Selling Fixed Assets

This document describes how to create a customer invoice for the sale of a fixed asset and how financial gains and losses per depreciation type are calculated at the sale in M3 Business Engine.

Outcome

The fixed asset sold has status 9='Sold or disposed fixed asset' in 'Fixed Asset. Open' (FAS001). The following documents are printed: a customer invoice, a depreciation report (FAS102PF), depreciation account entries (FAS103PF), and an accounting journal (GLS041PF).

You can send the invoice to the customer. Store the other documents as internal documentation of the sale.

Before you start

  • The Fixed Asset module must be set up to manage depreciations, as described in Defining Components for Fixed Asset Management and Configuring Depreciation of Fixed Assets.
  • Accounting rules for accounting event FA50 must be defined in 'Accounting Rule. Set' (CRS395). To separate sales revenue from financial loss or gain, accounting rules FA50-540 and FA50-545 must be defined. To separate gain and loss per depreciation type connected to the fixed asset, FA50-560 (for the debit transaction) and FA50-565 (for the credit transaction) must be defined. For an example illustrating how these account entries are used, see below.
  • The fixed asset must be recorded and have status 1 in 'Fixed Asset. Open' (FAS001).
  • Basic settings for sale of fixed assets must be defined in 'Settings - Fixed Asset Sales' (FAS925) and its sub-program 'Settings - Fixed Asset Sales' (FAS926). The first parameter defines which value type to use to store the sales amount. After the sale, the sales amount is displayed for this value type for the fixed asset in 'Fixed Asset. Connect Value Types' (FAS003). The parameters in (FAS926) determine the depreciation type or types to be used to calculate the depreciation at the sale. For each depreciation type selected, you must select the value types to be used for any capital gain and capital loss respectively. The second parameter is used to manage the custom statistical number and item description. It depends on the setting in (FAS925) which determines how these fields are displayed, and how it will be completed during the selling of fixed assets in 'Fixed Asset. Sell' (FAS130) on panel H.
  • The customer must be registered in 'Customer. Open' (CRS610).
  • FAM function FA50 (Sales) must be defined in 'FAM Function. Open' (CRS405).
  • If 'Additional payment references' are to be used, rules must be set up for this in 'Additional Payment Reference. Open' (CMS090). The only available reference number type is 1='Parallel invoice number'. The parallel invoice number is only added to the XML when the invoice is created.

Activity description

  1. Create invoice for sale of asset

    Record the sale of one or several fixed assets in (FAS130). For each invoice line, enter the ID of the asset on the H panel, the quantity to be sold and the sales price, the latter in the 'Line amount' field. If you are selling only a part of the fixed asset by entering a quantity lower than the one registered for the asset, the 'New FA' field is displayed where you enter a new fixed asset ID for the part to sell.

    The new asset is automatically registered with the specified quantity and status 9='Sold or disposed fixed asset' in 'Fixed Asset. Open' (FAS001). After the invoice is created, the asset with the original ID remains in status 1='Normal FA' but the sold quantity is deducted from the original quantity.

  2. Calculate financial gain or loss

    Any financial gain or loss at the sale are automatically calculated using the following formula: sales price minus the acquisition cost retrieved from the value type on the depreciation type, provided that the value type is not the same as is selected in 'Settings – Fixed Asset Acquisition' (FAS900), minus the accumulated depreciation. If the sales value is higher than the result of the formula, then it is a financial gain, otherwise a loss.

About the calculation

Depreciation types in M3 Business Engine represent different depreciation methods. Every depreciation type defines a value type that stores the acquisition cost of the asset, based on which a depreciation plan is created. Several depreciation types can be connected to the same asset. Some depreciation types do not update the general ledger with the calculated depreciations, but are used for taxation purposes instead.

The standard value type for acquisition costs is selected in 'Settings – Fixed Asset Acquisition' (FAS900). Often the same value type is selected for the individual depreciation types. However, depreciation types used for taxation purposes may need a different acquisition cost and therefore use a different value type for the acquisition cost than was selected in (FAS900), resulting in different acquisition costs for the same asset. For depreciation types for derogatory depreciation the acquisition cost is always zero, since the acquisition cost is managed by the associated depreciation type.

