08 - Asset Accounting

Chapter 8
Asset Accounting
Oil and Natural Gas Corporation Limited
Finance Manual
Chapter 8: Asset Accounting
Table of Contents
Contents Page Reference
1 Introduction
1.1 Process overview 8.7
1.2 Process objectives 8.8
2 Accounting policies
2.1 Fixed assets 8.9
2.2 Intangible Assets 8.9
2.3 Depreciation and Amortisation 8.9
2.4 Producing Properties 8.9
2.5 Depletion of Producing Properties 8.10
3 Process narratives & flowcharts
3.1 Additions to fixed assets 8.11

3.1.1 Ready to use assets (excluding land) 8.11
3.1.2 Asset under installation 8.14
3.1.3 Capitalization by work breakdown structure route 8.18
in Projects Systems module
3.1.4 Capitalization of well materials like drill pipes, X- 8.22
mas tree etc
3.1.5 Acquisition of land (leasehold and freehold) 8.27
3.1.6 Capitalization of intangibles 8.28
3.1.7 Capitalization of insurance spares 8.28
3.1.8 Capitalization of white goods/Laptops issued to 8.30

employees
3.1.9 Fixed assets fabricated at central workshop 8.34
Private & Confidential 8.2

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3.1.10 Adjustment for debit/credit memo issued to 8.34

vendors
3.1.11 Creation of new capital item in SAP on first
purchase 8.35
3.1.12 Dry well asset 8.36
3.1.13 Survey Asset 8.37
3.1.14 DRE Asset 8.37
3.2 Deletions from fixed assets 8.38

3.2.1 Discarding (condemnation & disposal) of fixed 8.38
assets
8.41
3.2.2 Replacement of fixed asset
3.3 Transfer of fixed assets 8.42

3.3.1 Transfer from one unit to other unit (cross 8.42
company code transaction)
3.3.2 Within the same unit (inter indenter transfer) 8.45
3.4 Accounting for depreciation/depletion 8.47

3.4.1 Accounting for depreciation 8.47
3.4.2 Capitalization of depreciation on facilities 8.52
3.4.3 Accounting for depletion 8.54
3.5 Physical verification procedures 8.58

3.5.1 Physical verification policy 8.58
3.5.2 Generation of discrepancy report and settlement of 8.59
discrepancies
3.6 Preparation of Schedule A (Fixed asset schedule) 8.62
3.7 Year end/ beginning activities 8.62
4. Process documentation 8.63

Finance Manual
5. Accounting entries 8.64
6. Information system and reporting 8.72
7. References
7.1 ICAI standards and guidelines (accounting standards, 8.73

guidance notes and Expert Advisory Committee opinions)
8. Appendix
8.1 Appendix 1: Glossary of terms used 8.74
8.2 Appendix 2: Relevant Circulars 8.76

Finance Manual
ACRONYMS
Acronym Meaning of the term
ACN Asset Condemnation Note

ATN Asset Transfer Note
AUI Asset Under Installation
BDC Batch Data Clearing
BDP Book of Delegated Powers
CAS Corporate Accounts Section, Delhi
CC Cost Centre
CO Controlling Module
CWIP Capital Work In Progress
DWIP Development Wells In Progress
EWIP Exploratory Wells In Progress
F&F Furniture & Fixtures
FA Fixed Assets
FI Financial Accounting Module
GL General Ledger
GR Goods Receipt voucher
G&G Geological & Geophysical
ICAI Institute of Chartered Accountants of India
IO Internal Order
MT Metric Tonne
P&L Profit & Loss
P&M Plant & Machinery
PMO Plant Maintenance Order
PO Purchase Order
PP Producing Properties

Finance Manual
Acronym Meaning of the term
PR Purchase Requisition
PS Project System Module
REC Reserves Estimation Committee
SES Service Entry Sheet
UoP Unit of Production
WBS Work Breakdown Structure
WDV Written Down Value
SPLAO Special Land Acquisition Officer

