharge difference) 50
(*12)Asset retirement obligation on March 31st, 20X6 863+26+27+27+28+29 = 1,000
FY20X1 FY20X2 FY20X3 FY20X4 FY20X5

Asset(APC) 10,000 10,000 10,000 10,000 10,000
In order to post a series of journal
Asset(Annual depreciation) 2,000 2,000 2,000 2,000 2,000 entries, the calculation of amounts
Asset(Accumlated depreciation) 2,000 4,000 6,000 8,000 10,000 described in the left chart might be
Asset(NBV) 8,000 6,000 4,000 2,000 0 necessary.
Useful life 5 5 5 5 5
Retirement Cost(APC) 863 863 863 863 863
Retirement Cost(Annual depreciation) 173 173 173 173 173
Retirement Cost(Accumlated depreciation) 173 345 518 690 863
Retirement Cost(NBV) 690 518 345 173 0
Retirement obligation(Balance at year-start) 863 889 916 943 971
Retirement obligation(interest cost) 26 27 27 28 29
Retirement obligation(Balance at year-end) 889 916 943 971 1,000
Discount rate 3.0% 3.0% 3.0% 3.0% 3.0%

Case 4 Asset retirement obligation occurs due to the
operation
Y Company acquired Plant A on April 1st, 20X1 and started using it. APC of Plant A was 10,000, its useful life is 10 years, and
the legal obligation to remove Plant A when its useful life expires. The estimated cash flow to remove Plant A is 3,000, and
2,000 of 3,000 occurs at the acquisition time of Plant A, and regarding the rest, which is 1,000, 1/10 occurs in every year
because the normal operation of Plant A makes the land polluted.
Y Company depreciates Plant A by the straight-line method and the cut-off value is zero. Y Company does the accounting
procedures described in the furthermore of paragraph 8. Balance sheet date of X Company is March 31 st. In this example, for
the simple explanation, the time-value (discount) is not considered.
Source: Guidance No.21 on Accounting Standard for Asset Retirement Obligation (Heisei 20, March 31st, ASBJ) [Case4]
April 1st,:20X1 Acquisition of Plant A and post asset retirement obligation

Dr)Fixed asset(PlantA) 12,000 Cr)Cash 10,000
Cr)Asset retirement obligation 2,000
(*1)Depreciation of Plant A 12,000 / 10years = 1,200
March 31st,:20X2 Post the retirement cost related to Plant A which occurs due to the operation
Dr)Fixed asset(PlantA) 100 Cr)Asset retirement obligation 100
Dr)Cost(Depreciation cost) 100 Cr)Accumulated dep. 100

Case 5 Change in the estimation of ARO(1/7)
Y Company acquired Plant A on April 1st, 20X1 and started using it. Its useful life is 10 years, and the legal obligation to
remove Plant A when its useful life expires. Y Company posts asset retirement obligation as liabilities and increases NBV of
fixed asset on April 1st, 20X1. Y Company calculates the discount value of asset retirement obligation by the use of the
estimated cash flow and the discount rate. Asset retirement obligation occurs only at the time of acquisition, and the change of
asset retirement obligation is made by the change of the estimation. Y Company depreciates Plant A by the straight-line
method and the cut-off value is zero. Balance sheet date of Y Company is March 31st.
In this example, for the simple explanation, only the accounting procedures on asset retirement obligation related to
acquisition.
Estimated future cash flow for the removal Discount rate
No change
Increase to 1,500
Decrease to 1,000
No change
Source: Guidance No.21 on Accounting Standard for Asset Retirement Obligation (Heisei 20, March 31st, ASBJ) [Case5]
April 1st, 20X1: Post asset retirement obligation related to the acquisition of Plant
Dr)Fixed asset 1,035 Cr)Asset retirement obligation 1.035
* The estimated cash flow 1,200 / (1+0.03)^5 = 1,035

March 31st, 20X2: Increase asset retirement obligation because the time passed
Dr)Cost(Interest cost) 31 Cr)Asset retirement obligation 31
* Asset retirement obligation as of April 1st, 20X1 1,035 * 3.0% = 31
March 31st, 20X2: Depreciation of the retirement cost posted as an asset

* Retirement cost posted as an asset on April 1st, 20X1 1,035 / 5 years = 207
*Asset retirement obligation as of April 1st, 20X2 (1,035+31) * 3.0% = 32

* Retirement cost posted as an asset on April 1st, 20X1 1,035 / 5 years = 207

March 31st, 20X3: Asset retirement obligation is adjusted due to the increase of the estimated cash flow
Dr)Fixed asset 279 Cr)Asset retirement obligation 279
* The increase of the estimated cash flow 300 / (1+0.025)^3 = 279
* Asset retirement obligation as of March 31st, 20X3 (1,035+31+32+279) * 2.9%(Weighted average discount rate) = 40
* Weighted average discount rate2.9% = (Initially estimated cash flow 1,200 / 1,500) * 3.0%＋(Increasing amount of estimated cash flow as of March
31st, 20X3 300 / 1,500) * 2.5%

* Retirement cost posted as an asset on April 1st, 20X1 1,035 / 5 years + Retirement cost posted as an asset on March 31st, 20X3 279 / 3years =
300
March 31st, 20X4: Asset retirement obligation is adjusted due to the decrease of the estimated cash flow
Dr)Asset retirement obligation 473 Cr)Fixed asset 473
* The estimated cash flow as of March 31st, 20X4 1,000 / (1+0.029)^2 - NBV of asset retirement obligation as of March 31st, 20X4
(1,035+31+32+279+40) = △473

* Asset retirement obligation as of March 31st, 20X4 (1,035+31+32+279+40-473) * 2.9% = 28

* Retirement cost posted as an asset on April 1st, 20X1 1,035 / 5 years + Retirement cost posted as an asset on March 31st, 20X3 279 / 3years -
Retirement cost deducted from assets in 20X4 year 473 / 2 years = 64
* Asset retirement obligation as of March 31st, 20X5 (1,035+31+32+279+40-473+28) * 2.9% = 28

* Retirement cost posted as an asset on April 1st, 20X1 1,035 / 5 years + Retirement cost posted as an asset on March 31st, 20X3 279 / 3years -
Retirement cost deducted from assets in 20X4 year 473 / 2 years = 63

March 31st, 20X6: Discharge asset retirement obligation

Dr)Asset retirement obligation 1,000 Cr)Cash 1,000

In order to create a series of journal entries above, the calculation like below is expected.

Asset(APC) 10,000 10,000 10,000 10,000 10,000
Asset(Annual depreciation) 2,000 2,000 2,000 2,000 2,000
Asset(Accumlated depreciation) 2,000 4,000 6,000 8,000 10,000
Asset(NBV) 10,000 8,000 6,000 4,000 2,000 0
Remaining useful life 5 4 3 2 1
A.20X1.04.01 Initial posting of ARO (Cash flow before discount = 1,200)

Retirement Cost(APC) 1,035 1,035 1,035 1,035 1,035
Retirement Cost(Accumlated depreciation) 207 414 621 828 1,035
Retirement Cost(NBV) 1,035 828 621 414 207 0
Retirement obligation(Balance at year-start) 1,035 1,066 1,098 1,131 1,165
Retirement obligation(Balance at year-end) 1,035 1,066 1,098 1,131 1,165 1,200
Discount rate 3.0% 3.0% 3.0% 3.0% 3.0%
B.20X3.03.31 Additional posting of ARO (Cash flow before discount = 300)

Retirement Cost(APC) 279 279 279
Retirement Cost(Annual depreciation) 93 93 93
Retirement Cost(Accumlated depreciation) 93 186 279
Retirement Cost(NBV) 279 186 93 0
Remaining useful life 3 2 1
Retirement obligation(Balance at year-start) 279 286 293
Retirement obligation(interest cost) 7 7 7
Retirement obligation(Balance at year-end) 279 286 293 300
Discount rate 2.5% 2.5% 2.5%
In case that the estimated cash flow increase, the discount

rate at that time should be used.