Any financial gain or loss is automatically calculated at the sale of an asset by using the following formula: sales price minus the acquisition cost retrieved from the value type on the depreciation type, provided that the value type is not the same as is selected in 'Settings – Fixed Asset Acquisition' (FAS900), minus all depreciations made. If the sales value is higher than the result of the formula, then it is a financial gain, otherwise a loss. Gains and losses are calculated per depreciation type and recorded based on accounting rules. The gains and losses recorded are displayed for the asset in 'Fixed Asset. Connect Value Types' (FAS003) in the value types selected for each depreciation type in 'Settings – Fixed Asset Sales' (FAS926).

At the sale, the acquisition cost or costs are reversed. Since the acquisition cost for the same value type should only be reversed once, it is checked whether the value type of the depreciation type is selected in (FAS900). If it is, then the acquisition cost is only reversed for the first depreciation type with this value type for the asset.

Calculation Example

A fixed asset will be sold for EUR 50,000. The actual acquisition cost was 100,000, stored in value type 01, which is also the one selected in (FAS900). Another acquisition cost of 160,000 is stored for taxation purposes in value type 02. This table shows the depreciation types that are connected to the asset:

Depr. Type Value Tp for Acq. Cost Acc. Depr.
10 (Economic) 01 40,000
20 (US GAAP) 01 50,000
30 (IFRS) 02 80,000
90 (Derogatory) 01 11,000

A gain and loss will be calculated per depreciation type at sales. Since the value type of depreciation types 10, 20 and 90 is the same as in (FAS900), only the acquisition cost for depreciation type 10 is reversed.

Line Acc. Tp Account entry Debit Credit Account Depr. Tp
1 100 Customer 52,000 A
2 120 Revenues (1) 50,000 B
3 111 VAT (1) 2,000 C
4 Acquisition cost reversed (2) 100,000 D
5 560 Offsetting debit transaction (5) 100,000 E
6 500 Depreciation reversed (3) 40,000 F 10
7 545 Financial loss (4) 10,000 E 10
8 565 Offsetting credit transaction (5) 50,000 B 10
9 500 Depreciation reversed (3) 50,000 G 20
10 540 Financial gain (4) 0 H 20
11 565 Offsetting credit transaction (5) 50,000 I 20
12 Acquisition cost reversed (6) 160,000 J
13 500 Depreciation reversed (3) 80,000 K 30
14 545 Financial loss (4) 30,000 L 30
15 560 Offsetting debit transaction (5) 50,000 M 30
16 500 Depreciation reversed (3) 11,000 N 90
17 540 Financial gain (7) 11,000 B 90

Comments on calculation example

  • Lines 2 and 3 are always created when you exit (FAS130).
  • Reversal based on the value type for acquisition cost selected in (FAS900).
  • The acquisition cost for this depreciation type is not reversed since it is based on the same value type selected in (FAS900) and already has been reversed.
  • Gain or loss is calculated in the following way: sales price – acquisition value minus accumulated depreciations previous years – accumulated year-to-date depreciation – extraordinary depreciation. In this case: 50,000–(100,000–40,000) = –10,000.
  • Since all account entries for a depreciation type must balance, any difference is recorded to account entry FA50-560 if it is greater than zero (debit), otherwise to FA50-565 if it is less than zero (credit).
  • Since the value type for acquisition cost for depreciation type 30 is not the same as selected in (FAS900), the acquisition cost is reversed.
  • Since depreciation type 90 is used for derogatory depreciation, it has no acquisition cost.

Selling Fixed Assets with Corporate Accounting and Reporting Activated

Multiple vouchers are created when a fixed asset is sold.

The book of account defined in 'FAM Function. Open Details' (CRS406) for FAM function FA50 is now used for the revenue voucher, and this must be connected to a voucher series that is 0-'Common'.

Acquisition reversal is written in a separate voucher set up in the FA51 FAM function and must be connected to a 0-'Common' voucher type.

Depreciation-specific transactions such as adjustments, depreciations, impairments, gains, or losses are written on vouchers according to the accounting ledger updated by the depreciation type.

With corporate accounting and reporting additional features for fixed assets, impairment or extraordinary depreciation now creates a different accounting line.

The voucher number and journal number that are to be retrieved are dependent on the period type used in the division. Additional information 40 is also created for the generated vouchers.

Example:

A fixed asset was purchased and activated on 20230801, addition and adjustment on the respective accounting ledger has been posted on the fixed asset. Then, a year-to-date depreciation was posted until the end of the current year for local and period 9 for the depreciation type that is updating the corporate accounting ledger.