Finance Manual
1 Introduction
1.1 Process overview
This chapter deals with policies, procedures, controls, roles and responsibilities
related to accounting of receipt, capitalisation, transfer, retirement, depreciation,
etc., of fixed assets. Fixed assets capitalized in the books of the Company are
classified into following broad categories:
a) Land (leasehold and freehold);
b) Buildings and bunk houses;
c) Railway sidings
d) Plant & Machinery (P&M);
e) Vehicles, survey ships, crew boats and helicopters;
f) Furniture & Fixtures (F&F);
g) Intangibles (Computer Software, Patent, trade mark, etc.)
Fixed asset accounting is carried out using Fixed Assets (FA) module in SAP
wherein different asset classes have been defined based on broad categories
of assets mentioned above. For capitalization of any asset, an asset master is
created in FA module. Asset master record primarily consists of
(i) Asset number and sub number,
(ii) Asset Class/GL account,
(iii) Description of Asset.
(iv) Inventory number,
(v) Date of Capitalisation,
(vi) Cost Centre/Internal order,
(vii) Indenter Code,
(viii) Census class,
(ix) Custodian,
(x) Origin of Asset i.e. WBS, GI number,
(xi) Depreciation key, etc.
(xii) Gross Value and accumulated depreciation

Finance Manual
Each asset capitalised through GR and GI route has been assigned a 12 digits
unique inventory number. The first 4 digits of the inventory number represent
‘Plant Code’ next four digits represent census classes and rest of the digits
represent ‘running serial number’. Asset master has a General Ledger (GL)
account assignment based on the asset class for posting of asset value to GL.
For each capital item, a census class, which is mandatory for assigning a
depreciation key to the asset, has been mapped in SAP system. The census
class consists of four digits i.e. from the third digit to the sixth digit, of the
material code for capital items in the material master. Depreciation key
determines the rate at which asset is depreciated. For controlling purposes,
indenter-wise asset details are maintained in FA module.
1.2 Process objectives

 All additions to/ deletions from/ movement of Fixed Assets are properly
recorded in the books of accounts.
 Depreciation is charged to Profit & Loss (P&L) account/capitalized in
accordance with the accounting policy of the Company.
 Intangibles are capitalized and amortized in accordance with the accounting
policy of the Company.
 Physical verification of fixed assets.

Finance Manual
2. Accounting policies
2.1 Fixed assets (FA)
2.1.1 Fixed Assets are stated at historical cost less accumulated depreciation and
impairment. Fixed Assets received as donations/ gifts are capitalized at assessed
values with corresponding credit taken to Capital Reserve.
2.1.2 All costs, net of applicable tax credits, relating to acquisition of fixed assets till the time
of bringing the assets to working condition for intended use are capitalized.
2.2 Intangible Assets
2.2.1 Intangible assets are stated at cost of acquisition, net of applicable tax credits, less
accumulated amortisation and impairment.
2.3 Depreciation and Amortisation
2.3.1 Depreciation on Fixed Assets is provided for under the WDV method in accordance with
the rates specified in Schedule XIV to the Companies Act, 1956.
2.3.2 Depreciation on additions/deletions during the year is provided on pro-rata basis with
reference to the date of additions/deletions except items of Plant and Machinery (P&M)
of low value items not exceeding Rs. Five Thousand which are fully depreciated at the
time of acquisition.
2.3.3 Depreciation on subsequent expenditure on Fixed Assets arising on account of capital
improvement, or other factors, is provided for prospectively.
Depreciation on refurbished/revamped assets which are capitalised separately is
provided for over the reassessed useful life at rates which are not less than the rates
specified in Schedule XIV to the Companies Act, 1956.
2.3.4 Depreciation on Fixed Assets (including support equipment and facilities) used for
exploratory/development drilling and on production facilities, is initially capitalized as
part of drilling cost or producing properties and expensed/depleted as stated in policy
on “Producing properties and depletion on producing properties” Depreciation on
equipment/assets deployed for survey activities is charged to Statement of Profit and
Loss. (refer Para 2, Chapter 11, Accounting for Exploration & Production Related Costs)
2.3.5 Leasehold land is amortized over the lease period except perpetual leases.
2.3.6 Intangible assets are amortised on Straight Line Method (SLM) over the useful life not
exceeding five years from the date of capitalisation.
2.4 Producing Properties
2.4.1 Producing Properties (PP) are created in respect of an area/ field having proved
developed oil and gas reserves, when the well in the area/ field is ready to commence
commercial production.