C.20X4.03.31 Decrease posting of ARO from Initial ARO (A) --- Proportionally
Retirement Cost(APC) (377) (377) In case that the estimated
Retirement Cost(Annual depreciation) (189) (189)
Retirement Cost(Accumlated depreciation) (189) (377) cash flow decrease, the
Retirement Cost(NBV) (377) (189) 0 discount rate at the posting
Remaining useful life 2 1 time of ARO should be used.
Retirement obligation(Balance at year-start) (377) (388)
Retirement obligation(interest cost) (11) (12)
(If companies cannot identify
Retirement obligation(Balance at year-end) (377) (388) (400) the specific discount rate for
Discount rate 3.0% 3.0% the decreasing part, the
weighted average discount
D.20X4.03.31 Decrease posting of ARO from Additional ARO (B) --- Proportionally
Retirement Cost(APC) (95) (95) rate can be accepted.)
Retirement Cost(Annual depreciation) (48) (48)
Retirement Cost(Accumlated depreciation) (48) (95)
Retirement Cost(NBV) (95) (48) 0
Remaining useful life 2 1
Retirement obligation(Balance at year-start) (95) (98)
We can get the same result
Retirement obligation(interest cost) (2) (2) by the following way.
Retirement obligation(Balance at year-end) (95) (98) (100)
Discount rate 2.5% 2.5% (1)The decreasing
estimated cash flow before
E.Total=A+B+C+D
Retirement Cost(APC) 0 1,035 1,035 1,314 841 841 discount is divided by the
Retirement Cost(Annual depreciation) 0 207 207 300 64 64 ratio of ARO
Retirement Cost(Accumlated depreciation) 0 207 414 714 778 841
Retirement Cost(NBV) 1,035 828 900 128 64 0 (2)They are discounted by
Retirement obligation(Balance at year-start) 0 1,035 1,066 1,377 944 972
each ratio, respectively.
Retirement obligation(interest cost) 0 31 32 40 27 28
Retirement obligation(Balance at year-end) 1,035 1,066 1,377 944 972 1,000

Begining balance of the first year (Paragraph18,19)
18. The beginning balance of the first year to adopt this accounting standard is calculated like below, and the difference must be posted as a loss in the
first year to adopt this accounting standard.
(1) Asset retirement obligation related to the existing assets at the year-start of the first year to adopt this accounting standard is calculated by the
estimated cash flow before discount and the discount rate at the year-start of the first year to adopt this accounting standard.
(2) Retirement cost which is included in NBV of the existing assets at the year-start of the first year to adopt this accounting standard is calculated like
below:
( Initial retirement cost calculated under the prerequisite that the estimated cash flow before discount and the discount rate at the time when asset
retirement obligation occurs are as same as those at the year-start of the first year to adopt this accounting standard ) – (accumulated depreciation by the
year-start to adopt this accounting standard )
19. Even if asset retirement obligation related to the existing assets at the year-start of the first year to adopt this accounting standard is already posted
as provisions, asset retirement obligation and the beginning balance of related fixed assets must be calculated based on the paragraph 18, and the
ending balance of provisions is taken over to asset retirement obligation.
FY20X1 FY20X2 FY20X3 FY20X4 FY20X5 If 20X3 is the first year to adopt the new
Asset(APC) 10,000 10,000 10,000 10,000 10,000
Asset(Annual depreciation) 2,000 2,000 2,000 2,000 2,000
accounting standard,
Asset(Accumlated depreciation) 2,000 4,000 6,000 8,000 10,000
Asset(NBV) 8,000 6,000 4,000 2,000 0 NBV at year-start (Retirement cost) 518
Retirement Cost(APC) 863 863 863 863 863 NBV of Asset retirement obligation 916
Retirement Cost(Accumlated depreciation) 173 345 518 690 863
Retirement Cost(NBV) 690 518 345 173 0 Dr)Fixed asset 863
Retirement obligation(Balance at year-start) 863 889 916 943 971 Cr)Accumulated dep. 345
Retirement obligation(Balance at year-end) 889 916 943 971 1,000
Discount rate 3.0% 3.0% 3.0% 3.0% 3.0% Cr)Asset retirement obligation 916
Dr)Loss 398
* If companies have already posted “Provision”, this
provision should be allocated to “Asset retirement
obligation”, thus “Loss” amount will decrease.

Agenda 24

1. Scope of SAP solutions p.23
2. Parameter setting of PGM: F107_START p.24
3. Posting asset retirement obligation and monthly procedure p.33
4. Appendix p.53
1. Case: Change in the discount rate
2. Case: Decrease (resolution) asset retirement obligation

2.1. Scope of SAP solutions 25
Accounting procedure and scope of SAP solutions
Does not exist

No action
List objects which Estimate the

Judge whether the Exists
may have the retirement cost
obligation exists on Obligation
obligation on the (cash out-flow
its retirement cost
retirement cost before discount)
FI-GL
Post an asset Is changed
Calculate present Adjust the asset Reversal of asset
retirement Is not changed
value on the asset retirement retirement
obligation (cash out- Estimation
retirement obligation because obligation due to the
flow before
obligation the time passed retirement
discount)
T-cd.FB01 PGM: F107_START PGM: F107_START T-cd.FB01
Able to just
You must
calculate PV by the
manually post
provision simulation
journal entries T-cd.ABZON T-cd.AFAB T-cd.ABAVN
function
Depreciate the
Post the retirement
retirement cost over
Calculate PV of the Calculate NBV of cost as an Assets are retired
the remaining useful
retirement cost at the retirement cost acquisition
life years
the time when it at the beginning of
occurred the first year
PGM: F107_PROVISIONS * If you depreciate the retirement cost over the remaining useful life of a main asset, you FI-AA
must use another asset (sub) number, or another depreciation area. You must consider
that you cannot assign “1 Area posts in realtime” to another depreciation area for the
retirement cost.

2.2. Parameter setting of PGM: F107_START 26
Discounting of provisions: IMG
1 You define “valuation areas” for discounting provision (Asset

retirement obligation). You assign the defined valuation area
to “accounting principles” and assign “accounting principles”
to “ledger group”.
2
You define “calculation methods (the discount rate and the
time unit of the discount calculation)” for provision (Asset
retirement obligation). You use “interest indicator” to specify
the discount rate, thus you must define “interest calculation
type” in advance.
34
You connect transaction types with actions.
“Action” means each activity in a series of the accounting

procedures for provision (Asset retirement obligation).
1
We can understand that “action” connects the accounting
procedures for asset retirement obligation with transaction
types in SAP system.
2
3
4
5
5 You define the account determination for the automatic
postings per the combination of the chart of account, the
6 valuation area, and transaction keys.
6 You modify the logic to decide the start date of discount

calculation.

1.Define valuation area 1/2
IMG:Financial Accounting (New)  General Ledger Accounting (New)  Periodic Processing  Valuate  Define Valuation
Areas
The valuation method 10 should be used.
You define your valuation area with your own name.

In this example, the valuation area is E2.
Per valuation area, you specify G/L account/Currency

type/Valuation method, and execute the valuation run.
View: V_FAGL_T033
IMG:Financial Accounting (New)  General Ledger Accounting (New)  Periodic Processing  Valuate  Define
Valuation Methods
If the valuation method 10 is not defined, you must define the

valuation method 10.
View: V_FAGL_T044A
1.Define valuation area 2/2
IMG:Financial Accounting (New)  General Ledger Accounting (New)  Periodic Processing  Valuate  Check
Assignment of Accounting Principle to Ledger Group
Accounting principle “GAAP”  Target Ledger

Group 0L
View: V_FAGL_TRGT_LDGR
IMG:Financial Accounting (New)  General Ledger Accounting (New)  Periodic Processing  Valuate  Assign
Valuation Areas and Accounting Principles
Valuation area E2  Accounting principle GAAP
View: V_TACC_BWBER_PR

2.Define calculation method and interest indicator
You define the calculation method for discounting of provision (G/L account).
View: F107_V_TPROVMETH
View: F107_V_TPROVMETH_T
View: V_T056Z
JGAAP does not request companies

to re-estimate provisions due to the
change of the discount rate, therefore
one interest rate is assigned to one
View: F107_V_TPROVMETD interest indicator.
Interest calculation type should be defined in advance.
View: V_T056

34.Assign transaction type to action
You (define and) specify the transaction type for the movement of the balance
of the provision (G/L account). The transaction type should be assigned to the
fixed action. When the valuation is run, based on these actions, the calculation
is executed and G/L accounts are decided.
1 Allocation Initial posting of provisions (Credit)
2 Utilization/Consumption Decrease of provision (Debit)
3 Dissolution* Decrease of provision (Debit)

*In English, the term is either “Recognition” or “Dissolution”.
View: F107_V_TASS_MT2A
**No difference on the system behavior between the transaction type 540 (2
Utilization/Consumption) and the transaction type 560 (3 Dissolution) exists. From the
business point of view, 2 transaction types are pre-defined.
***According to JGAAP, in case that the estimated cash flow is decreased, not only
asset retirement obligation but also the retirement cost should be decreased for the
present value, therefore SAP guess that 2 Utilization/Consumption and 3 Dissolution
are not used.
You (define and) specify the transaction type for the following actions after
provisions (G/L account) are posted. The following action should be assigned to
the transaction type. Based on these transaction type, when the valuation is run,
the journal entries are automatically created.
4 Initial discounting Discount of provisions posted by 1 allocation
5 Follow-on Interest Accumulation post interest
15 Discount Reversal Reversal of initial discounting and interest
7 Discount Correction from Allocation Reversal Discount of provisions reversal

View: F107_V_TASS_A2MT posted by 11 Allocation Reversal
*JGAAP does not require companies to re-estimate liabilities due to the change of the
discount rate, thus 6 Discount with interest change is not used.