Extraordinary depreciation was posted on the 12th period for the depreciation type updating the local accounting ledger.

Table 1.
FA transaction Period Ser Vouch no Name
AP100000050 202308 P07 217181 AP10510
AP100000050 202308 P07 217181 AP10510
AP100000050 202308 P07 217181 AP10510
AP100000050 202308 P07 217182 UPDATE
AP100000050 202308 P07 217182 UPDATE
GL010000050 202308 P11 11032 UPDATE
GL010000050 202405 P20 222037 UPDATE
FA100000050 202312 P10 231036 FA10L1
FA100000100 202409 PD2 232014 FA10C1
FA300000050 202312 P10 231037 EOLOC

(Continuation of Table 1)

Vtp Name Rcd Voucher type
1 Purchase Cost 0 0
3 Residual Value 0 0
10 Total Acq Cost 0 0
10 Total Acq Cost 0 0
4 Additional Cost 0 0
19 Adj Local 0 1
29 Adj Corp 0 2
12 10-YTD 0 1
22 20-YTD 0 2
16 10-EO 1 1

The fixed asset was later sold on 20231231 for 24000.

Program FAM function Book of account Voucher type
(CRS406) FA30 P10 1-Loc
(CRS406) FA50 F50 0-Common
(CRS405) FA51 F51 0-Common
(GLS085) FA50 P10 1-Local
(GLS085) FA50 P20 2-Corporate
Table 2.
FA transaction Period Ser Vouch no Name
FA500000050 202312 F51 512043 FA51
FA500000050 202312 P10 231038 FA50L1
FA500000050 202312 P10 231038 FA50L1
FA500000050 202312 P10 231038 FA50L1
FA500000050 202312 P10 231038 FA50L1
FA500000050 202409 P20 222038 FA50C1
FA500000050 202409 P20 222038 FA50C1
FA500000050 202409 P20 222038 FA50C1
FA500000050 202312 F50 50136 FA50

(Continuation of Table 2)

Vtp Name Rcd Voucher type
10 Total Acq Cost 0 0
12 10-YTD 0 1
16 10-EO 1 1
14 10-Gain 0 1
19 Adj Local 0 1
22 20-YTD 0 2
24 20-Gain 0 2
29 Adj Corp 0 2
50 Sale 0 0
Table 3.
FHSEQ7 FHFATR FHVONO FHAIT1 FHAIT2
20230927000000650 FA500000050 512043 P21541 P1020
20230927000000700 FA500000050 231038 P28110 P1020
20230927000000750 FA500000050 231038 P28110 10
20230927000000800 FA500000050 231038 P77521 P1020
20230927000000850 FA500000050 231038 P21541 P1020
20230927000000900 FA500000050 222038 P28120 P1020
20230927000000950 FA500000050 222038 P77521 P1020
20230927000001000 FA500000050 222038 P21541 P1020
20230927000001050 FA500000050 50136 P41300

(Continuation of Table 3)

FHAIT7 FHVSER FHVPER FHFAVA FHVOTP FHALDG FHACDT
FA70550 F51 202312 -13000 0 0 20231231
FA50500 P10 202312 -562.5 1 1 20231231
FA50520 P10 202312 -100 1 1 20231231
FA50540 P10 202312 10662.5 1 1 20231231
FA70550 P10 202312 -1000 1 1 20231231
FA50500 P20 202409 -604.15 2 2 20231231
FA50540 P20 202409 9604.15 2 2 20231231
FAFA70550 P20 202409 -2000 2 2 20231231
FA50120 F50 202312 24000 0 0 20231231
EGJRNO EGJSNO EGVONO EGFEID EGACAM
230415 1 50136 FA50 26400
230415 2 50136 FA50 -24000
230415 3 50136 FA50 -2400
230415 4 512043 FA50 -13000
230415 5 512043 FA50 13000
230415 6 231038 FA50 562.5
230415 7 231038 FA50 100
230415 8 231038 FA50 -10662.5
230415 9 231038 FA50 10000
230415 10 231038 FA50 -1000
230415 11 231038 FA50 1000
230415 12 222038 FA50 604.15
230415 13 222038 FA50 -9604.15
230415 14 222038 FA50 9000
230415 15 222038 FA50 -2000
230415 16 222038 FA50 2000
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