Finance Manual
2.4.2 Cost of temporary occupation of land, successful exploratory wells, all development
wells, depreciation on related equipment, facilities and estimated future abandonment
costs are capitalised and reflected as Producing Properties.
2.5 Depletion of Producing Properties
Producing Properties are depleted using the ‘Unit of Production’ method (UoP). The
rate of depletion is computed with reference to an area covered by individual lease/
licence/ asset/ amortization base by considering the proved developed reserves and
related capital costs incurred including estimated future abandonment costs. In case of
acquisition, cost of producing properties is depleted by considering the Proved
Reserves. These reserves are estimated annually by the Reserve Estimates Committee
(REC) of the company, which follows the International Reservoir Engineering
procedures.

Finance Manual
3. Process narratives & flow charts

3.1 Additions to fixed assets
Fixed assets capitalized in the books of the Company are classified into land
(leasehold and freehold), buildings and bunk houses, P&M, F&F, vehicles,
survey ships, crew boats, helicopters, railway sidings and intangibles. This
paragraph details the processes, by which different types of fixed assets are
capitalized in the books of accounts:
a) Capitalization of ‘ready to use’ assets (other than land).
b) Assets that require installation and/or commissioning (other than those
capitalized through WBS route in Project Systems module in SAP).
c) Fixed Assets capitalized through WBS route in PS module (for example PP,
buildings and other capital projects).
d) Well materials (like, well heads, X-Mas tree and drill pipes).
e) Capitalization of land (leasehold and freehold).
f) Intangibles (software, Trademark, Patent etc).
g) Capitalization of insurance spares.
h) Capitalization of asset fabricated in central workshop.
i) Creation of new capital item in SAP on first purchase.
j) Dry well assets.
k) Survey Asset.
l) DRE Assets.
3.1.1 ‘Ready to use’ assets (excluding land)

‘Ready to use’ assets include F&F, vehicles, crew boats, helicopters and certain
P&M that are ready to use. These capital items are procured through Purchase
Requisition (PR)/Purchase Order (PO) route and received in main stores.
Detailed process for acquisition and receipt of capital items is covered in
Chapter 5, Material Accounting. Capitalization process commences when the
indenter/ requisitioner creates a reservation in the system for issue of capital
item from stores. The detailed process narrative is given below:

Finance Manual
3.1.1.A Process narrative
S. No Activities including controls Responsibility
3.1.1.A1 Authorised capital indenter creates the reservation in SAP Authorised

using T-Code ZMMCIOS for issue of a capital item and capital indenter
forwards signed copy of the reservation to Main Store/Site
store. Authorised capital indenters are L-I/L-II/L-III level
officers as per CRC and the officers nominated by ‘L-I’
officers.
The indenter specifies the reason for movement, movement
type and custodian in the reservation created in SAP which
determines whether the capital item is issued to asset, cost
centre (in case of part replacement), WBS, Plant
Maintenance Order (PMO), etc.
3.1.1.A2 After creating the reservation, these details automatically Asset

flow in report ‘pending reservations for asset allotment’ Accounting
which can be executed using T-code – ZMMCIOS. Section
3.1.1.A3 Asset Accounting section runs the report pending Asset

reservations for asset and allots the asset number to the Accounting
capital item by using the T-code – ZMMCIOS. The F&A section
Section checks the cost centre etc and then mentions the
asset number on the hard copy of the reservation and hands
it over to the indenter.
3.1.1.A4 Main Store issues the capital item for which asset number is Main store
created after receiving signed copy of the reservation and
posts goods issue in SAP by using T-Code – ZMMCIOS.
Refer accounting entry no. AE/AA/001 mentioned below:
GL code Account description Dr/Cr

10*** Fixed Assets Dr.
907/8** CIOS Cr.
Note:
The capitalization of assets takes place on posting of goods
issue by Main Store.