5.Account determination for valuation
Adjustment of provision Interest (Adjustment of PV of provision) Offset account of provision
Table: T030U Table: T030U Table: T030U

5.Account determination for valuation (Note)
Transaction types, actions, and posting procedures are like below. All accounts must be defined as “G/L Account”.
Transaction Type Description(EN) Action Description(EN) Posting Procedure
Dr) Cr)
Manual 520 Allocation 1 Allotacion ZKR Allocation Account RSK Provision Account
Manual 540 Drawing 2 Utilization / Consumption RSK Provision Account RKV Consumption Account
Manual 560 Elimination 3 Recognition RSK Provision Account RKA Recognition Account
Manual 120 Acquisitions 11 Allocation Reversal RSK Provision Account ZKR Allocation Account
Manual 140 Retirements 12 Utilization / Consumption Reversal RKV Consumption Account RSK Provision Account
Manual 170 Transfers 13 Recognition on Reversal RKA Recognition Account RSK Provision Account
Automatic 275 Write-ups 4 Initial Discount RKK Provision Adjustment Account ZKK Allocation Adjustment Account
Automatic 270 Depr.-transfers 15 Discount Reversal ZKB Allocation Account from PV RKK Provision Adjustment Account
RKK Provision Adjustment Account ZKB Allocation Account from PV
Automatic 125 Interco.acquisitions 5 Follow-on Interest Accumulation ZKB Allocation Account from PV RKK Provision Adjustment Account
RKK Provision Adjustment Account ZKB Allocation Account from PV
Automatic 130 Acquis.cons.entity 6 Discounting with Interest Change RKK Provision Adjustment Account ZKK Allocation Adjustment Account
ZKK Allocation Adjustment Account RKK Provision Adjustment Account
Automatic 275 Write-ups 7 Discount Correction from Allocation Reversal ZKK Allocation Adjustment Account ZKB Allocation Account from PV
*PV = Present Value
G/L account items posted by the transaction key RSK are chosen as provisions to be discounted when the valuation is run.

6.Modify the start date of discount calculation for
reversed provision item
Regarding the way of the BADI
implementation, please see the IMG
documentation of “Enhance Valuation
Run for Open Items”
Financial Accounting (New)  General
Ledger Accounting (New)  Periodic
Processing  Valuate  Discounting of
Long-Term Receivables, Payables, and
Calculation star date = Key Date for OI
Provisions  Enhance Valuation Run for
Overview
Open Items
In case that the action type is “11
allocation reversal”, calculation start date
= Valuation date of the previous period
Effective date = Posting date of the

provision
Valuation date = Key Date for OI
Overview
In case of action 11 allocation reversal, the

calculation start date should be the key
<Example logic>
date for OI overview (in other words, it
If the valuation method is 10 and the
should be processed same as 1 allocation),
action type is 11 allocation reversal, the
using BADI, the calculation start date of
calculation start date is valuation date.
provisions posted by 11 allocation reversal
should be changed to the key date for OI
:
overview (BADI Definition F107_RUN,
Method CHANGE_ITEM).
Note on the G/L account definition of asset retirement
obligation
G/L account of provision (Asset retirement obligation) is not treated as the scope of valuation method 10 if it is not defined
as an “open item management” account.

2.3. Post asset retirement obligation and monthly procedure 35
Case 5 Change in the estimation of ARO 1/2
The example solution is explained by the use of CASE 5 of Guidance No.21 (P.14-P.20).
1 Estimated cash flow after 5 years 1,200 (discount rate3.0%)

ARO 1,200
Discount Rate 3.00% Annual
Periods 60
Period End Date NPV Interest Discount Annual Interest
0 2009.03.31 1,035.13 164.87
1 2009.04.30 1,037.68 2.55 162.32
Present value calculation
2 2009.05.31 1,040.24 2.56 159.76
3 2009.06.30 1,042.81 2.57 157.19 1,200 / (1+3.0%)^((60-0)/12) = 1,035.13
4 2009.07.31 1,045.38 2.57 154.62
5 2009.08.31 1,047.96 2.58 152.04 1,200 / (1+3.0%)^((60-1)/12) = 1,037.68
6 2009.09.30 1,050.54 2.58 149.46
7 2009.10.31 1,053.13 2.59 146.87
8 2009.11.30 1,055.73 2.60 144.27
9 2009.12.31 1,058.33 2.60 141.67
10 2010.01.31 1,060.94 2.61 139.06 Interest calculation
11 2010.02.28 1,063.56 2.62 136.44
12 2010.03.31 1,066.18 2.62 133.82 31.05
13 2010.04.30 1,068.81 2.63 131.19 1,037.68 – 1,035.13 = 2.55
14 2010.05.31 1,071.45 2.64 128.55
15 2010.06.30 1,074.09 2.64 125.91
2 Additional estimated cash flow when 2 years expires 300 (discount rate2.5%)
ARO 300
Periods 60
24 2011.03.31 278.58 21.42
25 2011.04.30 279.15 0.57 20.85 Present value calculation
26 2011.05.31 279.73 0.58 20.27
27 2011.06.30 280.30 0.58 19.70
300 / (1+2.5%)^((60-24)/12) = 278.58
28 2011.07.31 280.88 0.58 19.12
29 2011.08.31 281.46 0.58 18.54
30 2011.09.30 282.04 0.58 17.96 300 / (1+2.5%)^((60-25)/12) = 279.15
31 2011.10.31 282.62 0.58 17.38
32 2011.11.30 283.20 0.58 16.80
33 2011.12.31 283.79 0.58 16.21
34 2012.01.31 284.37 0.58 15.63
35 2012.02.28 284.96 0.59 15.04 Interest calculation
36 2012.03.31 285.54 0.59 14.46 6.96
37 2012.04.30 286.13 0.59 13.87 279.15 – 278.58 = 0.57
38 2012.05.31 286.72 0.59 13.28
39 2012.06.30 287.31 0.59 12.69

Case 5 Change in the estimation of ARO 2/2
3 Decrease the estimated cash flow when 3 years expires. Decreasing amount is 500.
ARO -400
Discount Rate 3.00% 400 of 500 should be decreased from the
Periods 60
initial part and the discount rate to be used is
36 2012.03.31 -377.04 -22.96 3.0% at the time of the initial posting. The
37 2012.04.30 -377.97 -0.93 -22.03
38 2012.05.31 -378.90 -0.93 -21.10 calculation start date is March 31st, 2012.
39 2012.06.30 -379.83 -0.93 -20.17
40 2012.07.31 -380.77 -0.94 -19.23
41 2012.08.31 -381.71 -0.94 -18.29 400 = 500 * 1,200 / (1,200+300)
42 2012.09.30 -382.65 -0.94 -17.35
43 2012.10.31 -383.60 -0.94 -16.40 Present value calculation
44 2012.11.30 -384.54 -0.95 -15.46
45 2012.12.31 -385.49 -0.95 -14.51 - 400 / (1+3.0%)^((60-36)/12) = - 377.04
46 2013.01.31 -386.44 -0.95 -13.56
47 2013.02.28 -387.39 -0.95 -12.61
48 2013.03.31 -388.35 -0.96 -11.65 -11.31 - 400 / (1+3.0%)^((60-37)/12) = - 377.97
49 2013.04.30 -389.31 -0.96 -10.69
50 2013.05.31 -390.27 -0.96 -9.73
51 2013.06.30 -391.23 -0.96 -8.77 Interest calculation
- 377.97 – 377.04 = - 0.93
ARO -100
Discount Rate 2.50% Annual 100 of 500 should be decreased form the
Periods 60 initial part and the discount rate to be used is
36 2012.03.31 -95.18 -4.82 2.5% at the of the additional posting. The
37 2012.04.30 -95.38 -0.20 -4.62
38 2012.05.31 -95.57 -0.20 -4.43
calculation start date is March 31st, 2012.
39 2012.06.30 -95.77 -0.20 -4.23
40
41
2012.07.31
2012.08.31
-95.97
-96.17
-0.20
-0.20
-4.03
-3.83
100 = 500 * 300 / (1,200+300)
42 2012.09.30 -96.36 -0.20 -3.64
43 2012.10.31 -96.56 -0.20 -3.44 Present value calculation
44 2012.11.30 -96.76 -0.20 -3.24
45 2012.12.31 -96.96 -0.20 -3.04 - 100 / (1+2.5%)^((60-36)/12) = - 95.18
46 2013.01.31 -97.16 -0.20 -2.84
47 2013.02.28 -97.36 -0.20 -2.64
48 2013.03.31 -97.56 -0.20 -2.44 -2.38 - 100 / (1+2.5%)^((60-37)/12) = - 95.38
49 2013.04.30 -97.76 -0.20 -2.24
50 2013.05.31 -97.96 -0.20 -2.04
51 2013.06.30 -98.17 -0.20 -1.83
Interest calculation
- 95.38 – 95.18 = - 0.20

