Project as an Investment Measure

Projects are often used as investment measures in the Investment Management component to manage the accounting and controlling aspects of either

a) Investment initiatives to produce long-term fixed assets for the enterprise; these have to be entered in the balance sheet as Asset Under Construction (AUC); or
b) Other measures for which you want to plan, collect and oversee costs

Investment measures are represented in the system as internal orders or WBS elements, possibly with an AUC assigned to them. The flow of data between Investment Management and Project Systems has several powerful business processes encapsulated including cost planning, budgeting, monitoring progress of AUC, etc…. This article expounds on the features dealing with the management of and settlement of projects to AUCs when the investment measure is to construct a long term asset for the enterprise.


Investment measures are used primarily for planning and monitoring capital investments that are not capitalized directly due to their scope or due to the large portions of in-house production involved. Investment measures are no different from any other internal orders or WBS elements, but they become relevant to asset accounting at the end of the period or the year. The additional functions they have as they relate to the asset under construction are:

- They have an AUC assignment to show the capitalized portions of the total cost.
- During the under construction phase, they have depreciation terms for special depreciation
and investment support calculation.

The AUC assigned to the investment measure is the vehicle for:
- the balance sheet transfer to the corresponding G/L accounts for AUCs
- inclusion in the asset history sheet
- calculation of special depreciation or investment support

The most important control feature from the perspective of Investment Management is the investment profile. A WBS element becomes an investment measure by assigning an investment profile to it. By default, the WBS element inherits the investment profile assigned to the project profile, but it can be overwritten in the individual WBS elements.

Here is a screen print that shows the assignment of the investment profiles to the project profile that all the WBS elements created for the project inherit.

The following is a screen print of the investment profile.

The investment profile determines the following:
- whether an AUC is created when the WBS element is released
- the asset class to be used to create the AUC - summary or line item settlement for the AUC - asset class for depreciation simulation - budget vs plan distribution to the investment measure
- whether a separate AUC is created per assignment in the source structure, meaning a separate AUC is created for each cost element or cost element group specified in the source structure assignments

Debits on Investment Measures
The actual costs on investment measures (WBS elements or internal orders) consist of
- Postings in Financial Accounting
- Movement of goods in Materials Management
- Internal activity allocations and overhead in Controlling

During the under construction phase, it is not possible to post acquisitions directly to the AUC. Acquisitions are posted to the investment measure through account assignment using primary cost elements. During the periodic settlement, the costs are divided into those requiring capitalization on the AUC and those not requiring capitalization on the AUC. These costs are only temporarily represented in Controlling as primary costs until a period-end closing is carried out. At the end of the period, the following happens:
- Costs requiring capitalization are credited to the corresponding investment measure (WBS element) and transferred to the AUC or the fixed asset as the case may be.
- Cost not requiring capitalization are credited to the corresponding investment measure (WBS element) and transferred to CO receivers, such as a cost center.
The graphic below shows the flow of information to and from the investment measure.



Settlement of Investment Measures
During period-end closing, the values requiring capitalization are transferred to the AUC and those not requiring capitalization are transferred to one or more of the CO receivers from the investment measure. The settlement profile, and especially the source structure, plays an important role in achieving the bifurcation and settlement of costs to the AUC vs CO receivers based on where those costs arise from. The source structure is also required when costs from source assignments need to be distributed to different receivers, for example, by percentage assignments. The following graphic shows the costs on a project using the CJI3 line item report for actual costs.
It can be visualized that costs on the project arise from two different cost elements – primary cost element 892014 and secondary cost element 51043000. A primary and a secondary cost element are used to clearly distinguish costs requiring capitalization using the primary cost element and those not requiring capitalization using the secondary cost element. The settlement profile assigned to the project uses an allocation structure and a source structure and allows settlement to an asset and a cost center based on the cost element used to post the actual costs.

The allocation structure specifies the settlement cost elements to be used for each of the cost elements from the source assignment.
Source cost elements for assignment CAP:

Settlement cost element for assignment CAP:


Source cost elements for assignment EXP:
Settlement cost element for assignment EXP:

The source structure assigned to the settlement profile specifies two source assignments – one for cost elements requiring capitalization and one for those not requiring capitalization.

Source assignment for cost elements requiring capitalization:

Source assignment for cost elements not requiring capitalization:

Now, when using the source structure, the settlement rule on the investment measure allows using the source structure assignment in the distribution rule. The example below shows a settlement rule that requires the actual costs created using a cost element from the source assignment EXP to settle a 100% to a cost center.

When settlement is executed for the first time, a settlement rule is automatically created to settle the costs requiring capitalization to the AUC. After carrying out settlement for the project above, a second rule is added to the settlement distribution rules list by the system to settle the remaining costs to the AUC. This is how the settlement rules are transformed after settlement is executed for the first time for the investment measure.

After settlement, the WBS is credited for all the costs using the appropriate settlement cost element specified in the allocation structure. The costs created using the cost elements used in the EXP assignment are settled to the cost center specified in the settlement rule and everything else is settled to the AUC. This is how the CJI3 report looks after settlement:

This article is intended to provide a high level process flow of how settlement is execute to distribute costs between an AUC and a cost center with the usage of a source structure in the settlement profile. As always, please feel free to contact me or post a comment.