Finance Manual
3.1.1.B Process flowchart
Authorised capital indenter

creates reservation in SAP for
issue of capital item &
forwards copy to Main Store/
Site store
SAP Report pending

reservations for assets
reviewed by Asset Accounting
Section
Asset Accounting section

allots asset number to capital
item in SAP
Main Store issues material

after receiving signed copy of
reservation & posts goods
issue in SAP

Finance Manual
3.1.2 Asset under installation

Assets that require installation and/or commissioning before they are ready for
use are capitalized through Asset Under Installation (AUI) route. For example
air conditioning units. This does not include fixed assets capitalized through
WBS route in PS module in SAP. This process commences before a Purchase
Requisition (PR) for asset with installation/commissioning charges is created by
the indenter in SAP. The detailed process is given below.
3.1.2.A Process Narrative
3.1.2.A1 The indenter informs the Asset Accounting section, by SAP Indenter
mail, to create AUI in Fixed Assets module for capturing
installation/commissioning charges related to capital item(s)
proposed to be purchased.
3.1.2.A2 Asset Accounting section creates an AUI in Fixed Assets Asset

module by using T-Code – AS01 and intimates the AUI Accounting
number to the indenter by SAP mail section
Note - For creation of AUI, indenter code, CC and asset
class to determine the GL account are specified.
3.1.2.A3 Indenter creates PR in SAP with separate line items for Indenter
asset and installation/commissioning charges.
Relevant AUI number provided by Asset Accounting section
is assigned in PR to the line item for
installation/commissioning charges.
3.1.2.A4 The asset is received in Main Store as capital inventory and Capital indenter
capital indenter creates the reservation in SAP using T-Code
ZMMCIOS for issue of Capital Item. The capital indenter
forwards signed copy of the reservation to Main Store/Site
store for issue of Capital item.
The indenter specifies the reason for movement and
movement type in the reservation created in SAP which
determines whether the Capital item is issued to Asset
(AUI), CC (in case of part replacement), WBS, PMO etc.
3.1.2.A5 After creating the reservation, these details automatically Asset

flow in the report pending reservations for asset allotment accounting
which can be run by T-code ZMMCIOS. section

Finance Manual
3.1.2.A6 Asset Accounting Section executes the report pending Asset

reservation for asset allotment and allots the AUI number to Accounting
the capital item by using T-code – ZMMCIOS and mentions Section
the AUI number on the hard copy of the reservations and
hands it over to the indenter.
3.1.2.A7 Main Store issues the capital item after receiving signed Main Store
copy of the reservation having asset number and posts
goods issue in SAP by using T-Code – ZMMCIOS

10*** Fixed Assets - Dr.
907/8** CIOS Cr.
3.1.2.A8 Indenter creates Service Entry Sheet (SES) for Indenter

installation/commissioning charges after the asset has been
put to use using T-code – ML81N and forwards the
commissioning note to the Asset Accounting section.

40701 to Relevant AUI Accounts Dr.
40854
190117 SR/IR A/c – services Cr.
3.1.2.A9 Asset Accounting section, based on the installation Asset

certificate from the indenter, creates asset number, defines Accounting
the settlement rule for AUI by using T-code – AIAB and uses section
T-Code – AIBU for final settlement of
installation/commissioning charges to the asset.

10*** Fixed Assets Dr.
40701 to Relevant AUI Accounts Cr.
40854
Note:
At the time of settlement of AUI, the Asset accounting
section has to put the commissioning date as value date in

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the settlement parameter. In case the value date falls in the

closed period the value date should be changed in the Asset
Master.

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Indenter informs Asset

Accounting section to create
AUI in FA module

creates AUI in SAP &
intimates AUI number to
indenter
Indenter creates PR in SAP

with asset & installation/
commissioning as separate
line items
Capital Indenter creates

reservation in SAP for issue of
capital item & forwards it to
Main Store/Site store
Indenter intimates Asset

Accounting section & provides
details of reservation

allots AUI number to capital
item in SAP
Main Store issues capital item

after receiving signed copy of
reservation & posts goods
issue in SAP
Indenter creates SES for

installation/commissioning
charges in SAP
Indenter forwards
‘commissioning note’ to Asset
Accounting section
Indenter intimates asset

numbers linked to AUI
numbers to Asset Accounting
sectionn

settles installation/
commissioning charges to
main asset

Finance Manual
3.1.3 Capitalization by work breakdown structure (WBS) route in Projects