Assign provision contents (t-cd.F107_PROV)
You define the provision contents (like the master of provision calculation method) for the combination of the chart of account
and the valuation area.
View: F107_V_TPROVH
View: F107_V_TPROV
Provision content “E2GAAP0L” has 2 entries. The calculation method X001 is for provision account
(Asset retirement obligation) 533008, and the calculation method X002 is for provision account
(Asset retirement obligation) 533010.
Asset retirement obligation account : Calculation Method = 1 : 1
Calculation Method : Discount rate through the calculation period (Interest indicator) = 1 : 1
(JGAAP does not require companies to re-estimate liabilities due to the change of the discount rate)
Thus, you must define another G/L account for Asset retirement obligation if the discount rate to be
applied is different.

Initially post asset retirement obligation(t-cd.FB01)
You post asset retirement obligation (Credit) for 1,200 which is the estimated cash flow before discount. If you set any key in the
field of “reference” of the document header, you can show this in the report (RFVALU10).
In the program “F107_START”, it has the prerequisite that the end date of month is the base date for the calculation of remaining
periods, and the calculation start date for asset retirement obligation posted during the month is the end date of the month
(Exception: Action11 allocation reversal). In CASE5 of Guidance No.21, the posting date is April 1st, however, from the system
point of view, please post March 31st in the previous fiscal year. In order not to present asset retirement obligation on balance
sheet of the previous fiscal year, please also post the proper adjustment entries in FI-GL.
You assign the date (5 years after the initial posting) to the base line
date, “520” to the transaction type, and the provision content
“E2GAAP0L” to the assignment, respectively of the credit item of asset
retirement obligation.
*The standard logic uses the assigned value to BSEG-ZUONR to decide

the provision content, however, you define your own decision logic by
BADI (BADI Definition F107_RUN, Method GET_OBJECT_KEY).

Additionally post asset retirement obligation(t-cd.FB01)
You post asset retirement obligation (Credit) for 300 which is the additional estimated cash flow before discount. Because the
discount rate to be applied is different, you post another asset retirement obligation account (Please refer to P.34). If you set
any key in the field of “reference” of the document header, you can show this in the report (RFVALU10).
You assign the date (3 years after the additional posting) to the base
line date, “520” to the transaction type, and the provision content
“E2GAAP0L” to the assignment, respectively, to the credit item of
asset retirement obligation.
*The standard logic uses the assigned value to BSEG-ZUONR to

decide the provision content, however, you define your own decision
logic by BADI (BADI Definition F107_RUN, Method
GET_OBJECT_KEY).

Decrease asset retirement obligation(t-cd.FB01)
You post asset retirement obligation (Debit) for 400 which is the decreasing estimated cash flow before discount,
corresponding to asset retirement obligation initially posted on March 31st, 2009. If you set any key in the field of “reference”
of the document header, you can show this in the report (RFVALU10).
You assign the date (2 years after the decreasing posting) to the
base line date, “120” to the transaction type, and the provision
content “E2GAAP0L” to the assignment, respectively, to the debit
item of asset retirement obligation.

GET_OBJECT_KEY).

Decrease asset retirement obligation(t-cd.FB01)
corresponding to asset retirement obligation additionally posted on March 31st, 2011. If you set any key in the field of
“reference” of the document header, you can show this in the report (RFVALU10).
You assign the date (2 years after the decreasing posting) to the base
line date, “120” to the transaction type, and the provision content
“E2GAAP0L” to the assignment, respectively, to the debit item of asset
retirement obligation.

GET_OBJECT_KEY).

Consume asset retirement obligation (t-cd.FB01)
corresponding to asset retirement obligation initially posted on March 31st, 2009. If you set any key in the field of “reference”
of the document header, you can show this in the report (RFVALU10).
“E2GAAP0L” to the assignment, respectively, to the debit item of

GET_OBJECT_KEY).

Consume asset retirement obligation (t-cd.FB01)
corresponding to asset retirement obligation additionally posted on March 31st, 2011. If you set any key in the field of
“reference” of the document header, you can show this in the report (RFVALU10).
“E2GAAP0L” to the assignment, respectively, to the debit item of

GET_OBJECT_KEY).

Valuation run: F107_START(t-cd.SE38)
Delete entries of BWPOS, BWPOSI (Caution: after you post FI
key of F107: List details (for
documents, if you want to delete the entries, you could delete them
(Run date + valuation
by t-cd.SE16, however, the consistency with FI documents cannot
Identification) method 10)
be kept.)
Items with the clearing

date after “Key Date for
OI Overview” are
selected, and “Key Date
for OI Overview”
becomes the
calculation start date of
the valuation run.
Immediately create Test posting Transfer

entries in the table:
BWPOS, BWPOSI
If you mark “Posting required” in the posting parameter
tab and push “Test posting”, you can see the journal
After you run the valuation, the entries are created in the table BWPOS, BWPOSI (only for entries which is about to be posted in advance.
valuation method 10). You cannot do “Reset” after “Transfer”.
If you mark “Posting required” in the posting parameter
tab and push ”Transfer”, FI documents are automatically
created.

Valuation run: F107_START(t-cd.SE38) Detail list / test
posting 1/
If you execute the valuation run for the asset retirement obligation account 533008 with the key date of OI overview
“2009.03.31”, the result is as follows:
The posting date becomes the maturity start date of
asset retirement obligation, and the base line date
becomes the maturity end date of asset retirement
obligation.
The system calculates the remaining periods by counting

the number from the calculation start date to the maturity
end date, specifies the provision content by the
assignment (ZUONR), and calculates the discounted
value by the calculation method as of the calculation start
date.
When the system calculates the remaining periods, the

base date is the end date of month. If the asset
retirement obligation is posted during the month
(including the start date of month, the end date of month
becomes the calculation start date (Exception: Action 11
allocation reversal).
3/31 transaction type 520 initial posting
Dr)461310 G/L Fixed asset adjustment 1,200

Cr)533008 G/L Asset retirement obligation’08 1,200
3/31 transaction type 275 initial discount (action4)
Dr)533108 G/L Asset retirement obligation’08 adjustment 165

Cr)461310 G/L Fixed asset adjustment 165
4/1 transaction type270 reversal: discount (action15)
Dr)881010 Interest expense 165

Cr)533108 G/L Asset retirement obligation’08 adjustment 165

posting 2/
If you execute the valuation run for the asset retirement obligation account 533008 with the key date of OI overview
“2009.04.30”, the result is as follows:

asset retirement obligation, and the baseline date
obligation.
The system calculates the remaining periods by

counting the number from the calculation start date to
the maturity end date, specifies the provision content by
the assignment (ZUONR), and calculates the discounted
value by the calculation method as of the calculation
start date.
4/30 transaction type125 following discount (action5)

Cr)881010 Interest expense 162
Dr)881010 interest expense 162


posting 3/
If you execute the valuation run for the asset retirement obligation account 533008 and 533010 with the key date of OI
overview “2011.03.31”, the result is as follows:

asset retirement obligation, and the baseline date
obligation.

