Calculate Cost of Capital for Fixed Assets

This procedure is used to calculate the cost of capital related to a fixed asset.

Cost of capital is a theoretical, fabricated, interest used when making estimations. The cost corresponds to the company's required return on the capital invested in machines, inventories, and so on.

Outcome

When a proposal is created a list of the cost of capital calculation and/or a list of the account entries is printed. You can chose to delete or accept the proposal.

If immediate update is used, general ledger is updated with the account entries created. Each fixed asset is updated in the fixed asset ledger, a journal containing all the cost of capital calculations is created and the value type for the cost of capital for the fixed asset is updated.

The cost of capital can be calculated based on an estimated replacement cost or on a replacement cost determined from an index. For more information, refer to Create Cost of Capital Method for Fixed Assets.

Before You Start

  • A fixed asset must be defined and assigned status 1='Normal FA' or 8='Fully depreciated FA' in 'Fixed Asset. Open' (FAS001).
  • A method for calculating cost of capital must be defined in 'Cost of Capital Method. Open' (FAS090).
  • A cost of capital method must be connected to the fixed asset in 'Fixed Asset. Open' (FAS001). This is done either manually in (FAS001) or automatically if the method is connected to a fixed asset type.
  • Parameters for cost of capital must be set in 'Settings - Cost of Capital Calculation' (FAS915). In this program you specify whether the history file will be updated with the transactions created and the value type that will be used for cost of capital.
  • Accounting rules for accounting event FA20 (Cost of capital calculation) must be defined in 'Accounting Rule. Set' (CRS395).
  • At least one detail record must be defined for accounting event FA20 (Cost of capital calculation) in 'FAM Function. Open' (CRS405).

Follow These Steps

  1. Start 'Cost of Capital. Calculate' (FAS120/E).

  2. Select one of the following alternatives:

    • Create a Proposal
    • Update Immediately
    • Accept or Reject a Proposal

Create a Proposal

  1. On the E panel, specify a 'from and to' period for the cost of capital calculation and an accounting date.

  2. Do not activate the Update field.

  3. Specify whether or not you want to generate a detailed list for the calculation proposal.

  4. If necessary, specify a voucher text and a report text. Press Enter.

  5. Specify whether to print a list of account entry proposals. Press Enter.

    If you chose to print a list of the account entries, the list will be replaced by a journal when updating.

Update Immediately

  1. On the E panel, specify a 'from and to' period for the cost of capital calculation and an accounting date.

  2. Activate the Update field.

  3. If necessary, specify a voucher text and a report text. Press Enter.

Accept or Reject a Proposal

  1. On the E panel, press Enter.

    The message 'Proposal already exist' is displayed.

  2. Accept the proposal and update general ledger by activating the 'Proposal action' field. Delete the proposal by not activating the 'Proposal action' field. Press Enter.

Related topics