Systems module
Fixed Assets capitalized through WBS route in PS module include capitalization
of PP, buildings and other capital projects. The process for issue of materials
from stores and allocation of services to different WBS elements in PS module
is covered in Chapter 5, Materials accounting and Chapter 3, Procurement of
Services including Works Accounting. Relevant common costs are allocated to
different WBS by cost cycle run. For details of cost cycle run refer Para 2.3,
Chapter 16, Cost Accounting. Once all relevant costs are captured in different
WBS elements in PS module, these costs are either capitalized or taken to
Capital Work In Progress (CWIP) or Exploratory Wells In Progress (EWIP) or
Development Wells In Progress (DWIP), as the case may be, with settlement of
expenditure on monthly WBS settlement. For details refer Chapter 11,
Accounting for Exploration & Production Related Costs. Where a particular
asset is ready for use, the process of capitalization commences (before WBS
settlement is done) with the creation of new asset master in Fixed Assets
module. The detailed process is given in section 3.1.3.A

Finance Manual
3.1.3.A1 Asset Accounting section creates a new asset master by Asset Accounting
using T-code – AS01 on receipt of section
commissioning/completion certificate from indenter (e.g.
completion certificate is received from engineering services
in case of new building/projects)
Note:
At the time of creation of asset master, Cost Centre, Internal
Order, indenter code and asset capitalisation date are
specified.
3.1.3.A2 Asset Accounting section forwards the new asset number to Asset Accounting
the indenter and the Central Accounts Section by SAP mail. section
3.1.3.A3 Central Accounts Section/Engineering Services enters the Central Accounts

Asset number in the settlement rule in the WBS element and Section/
carry out WBS settlement., Accounting for exploration & Engineering
development expenditure costs that needs to be capitalized Services (F&A)
gets settled to EWIP, DWIP, and PP, as the case may be.
For detailed process refer Chapter 11.
The cost corresponding to CWIP is settled in relevant fixed
assets.

703** EWIP Dr.
703** DWIP Dr.
10*** Relevant Fixed Assets A/c (like Dr.
buildings, Facilities)
50*** Capital work in progress (in case of Dr.
incomplete jobs)
209998/99/ Allocation expense/depreciation Cr.
229998/99/
240998/99
249998

Finance Manual
Note:
All progress payments are initially booked to WBS with GL 24* in case of turn key contracts.
Initial/automatic settlement of the WBS is done at period end for settling the amount booked in
WBS/GL 24* series to CWIP (GL 05* series). Based on the commissioning certificates, final
settlement from CWIP to Fixed Assets (GL 010* series) is done from CWIP (GL05* series).
Similarly for wells, amount booked through costs cycles (both primary and secondary) to EWIP
and DWIP (07* series) is settled to PP/dry well etc based on the well status.

Finance Manual

creates new asset master in
SAP on receipt of
commissioning certificate

forwards new asset number to
indenter & Central Accounts
Section
Central Accounts Section

Costing Cell/Engineering
Services carry out WBS run

Finance Manual
3.1.4 Consumption of well materials like drill pipes, X- mas tree and well head
There are various materials used for drilling of exploration or development wells
like, well heads, drill pipes and X-mas tree .Casing pipes and tubings will be
treated as stores items in all stages i,e from procurement to consumption and
accordingly will be charged to well as consumption of material. Well head would
be capitalised on issuance for use as the depreciation rate is different onshore
and offshore (30%- in case of on-shore and 100% in case of Offshore).
Depreciation on well head is initially posted to WBS of the well in System. From
WBS , it is finally posted to EWIP or DWIP, as the case may be, through
settlement.
The Process of Accounting / capitalization of well material in system has
undergone a change as per new circular 385/2012 (CA) dated 31.05.2012
.(Refer topic 8.2 Appendix 2: Relevant Circulars) . As per this circular process
of capitalizing of well material would be discontinued & Well head would be
capitalised on issuance for use.
Treatment to well material already capitalized:
Gross block of Well material capitalized till cutoff date i.e. date of shifting from
capitalization route to consumption would continue to appear under existing
head .i.e. plant & machinery.
Treatment to well material issued to well in progress:
New process of issue of well material can be implemented from cutoff date
01.04.2012.
All the well material issued on or after 01.04.2012 will be booked to
consumption with WBS as cost object.
Well material issued till 31.03.2012, will be capitalized in line with existing
process. The process for charging of well materials to consumption and
capitalisation of well head is given below:

Finance Manual

st
(Entry 3.1.4.A7 -3.1.4.A4 have be discontinued for well material w.e.f 1 April 2012. Only well
st
heads are capitalised w.e.f 1 April 2012)
3.1.4.A1 Authorised indenter creates the reservation in SAP using T- Authorised

Code MB21 for issue of well materials and forwards signed indenter
copy of the reservation to Main Store/Site Store for issue of
material.
The indenter specifies the WBS/CC through relevant
movement type in the reservation created in SAP.
3.1.4.A2 Main Store issues the well materials after receiving signed Main Store
copy of the reservation and posts goods issue in SAP by
using T-Code – MIGO

210101 Mat Consumed-Stores-Drill Pipes – Dr.
Imported
210103 Mat Consumed-Stores-Drill Pipes – Dr.
Indigenous
210105 Mat Consumed-Stores-Casing Pipes – Dr.
Imported
210107 Mat Consumed-Stores-Casing Pipes – Dr.
Indig
210109 Mat Consumed-Stores-Oth Pipes &Pipe Dr.
Fitting-Import
210111 Mat Consumed-Stores-Oth Pipes & Dr.
Pipe Fitting-Indig
210157 Mat Consumed-Stores-Tubings- Import Dr.
210159 Mat Consumed-Stores-Tubings- Indg Dr.
210161 Mat Consumed-Stores-Well Heads – Dr.
Imported
210163 Mat Consumed-Stores-Well Heads Dr.
90201 CA-Stores-Drilling Pipes-Imported new Cr.
90203 CA-Stores-Drilling Pipes-Indigenous Cr.
new
90205 CA-Stores- Casing Pipes – Imported Cr.
new
90207 CA-Stores- Casing Pipes – Indigenous Cr.

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new
90209 CA-Stores- Other Pipes & Pipe Fittings- Cr.
Import new
90211 CA-Stores- Other Pipes & Pipe Fittings- Cr.
Indig new
90257 CA-Stores- Tubings Pipes & Fittings- Cr.
Imp
90259 CA-Stores- Tubings Pipes & Fittings- Cr.
Indg
90261 CA-Stores- Well Head & X’mas Tree – Cr.
Imported new
90263 CA-Stores- Well Head & X’mas Tree – Cr.
Indig new
Note: Well materials are issued to respective WBS element

of the well as and when they are used in the well.
3.1.4.A3 At the end of the month, Asset Accounting section Asset

downloads consumption of, X-mas trees, well heads and drill Accounting
pipes booked during the month using T-code- FBL3N. Asset section
Accounting section identifies the line items against which
WBS element is mentioned that specifies the amount of
material used in exploratory and development wells.
3.1.4.A4 Asset Accounting section creates new asset masters for well Asset
heads and X-Mas tree etc by using internal order type ‘1ZZ’ Accounting
in cost object [T-code AS01]. section
3.1.4.A5 Asset Accounting section passes a direct Finance (FI) entry Asset
for capitalization of, well heads as identified in activity Para Accounting
3.1.4.A3 using T-Code F-90 section

10405 F/A-P&M-Well Heads Dr.
10404 F/A-P&M-Drill Strings Dr.
210101 Mat Consumed-Stores-Drill Pipes – Cr.
Imported
210103 Mat Consumed-Stores-Drill Pipes – Cr.
Indigenous

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210109 Mat Consumed-Stores-Oth Pipes &Pipe Cr.