the assignment (ZUONR), and calculates the discounted
value by the calculation method as of the calculation
start date.
Dr)461310 G/L Fixed asset adjustment 300

Cr)533010 Asset retirement obligation’10 300
3/31 transaction type275 initial discount (action4)

Cr)461310 G/L Fixed asset adjustment 21
Dr)881010 interest expense 21


posting 4/
Original posting date becomes the maturity start date of

reversed asset retirement obligation, and the baseline
date becomes the maturity end date of asset retirement
obligation.

the assignment (ZUONR), and calculates the
discounted value by the calculation method as of the
calculation start date.
Regarding the provision (asset retirement obligation)

debit item (action 11 allocation reversal), because the
standard logic starts the discount calculation from the
previous valuation date, by the implementation of the
logic described in P.31, the calculation start date of the
debit item (action 11 allocation reversal) becomes “key
date for OI over view” (= the end date of month).
The calculation
start date for all
items (both
credit and debit)
is “key date for
OI overview”

posting 5/
3/31 transaction type120 discount reversal (action11)
Dr)533008 G/L Asset retirement obligation’08 400 Cr)461310 G/L Fixed asset adjustment 400
Dr)461310 G/L Fixed asset adjustment 23 Cr)881010 Interest expense 23
Asset retirement obligation’08 3/31 transaction type125 following discount (action5)

1,200(Cr), 400(Dr) Cr)881010 Interest expense 69


3/31 transaction type120 discount reversal (action11)
Dr)533008 G/L Asset retirement obligation’10 100 Cr)461310 G/L Fixed asset adjustment 100
Dr)461310 G/L fixed asset adjustment 14 Cr)881010 Interest expense 14

Asset retirement obligation’10 Cr)533108 G/L Asset retirement obligation’10 adjustment 5
400(Cr), 100(Dr)

Dr)533108 G/L Asset retirement obligation’10 adjustment 5 Cr)881010 Interest expense 5

posting 6
Original posting date becomes the maturity start date of
reversed asset retirement obligation, and the baseline
date becomes the maturity end date of asset retirement
obligation.

the assignment (ZUONR), and calculates the
discounted value by the calculation method as of the
calculation start date.
Regarding the provision (asset retirement obligation)

debit item (action11 allocation reversal), because the
standard logic starts the discount calculation from the
previous valuation date, by the implementation of the
logic described in P.31, the calculation start date of the
debit item (action11 allocation reversal) becomes “key
date for OI over view” (= the end date of month).
The calculation
start date for all
items (both
credit and debit)
is “key date for
OI overview”

posting 7/

Asset retirement obligation’08 1,200(Cr), 400(Dr)



Asset retirement obligation’10 400(Cr), 100(Dr) Dr)881010 Interest expense 5



posting 8/
Original posting date becomes the maturity start

date of reversed asset retirement obligation, and the
baseline date becomes the maturity end date of

counting the number from the calculation start date
to the maturity end date, specifies the provision
content by the assignment (ZUONR), and
calculates the discounted value by the calculation
method as of the calculation start date.
Because the remaining periods becomes zero, the

system concludes that the discount calculation is
not necessary, thus the estimated cash flow before
discount becomes the amount of asset retirement
obligation.
* No item of the asset retirement obligation to be discounted exists, therefore the screen to show the journal entries is not
displayed even if you execute “Test posting”.

F107_PROVISIONS(t-cd.SE38) Provision simulation 1/2
Calculation method By the simulation function, you can see the

has the time unit
and the discount schedule of the discounted amount and the
rate.
interest expense for each asset retirement
obligation over the effective periods, per the
Maturity start discount rate(*).
date and
maturity end
date * The calculation method is expected to have one
Whether to
discount rate under JGAAP.
display the
calculation
result offset or Calculation
not start date
The next slide shoes you the result of the

simulation for asset retirement obligation’08
Effective start date
1,200 in CASE 5 of Guidance No.21.
of asset retirement
obligation (Posting
date of provision)

F107_PROVISIONS(t-cd.SE38) Provision simulation 2/2
Although the journal entries is not created, the image is as follows:
T-cd.FB01
Dr)461310 Fixed asset adjustment 1,200 Cr)533008
Asset retirement obligation 1,200
Dr)533108 Asset retirement obligation adjustment 165 Cr)461310 Fixed asset adjustment 165
Dr)881010 Interest expense 165 Cr)533108 Asset retirement obligation adjustment 165
Dr)533108 Asset retirement obligation adjustment 162 Cr)881010 Interest expense 162

T-cd.FB01
Dr)533008 Asset retirement obligation 400 Cr)461310 Fixed asset adjustment 400
Dr)461310 Fixed asset adjustment 23 Cr)461310 Interest expense 23



2.4.Appendix 55
F107_START Main logics
Program F107_RUN
Function Module F107_VALUATION_10
F107_PROVISION_CALCULATE
F107_PROVISION_CALCULATE_SIMU
PRESENT_FUTURE_VALUE_COMPUTE
VALUATION_CREATE_POSTINGS_10
Class CL_F107_PROVISION_SUBJECT
CL_F107_PROVISION_ACTION
CL_F107_PROVISION_POST_SCHEMA
CL_F107_PROVISION_CALCULATION
BADI Definition F107_RUN

2.4.Appendix 56
Change of discount rate 1/3
You post G/L items of asset retirement obligation same as P.36 and P.37, and the discount rate from March 31 st, 2011 is
changed to 2.5% from 3.0%. The calculation result is as follows.
1 Estimated cash flow after 5 years 1,200(discountrate 3.0%)  Discount rate 2.5% from March 31st, 2011
ARO 1,200 1,200
Discount Rate 3.00% Annual 2.50% Annual
Periods 60 60
Period End Date NPV Interest Discount Annual Interest NPV Interest Discount Annual Interest
0 2009.03.31 1,035.13 164.87 1,060.63 139.37
1 2009.04.30 1,037.68 2.55 162.32 1,062.81 2.18 137.19
2 2009.05.31 1,040.24 2.56 159.76 1,065.00 2.19 135.00
Present value calculation
3 2009.06.30 1,042.81 2.57 157.19 1,067.19 2.19 132.81
4
5
2009.07.31
2009.08.31
1,045.38
1,047.96
2.57
2.58
154.62
152.04
1,069.39
1,071.59
2.20
2.20
130.61
128.41
1,200 / (1+3.0%)^((60-0)/12) = 1,035.13
6 2009.09.30 1,050.54 2.58 149.46 1,073.80 2.21 126.20
7 2009.10.31 1,053.13 2.59 146.87 1,076.01 2.21 123.99 1,200 / (1+3.0%)^((60-1)/12) = 1,037.68
8 2009.11.30 1,055.73 2.60 144.27 1,078.23 2.22 121.77
9 2009.12.31 1,058.33 2.60 141.67 1,080.45 2.22 119.55
10 2010.01.31 1,060.94 2.61 139.06 1,082.68 2.23 117.32
11 2010.02.28 1,063.56 2.62 136.44 1,084.91 2.23 115.09 Interest calculation
12 2010.03.31 1,066.18 2.62 133.82 31.05 1,087.14 2.23 112.86 26.52
13 2010.04.30 1,068.81 2.63 131.19 1,089.38 2.24 110.62
14 2010.05.31 1,071.45 2.64 128.55 1,091.62 2.24 108.38 1,037.68 – 1,035.13 = 2.55
15 2010.06.30 1,074.09 2.64 125.91 1,093.87 2.25 106.13
16 2010.07.31 1,076.74 2.65 123.26 1,096.13 2.25 103.87
17 2010.08.31 1,079.40 2.66 120.60 1,098.38 2.26 101.62
18 2010.09.30 1,082.06 2.66 117.94 1,100.65 2.26 99.35
19 2010.10.31 1,084.73 2.67 115.27 1,102.91 2.27 97.09
20 2010.11.30 1,087.40 2.68 112.60 1,105.19 2.27 94.81
21 2010.12.31 1,090.08 2.68 109.92 1,107.46 2.28 92.54
22 2011.01.31 1,092.77 2.69 107.23 1,109.74 2.28 90.26
23 2011.02.28 1,095.47 2.70 104.53 1,112.03 2.29 87.97
24 2011.03.31 1,098.17 2.70 101.83 31.99 1,114.32 2.29 85.68 27.18
Modifying present value due to the change
25 2011.04.30 1,100.88 2.71 99.12 1,116.61 2.30 83.39 of the discount rate
26 2011.05.31 1,103.59 2.72 96.41 1,118.91 2.30 81.09
27 2011.06.30 1,106.32 2.72 93.68 1,121.22 2.30 78.78
1,200 / (1+3.0%)^((60-24)/12) = 1,098.17
1,200 / (1+2.5%)^((60-24)/12) = 1,114.32

2 ARO
Additional estimated cash flow when 2 years expires 300 (discountrate2.5%)
300 1,098.17 – 1,114.32 = - 16.15
Periods 60
Period End Date NPV Interest Discount Annual Interest  Over discount, thus, up-wards the
24 2011.03.31 278.58 21.42
25 2011.04.30 279.15 0.57 20.85
Present value calculation present value of asset retirement
26 2011.05.31 279.73 0.58 20.27
27 2011.06.30 280.30 0.58 19.70
obligation
28 2011.07.31 280.88 0.58 19.12 300 / (1+2.5%)^((60-24)/12) = 278.58
29 2011.08.31 281.46 0.58 18.54
30 2011.09.30 282.04 0.58 17.96
31 2011.10.31 282.62 0.58 17.38 300 / (1+2.5%)^((60-25)/12) = 279.15
32 2011.11.30 283.20 0.58 16.80
33 2011.12.31 283.79 0.58 16.21
34 2012.01.31 284.37 0.58 15.63
35 2012.02.28 284.96 0.59 15.04 Interest calculation
36 2012.03.31 285.54 0.59 14.46 6.96
37 2012.04.30 286.13 0.59 13.87
38 2012.05.31 286.72 0.59 13.28 279.15 – 278.58 = 0.57
39 2012.06.30 287.31 0.59 12.69

2.4.Appendix 57
1 Define the provision content, the calculation method  The discount rate is 2.5% from March 31st, 2011, for the provision
account 533000.
2 You post G/L items of the asset retirement obligation by transaction type 520 same as P.36 and P.37.

2.4.Appendix 58
3 The result of valuation as of March 31st, 2011 is as follows.
The discounted value and the interest expense are calculated based on 3.0%,
and then,
The difference between the discounted value based on 2.5% and that based
on 3.0% is posted as the adjustment.
The discounted value is calculated based on 3.0% at first, and then,
The difference between the discounted value based on 2.5% and that based
on 3.0% is posted as the adjustment.
At the beginning of the next month, the discounted value based on 2.5% is
reversed, and during the next valuation, the discounted value and the interest
expense are calculated based on 2.5%

2.4.Appendix 59
Consume asset retirement obligation (t-cd.FB01) 1/2
If you post the decrease of asset retirement obligation described in P.38, 39 by the transaction type 540, the calculation result
as of March 31st, 2012 is shown in the next slide.
* In case that you use the transaction type560, the calculation result as of March 31st, 2012 is same as the case of the
transaction type540.

2.4.Appendix 60
Consume asset retirement obligation (t-cd.FB01) 2/2

Debit account is NOT ”G/L fixed asset
adjustment” but “Interest expense” due to NOT Dr)533008 G/L Asset retirement obligation’08 400 Cr)461310G/Lfixed asset adjustment 400
“action 7”.
3/31 transaction type 125 following discount (action5)
As the result, the retirement cost is NOT
discounted (that means NBV of fixed asset is Dr)881010 Interest expense 23
over-booked.) The amount corresponding to Cr)533108 G/L Asset retirement obligation’08 adjustment 23
discount is realized as one-time cost, Interest
4/1 transaction type 270 reversal: discount (action15)
expense (although it is realized through the
depreciation.) Dr)533108 G/L Asset retirement obligation’08 adjustment 23 Cr)881010 Interest expense 23

Agenda 61


Frequently Asked Questions Q1 62
<Q1> For the lower version described in P.3, within the Standard Support Service, will the
program F107_START be delivered as the standard solution ?

Frequently Asked Questions A1 63
<A1> Note.1406708 mentions the planned delivery dates on F107_START.
Regarding the manual correction,

For SAP R/3 Enterprise, Note.1406556(and its correction of Note.1422850, 1439462) is released.
For SAP R/3 4.6C(Support Package 35 and higher), Note.1425206 is released.
For SAP ECC 6.0, SAP will not release the manual correction.
The issues on the translation objects exist, therefore please also refer to the following notes.
Note.1431253 F107: Note 1406556 item text in valuated document

Note.1440319 SAPF107_start: Tab texts only in German
Note.1381357 SAPF107_start: Tab pages texts displayed in German only
Note.1477965 F107, Japanese texts are overwritten after Note 1425206
Note.1483186 F107: Transactions cannot be executed after Note 1425206
Note.1488462 F107 Maintaining transactions in customer menu
Furthermore, the following SAP Notes are released. Please also refer to them.
Note.1433194 F107: Error with method SUMMARIZE_POSTING from BAdI F107_RUN

Note.1443957 F107: Provision discounting, posting date of FI document
Note.1447810 F107: Error in init. disc. of long-term receivables/payables
Note.1448748 F107, method 10: Selection using company codes
Note.1461081 F107, provision: Last date in initial discounting
Note.1475891 F107, method 10 posts to all ledgers
Note.1463145 F107, method 10: Calcultn error in case of expired documents

<Q2> In case of NOT NewGL, are there any problems to do the parameter setting described from P.25
to P.32 ?

<A2> In case of NewGL, you can assign the valuation area to the ledger group via the accounting principles, however in
case of NOT NewGL, the features on the ledger group do not exist. Thus, the setting described in P.26 is different from
that of NewGL and the setting described in P.27 does not exist (Other settings are as same as those of NewGL). Please
replace P.25 and P.26 by the following slides.

Frequently Asked Questions A2 Continue 66
<A2> Continue

<Q3> P.36 mentions that you should define another G/L account for Asset Retirement Obligation if
the discount rate is different. Is there any other way than described in P.36 ?

<A3> If you define another “Provision Content”, you can apply the different calculation method (the discount rate) for the
same G/L account for Asset Retirement Obligation. When you post the Asset Retirement Obligation, you should set the
expected provision content in the allocation field (BSEG-ZUONR).
View: F107_V_TPROVH
View: F107_V_TPROV
Calculation method X001(Discount rate 3%) is applied.
Calculation method X002(Discount rate 2.5%) is applied.

Frequently Asked Questions Q4, A4 69
<Q4> How can we assign the cost center to the interest expense item ?
<A4>
If you would like to define an interest
expense account as a cost element and
assign the cost center to the interest
expense item, at least, the G/L items are
automatically created per the cost center.
The key fields of the summarization are

“Company code”, “Provision G/L account”,
“Business area”, “Trading company”, and Modify the
“Provision content (which is set in BSEG- value of
prov_id to
ZUONR)”, and after the summarization, the the value of
G/L items are automatically created. If you Cost
use BADI Definition F107_RUN Method Center
summarize_posting to modify the value of
Set the value
“Provision content” to such as the cost of ZUONR to
center value, you can summarize by “Cost KOSTL (Cost
Center” becomes and create G/L items per Center)
cost center.
* In order for you to use the modified value by BADI
Definition F107_RUN Method summarize_posting,
please implement Note.1433194.
Furthermore, there is no standard logic to Summarization

assign CO object to the interest expense
item, thus, you should also implement the
logic in the BADI Definition F107_RUN
Method change_posting to set the value of
ZUONR to KOSTL (Cost Center).
<Q5> How to make the linkage between the asset number and the asset retirement obligation
item ?
<A5> It is not expected that the program F107_START is used only for “Asset Retirement Obligation”.
This means that the offset account will not be only Fixed Asset account. Considering this, the
standard program will not automatically make a linkage between an asset master and a FI
document of “Asset Retirement Obligation”. If you would like to make a linkage, you manually do
that.
“List Details” (RFVALU10) has the “reference” field. For example, if you set any value in the
“reference” field of FI document header when you post the asset retirement obligation, you could
make a linkage between an asset number and an asset retirement obligation item.
Because “Asset Retirement Obligation” is directly posted via FI-GL (not FI-AA), there is no standard
report to fully show the main asset part, the retirement cost part, and the asset retirement
obligation part. If you would like this kind of report, you need to develop your own add-on report.