Fitting-Import
210111 Mat Consumed-Stores-Oth Pipes & Cr.
Pipe Fitting-Indig
210161 Mat Consumed-Stores-Well Heads – Cr.
Imported
210163 Mat Consumed-Stores-Well Heads Cr.
3.1.4.A6 The asset accounting section executes the depreciation run Asset
to charge the depreciation on well materials using T-Code- Accounting
AFAB. section
3.1.4.A7 Central Account section defines the WBS of the concerned CA

well/cost centre of the concerned Rig as settlement rule in
WBS itself and executes the settlement of WBS to transfer
the depreciation to the Wells/Rigs

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Finance Manual
3.1.5 Acquisition of land (leasehold and freehold)

Land acquisition costs include purchase cost, registration charges, legal charges etc.
Land can be acquired either directly from landowner/Local Authorities or through
Special Land Acquisition Officer (SPLAO). Land Acquisition section forwards a demand
note to Pre-Audit section for making the payment for land acquisition. Pre-Audit section
forwards a request for creation of an asset to Asset Accounting section (manual request
giving the well name, area, tax office number etc). Asset accounting section creates an
asset in the Fixed Asset module using T-code AS01 and forwards the asset number to
Pre-Audit section. Pre-Audit section makes the payment and passes a direct FI entry in
SAP. Different accounting entries are passed by Pre-Audit where land is purchased
directly from land owner and where these are acquired through SPLAO.
Refer accounting entry no. AE/AA/007 mentioned below, if land is acquired directly from
land owner. T-code used is F-90
10101/ Freehold land/ Dr.
10102 Leasehold land
****** Vendor Cr.
Refer accounting entry no. AE/AA/008 mentioned below, if land is acquired through
SPLAO/Local Authority
a) At the time of making deposits with SPLAO (T-code – F-02)
101123 Deposits-Deposit With SPLAO for Land Dr.
Acquisition
(if deposit is for permanent acquisition
of land & use fund centre where funds
are kept)
101120 Deposits-Deposit With Govt. Authorities Dr.
19**** Vendor (SPLAO) Cr.

19**** Vendor (SPLAO) Dr.
09**** Bank clearing A/c Cr.
b) On adjustments of deposits (T-code – ABSO)

10101/ Freehold land/ Dr.
101123 Deposits-Deposit With SPLAO for Land Cr.
Acquisition
101120 Deposits-Deposit With Govt. Authority Cr.

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3.1.6 Capitalization of Intangible Assets

An intangible Asset is an identifiable non-monetary asset, without physical substance,
held for use in the production or supply of goods or services, for rental to others or for
administrative purposes. Cost incurred on Intangible assets resulting in future economic
benefits is capitalised as intangible assets. These are accounted for and amortised in
accordance with Accounting Standard 26 (AS 26) on intangible assets. As per para 1(c)
of this Standard, expenditure on exploration for or development and extraction of
mineral oil, natural gas and similar non-regenerative resources are out of the scope of
the Standard. Hence, this standard is not applicable in respect of expenditure on DRE
(like expenditure on dry docking, mobilization and demobilization charges, etc).
However, the standard is applicable in respect of Intangible Assets like application
software like SAP implementation and licence acquisition costs, data interpretation
software for Geological & Geophysical activities and other computer software etc.
Intangibles are capitalized in accordance with the accounting policy of the Company.
Software is capitalized through following methods:
a) Capitalized by AUI route – For details refer Para 3.1.2 mentioned above
b) WBS route – For details refer Para 3.1.3 mentioned above
3.1.7 Capitalization of insurance spares

Determination of insurance spares happens at PR stage where user specifies whether
the item required to be procured is an insurance spare or not in the PR. Guidance is
available vide circular no.CA 268/2005 dated 07.11.2005 for identification of particular
item as insurance spares. It is also verified by F&A section during financial concurrence
to ensure appropriate accounting. The process for receipt of insurance spares in stores
and logistics invoice verification is same as other materials. There is specified storage
location defined in SAP for warehousing of insurance spares at each location. All
insurance spares are received in this storage location based on the assignment in
PR/PO.
Indenter intimates Asset Accounting section about the requirement of creation of sub
asset numbers against identified assets for which insurance spares are purchased. The
Asset Accounting section creates sub-asset number by using T-code AS11 in SAP and
intimates the indenter. On such intimation, indenter creates the reservation for
insurance spares through T-Code MB21 using movement type X41, inputs the sub-
asset number in the following screen and changes the valuation type to SPNO_
VALUE. Stores section executes ZMMCONV. The system automatically issues the item
to sub-asset number created by Asset Accounting section when stores posts the goods
issue (only value) in SAP by using T-Code MIGO.
Insurance spares stock quantity after capitalization is maintained in material master as
non-valued stock i.e. at nil value to have a physical control over them. They are tracked
based on material code assigned at the time of creation of GR by Main Store.