<Q6> Can we display the discount rate and the transaction type in “FI Valuation Lists” (RFVALU02) and “F107 Provisions
and Long-Term Payables/Receivables”(RFVALU10) ?
<A6> SAP released Note.1443957 to modify the program F107_START to show the discount rate and the transaction type
in “FI Valuation Lists” (RFVALU02) and “F107 Provisions and Long-Term Payables/Receivables”(RFVALU10)

<Q7> When we execute the valuation run for many items of asset retirement obligation which have
the same provision content but the different maturity date, the result is not as we expected. Is this
symptom an error ?
<A7> The standard logic groups the items

of asset retirement obligation if they have
the same provision content, the same
maturity date is applied for this group.
If you want to separately run the valuation

for the items with the different maturity
date and the same provision content, for
example, you should set the different
value , such as “Provision content +
maturity date”, to the Valuation Group
(BWPOS-GRUPPE) in order for each item to
belong to the different valuation group. Set “Provision
Content” +
The standard logic sets “Provision content “Maturity date”
to bwpos-gruppe
(BSEG-ZUONR)” as the default of the
valuation group, but you can change the
value by the BADI Definition F107_RUN
The valuation
Method change_bwpos. (the discount
calculation) is
executed per
the valuation
group

<Q8> P.37 mentions the initial posting date of asset retirement obligation. Is there any other way ?
Do we have to post the asset retirement obligation on March 31 st and offset by another G/L
adjustment account in order not to present it on the balance sheet ?

<A8> After note.1443957 is implemented, the initial posting date of ARO belongs to the calculation
period which “Key date for OI Overview” belongs to, and the initial posting date is before the last
date of the calculation period (*), we can make the calculation start date of ARO become the start
date of the calculation period which the initial posting date of ARO belongs to.
* For example, the posting date of ARO is from April 1st to April 29th, and Key date for OI overview is April 30th.
However, the calculation period still includes only the last date of the current calculation period,
therefore if the calculation start date is the initial posting date of the asset retirement obligation, we
still have the different result of the initial discount calculation for one date.
<After Note.1443957 is implemented>

In case that the initial posting date is April 1st, the initial discounted value is
calculated as the discounted value to the end point of April 1st.

<A8> Continue
Although the calculation period still includes only the last date of the current calculation period,
once you implement SAP Note.1461081, in case of only “Initial Discounting”, the calculation period
includes the last date of the previous calculation period (the last date of the previous calculation
period is the start date of the current calculation period.), thus, the difference from the missing-one-
day will not occur.
<After Note.1461081 is implemented>

The initial discounted value is calculated as the discounted value to the end point of
March 31st.

<Q9> In case that the business-use date of the main asset is May 1st and the retirement cost for this
main asset cannot be estimated in May but in August, can we calculate the discounted value to May
1st (April 30th) in August and post the interest expense for May, June, and July at one time in
August ?
Example)
Discount rate 3%
<A9> The standard logic Useful life

Dep. method
3 years
Straight-Line Method
does not expect that the CF before discount Discount amount NPV Interest expense
initial discount calculation

2010/03/31 1,000,000,000 84,858,341 915,141,659
is retroactively executed 2010/06/30 1,000,000,000 78,070,669 921,929,331

6,787,672
with the target date before

the posting date of asset
2,273,726
2010/07/31 1,000,000,000 75,796,943 924,203,057
retirement obligation. The : : : : :
standard logic expects that

the valuation run is 1)Post the asset retirement obligation for the estimated cash flow before discount
periodically executed at the 2010/06/30 Dr)Adjustment of Fixed Asset 1,000,000,000 Cr)ARO 1,000,000,000
end of month, and based on 2)Valuation Run (F107_START): End of June
this assumption, the

2010/06/30 Dr)Adjustment of ARO 78,070,669 Cr)Adjustment of Fixed Asset 78,070,669
2010/07/01 Dr)Interest expense 78,070,669 Cr)Adjustment of ARO 78,070,669
standard logic decides the 3)Additional journal entries to retroactively adjust (Manual or Add-on program)
previous valuation period. 2010/06/30 Dr)Interest expense 6,787,672 Cr)Adjustment of Fixed Asset 6,787,672
Therefore under the

* Balance of "Adjustment of Fixed Asset" 915,141,659 is transferred to asset with the posting date 2010/June/30 and the asset value date 2010/April/01.
standard logic, we cannot 4)Depreciation Run: June

2010/06/30 Dr)Depreciation 76,261,805 Cr)Accumulated Depreciation 76,261,805
calculate the initial =915,141,659*1/36*3 =915,141,659*1/36*3
discounted value to the past 5)Valuation Run (F107_START): End of July

date and cannot post the 2010/07/31
2010/08/01
Dr)Adjustment of ARO
Dr)Interest expense
75,796,943 Cr)Interest expense
75,796,943 Cr)Adjustment of ARO
75,796,943
75,796,943
lump-sum adjustment. The
manual adjustment should 6)Depreciation Run: July
2010/07/31 Dr)Depreciation 25,420,602 Cr)Accumulated Depreciation 25,420,602
be manually posted (or by =915,141,659*1/36 =915,141,659*1/36
your own add-on program).

<Q10> It is difficult to imagine the real operations or practices on the asset retirement obligation. What flow of the
monthly closing procedures should we imagine ?
<A10>
Regarding “Provision (Asset retirement obligation)”, (1)you post the provision for the estimated cash flow before discount
by the use of FI-GL transaction and (2) do the monthly discount calculation by F107_Start, and regarding “Retirement cost
(Asset)”, (1)you post the acquisition for the discounted value by the use of FI-AA transaction and (2) do the monthly
depreciation run over the remaining useful life of the main asset. They are technically independent from each other.
But considering the posting of the retirement cost for the discounted value and the reversal posting of the initial/following
discount, the procedure seems to be as follows:
<Outside SAP System>

(1)Estimate the future cash flow (before discount) for the retirement cost per each asset
(2)Decide the discount rate
<SAP System>
(3)Create “Provision content”.
(4)Post the provision (the asset retirement obligation) for the estimated cash flow before discount by the end of month. At
this time, “Provision content” defined in (3) is assigned to “Assignment (BSEG-ZUONR)”, and asset number is assigned to
Reference document number (BKPF-XBLNR).
(5)Open the next posting period.
(6)Execute the valuation run (F107_START) with the key date the end date of month. This time, NPV of the retirement cost
is calculated. (“Amount Evaluate” means NPV.)。
(7)Post the acquisition for NPV of the retirement cost by FI-AA
(8)Execute the depreciation run in FI-AA
* In case that the depreciation for the retirement cost part starts from the next month, you could execute the depreciation
run without waiting the process from (1) to (7).
** In case that you do the discount calculation outside SAP as well, you don’t need to execute the processes from (3) to (6).
You could start the process from (7).

<Q11> For the program F107_START, what kind of BADIs does SAP deliver ?
<A11>
There are 7 BADI Methods. Some of them are called during the valuation, and the others are called from FI Posting.
1.BADI Methods called during the valuation
CHANGE_BWPOS: Change content of table BWPOS

Called from Program F107_RUN Form accounts_gl
The selected documents (the item of Asset Retirement Obligation) can be changed in this method.
GET_OBJECT_KEY: Determine key from item

Called from Include LF107PROVISIONU02 / Function module F107_VALUATION_10
In the standard system, the assignment number field from the open item is selected as the key for determining the provision content.
A calculation method is assigned to the provision content. You can use this method to execute a customer-specific determination.
CHANGE_ITEM: Change item for calculation

Called from Include LF107PROVISIONU02 / Function module F107_VALUATION_10
You use this method to change the content of a provision (such as calculation start date, effective date, target date)
CHANGE_RESULT: Change result

Include LF107PROVISIONF01 Form modify_bwpos
You use this method to change the results in accordance with customer requirements after valuation has taken place.
2.BADI Methods called during FI posting
SAVE_RESULT: Save the valuation results

Called from Program F107_RUN Form update_items
During transfer (posting and saving the results), you can use this method to execute customer-specific actions. For example, by Form
update_items, the table “bsbw” is updated.
SUMMARIZE_POSTING: Create summary of postings

Called from Include LF107PROVISIONU03 / Function module VALUATION_CREATE_POSTINGS_10
As the standard behavior, key fields are “Company code”, “Provision account”, “Business area”, “Trading Company”, “Provision content”.
You can use this method to summarize the created postings according to customer specifications. You can modify the value in the
“Provision content” to do that.
CHANGE_POSTING: Change a posting

Called from Include LF107PROVISIONU03 / Function module VALUATION_CREATE_POSTINGS_10 Form call_direct
You can use this method to change the posting created (the automatically created G/L item) according to
customer-specific requirements
<A11> Continue
You can set the break-point in each method to always stop the process at this point. When the process is stopped, you
can see the variables or in/out parameters.

<Q12> When you execute F107_START with specifying the currency type 10 and post the valuation
result to FI, the accounting documents which have only the local currency amount are
automatically created. Can we set the document currency amount as well ? Our case is that the
document currency amount is equal to the local currency amount.
<A12>
The standard behavior of F107_START is to automatically
create a FI document with only local currency amount when
the currency type 10 is specified. If you want just to copy the
local currency amount to the document currency amount, you
can use Method change_posting to set the document
currency amount, however, please do the sufficient test
including the subsequent processing.

<Q13> In P.27 and P.66, we have to define the valuation method 10 in the view “V_FAGL_T044A” or
the view “V_T044A”, however , FAGL_T044A and T044A is for the valuation method of Foreign
Currency Valuation. We don’t have to define the valuation method in this view. Does F107_START
refer to this view ?
<A13> The valuation area is mandatory, therefore you should define the valuation area in the view
“V_FAGL_T033” or “V_T033”, however, the valuation method does not need to be assigned to the
valuation area. This means that you don’t have to define the valuation method 10 in the view
“V_FAGL_T044A” or V_T044A”.
When you define the valuation area, the currency types to be posted should be assigned to the
valuation area. In case that NewGL is not activated, you have another option to directly fill the
currency type when you run the program F107_START, but SAP recommends to assign the
currency types to the valuation area.
<Q14> In case that NewGL is actiavted and defined the parallel ledgers, can we post the different
valuation result to a specific ledger ?
<A14> For one provision (ARO) account, we can do the different discount calculation by assigning
the calculation method to the combination of “provision content” and “valuation area”.
Valuation area  Accounting principles  Ledger Group(Settings described in P.27, P28)
The valuation result in the valuation area E1

and E3 is posted to the ledger group 0L and IA1,
respectively.
*The pictures are taken in the system where SAP ERP 6.0 SAP_APPL SAPKH60014 and Note.1475891
is implemented.

Account determination per the valuation area(Setting described in P.31)
Adjustment of provision Interest (Adjustment of PV of provision) Offset account of provision
Table: T030U Table: T030U Table: T030U

is implemented.
Definition of “Provision Content”(Setting described in P.37)

The Provision Content “ESD12009” has two valuations.
In the valuation area E1, ARO account 533950 is
discounted based on the calculation method X001.
In the valuation area E3, ARO account 533950 is
discounted based on the calculation method X003.
is implemented.

You post the asset retirement obligation (Credit) for

10,000,000 which is the estimated cash flow before discount.
Because this document is posted without specifying the
ledger group, ARO is posted to all ledgers with the same
amount.
ARO items to be valuated by the program F107_START are

selected from the table BSIS, thus the basic conditions of
discounting on this ARO, such as amount, maturity date,
provision ID, etc, are same regardless of the ledger group.
is implemented.

The valuation result of ARO account posted in P.85 as of April 30 th, 2009 in the valuation area E1 is
as follows.
is implemented.

posted to the ledger group 0L.
Initial Discounting: Doc.no 100000245 Following Discounting: Doc.no 100000247
is implemented.

as follows.
is implemented.

posted to the ledger group IA1.
Initial Discounting: Doc.no 8000000001 Following Discounting: Doc.no 8000000003
is implemented.

<Q15> Since NewGL is activated, multiple ledgers are defined, and Note.1475891 is implemented,
we thought that we can post the different valuation result to a specific ledger, however we face the
error message FAGL_POST_SERVICE012 when we are about to post FI document. Is there any issue
to be solved ?
<A15> NewGL does not allow us to post FI documents to an account by the open-item management
(Vendor, Customer, G/L account with the open-item management) with specifying a certain ledger
group. Open items themselves are relevant to all ledgers, thus we are not allowed to do that.
The program F107_START (discount provisions) and the foreign current valuation program
automatically creates journal entries to post the valuation results.
Journal entries of the valuation results should be posted with specifying a certain ledger group to
prepare for Financial Statements, therefore for accounts used in the journal entries of the valuation
results, they are not expected to be managed as the open-item management account.
Accounts to be valuated themselves (such as vendor, customer, suspense, provision, etc) are
necessary to be the open-item management account for the valuation, such as the foreign currency
valuation and the re-measurement of assets/liabilities, but the adjustment accounts used in the
valuation posting MUST NOT be the open-item management account.
Please don’t define the adjustment accounts described in P.31 or P.83 (the adjustment account for
transaction key RKK, transaction key ZKB, and the transaction key ZKK) as the open-item
management account.

SAP Japan Customer Innovation Center Solutions August 9th, 2010

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What is the document about?

What is the document about?

What accounting standard is discussed?

What accounting standard is discussed?

Accounting Standard for Asset Retirement Obligation

Version Changed on Changed Content Changed by

1.3 2010/3/14 P2 Add “Change History” SAP Japan

P5 Add “3. Frequently Asked Questions” SAP Japan

P6 Add “3. Frequently Asked Questions” SAP Japan

P23 Add “3. Frequently Asked Questions” SAP Japan

P.70 SAP Japan

(Before) SAP intends to

(After) SAP released Note.1443957

P.74-P.77 – Change of paging (P.75-P.78) SAP Japan

© SAP AG 2009. All rights reserved. / Page 2

Version Changed on Changed Content Changed by

P.63 ｰ Add Note.1475891 to solve the posting issue SAP Japan

P.63 ｰ Add Note,1463145 to solve the calculation issue SAP Japan

P.81 – P.90 ｰ Added SAP Japan

© SAP AG 2009. All rights reserved. / Page 3

This documentation comprises three parts.

We hope this documentation will help you to implement the function.

© SAP AG 2009. All rights reserved. / Page 4

This documentation shows you, as an example, how to set FI-GL parameters to

© SAP AG 2009. All rights reserved. / Page 5

1. Accounting Standard for Asset Retirement Obligation p.4

© SAP AG 2009. All rights reserved. / Page 6

1. Accounting Standard for Asset Retirement Obligation p.4

© SAP AG 2009. All rights reserved. / Page 7

© SAP AG 2009. All rights reserved. / Page 8

Note: Translated by SAP Japan

(2) In case of decreasing the estimated cash flow

 Discount rate when liabilities are originally posted

The adjusting amount must be added/subtracted

© SAP AG 2009. All rights reserved. / Page 10

April 1st,:20X1, Acquisition of Plant A and post asset retirement obligation

© SAP AG 2009. All rights reserved. / Page 11

© SAP AG 2009. All rights reserved. / Page 12

© SAP AG 2009. All rights reserved. / Page 13

March 31st,:20X6 Remove Plant A and asset retirement obligation is discharged

Dr)Accumulated dep. 10,863 Cr)Fixed asset(PlantA) 10,863

FY20X1 FY20X2 FY20X3 FY20X4 FY20X5

© SAP AG 2009. All rights reserved. / Page 14

April 1st,:20X1 Acquisition of Plant A and post asset retirement obligation

© SAP AG 2009. All rights reserved. / Page 15

© SAP AG 2009. All rights reserved. / Page 16

March 31st, 20X2: Depreciation of the retirement cost posted as an asset

March 31st, 20X3: Depreciation of the retirement cost posted as an asset

© SAP AG 2009. All rights reserved. / Page 17

March 31st, 20X4: Depreciation of the retirement cost posted as an asset

© SAP AG 2009. All rights reserved. / Page 18

March 31st, 20X5: Depreciation of the retirement cost posted as an asset

March 31st, 20X6: Depreciation of the retirement cost posted as an asset

© SAP AG 2009. All rights reserved. / Page 19

March 31st, 20X6: Discharge asset retirement obligation

© SAP AG 2009. All rights reserved. / Page 20

FY20X1 FY20X2 FY20X3 FY20X4 FY20X5

A.20X1.04.01 Initial posting of ARO (Cash flow before discount = 1,200)

B.20X3.03.31 Additional posting of ARO (Cash flow before discount = 300)

In case that the estimated cash flow increase, the discount

© SAP AG 2009. All rights reserved. / Page 21

FY20X1 FY20X2 FY20X3 FY20X4 FY20X5

© SAP AG 2009. All rights reserved. / Page 22