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10*** Sub-asset number (Insurance spare) Dr.
90*** Stores/spares inventory Cr.

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3.1.8 Capitalization of White goods/Laptop issued to employees

White goods/Laptops may be issued to the employee according to their
entitlements.
3.1.8. A Process narrative
3.1.8 A1 Employee creates a request through a service in WEBICE Employee and

Portal for advances and provides list of white goods item HR/ER
(s)/Laptop proposed to be purchased along with details of
estimated value. There are no FI interventions at this stage.
After creation of request for advance I/C HR/ER runs T-code
ZHRWG_UNLOCK to approve the request. The main asset
number is created when concerned PCS user runs T-code
ZPYWG_UNLOCK with asset class 10801(White good) or
10802 (Laptop). This t-code also creates advance entry for
processing through Off-cycle for payment to employee
through the GL account 100411(white goods)/
100414(Laptops). Employee’s payment is routed through
DME route for Dehradun.
Refer accounting entry no. AE/AA/010(a) mentioned below:

100411 Advance A/c Dr.
/100414
190426 Employees E-Payments Payable A/C Cr.
3.1.8 A2 Employee submits hard copy of all receipts to HR/ER and Employee and
updates purchase details in WEBICE Portal through another HR/ER
service for White Goods Adjustment.
HR/ER verifies all details and supporting bills and approves
employee adjustments in the system and run the tcode
ZHRWG_ADJUNLOCK for white goods or
ZHRLT_ADJUNLOCK for laptops to approve the adjustment
submitted.
Refer accounting entry no. AE/AA/010(b) mentioned below

010801 / Asset number (White Good)/ Asset Dr.
010802 number (LAPTOP)
100411 / Advance A/c Cr.
100414
Depreciation for these items is accounted for through the Z-

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Program which is executed at the end of each month after

depreciation is executed for the DDN company code.
Scheduled background jobs ensure that depreciation of all
white good items is transferred into the company code
where the employee is presently posted from the DDN
company code
Refer accounting entry no. AE/AA/011(a) mentioned below:
229913 / Receiving Co Code A/c Dr.

229914
120102 IUT- Receivable/Payable Cr.
120102 IUT- Receivable/Payable Dr

229913 / DDN A/c Cr.
229914
On completion of the specified period or on separation from

service the balance lying against white goods is recovered
from the employee through payroll and the recovered
amount is taken to GL 100292.
Refer accounting entry no. AE/AA/011(b) mentioned below:

190310/ Recovery on a/c of White Goods or Dr.
190314 recovery on a/c of Laptops
100292 / Account Receivable White Goods or Cr.
100293 Account Receivable –Laptop
Simultaneously, the white goods asset is also retired through

ABAVN and the retired value is taken to GL 100292 where
the two values are paired and cleared.
Refer accounting entry no. AE/AA/011(c) mentioned below:

100292 / Account Receivable White Goods or Dr.
100293 Account Receivable –Laptop
10801 / F/A Furniture & Fixture Emp. F/A or Cr.
10802 Furniture & Fixture -Lap Top
30801 / Accu. Dep. F&F or Dr.

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30802 Accu. Dep. F/A F & F -Lap Top
In case of demise the WDV on account of white goods is

charged directly to 201525.
Refer accounting entry no. AE/AA/011(d) mentioned below:

201525 Asset written off Account Dr.
10801 / F/A Furniture & Fixture Emp. F/A / Cr.
10802 Furniture & Fixture -Lap Top
30801 / Accu. Dep. F&F or Dr.

Finance Manual
3.1.8. B Process flowchart
Employee creates request for

White Good advance in
system (asset number gets
generated)
White Good Advance paid

along with payroll to employee
Employee submits hard copy

of all receipts to HR/ER and
makes adjustments in system
HR/ER verifies all receipts and

approves adjustments in
system. Scheduled
background jobs track all
adjustments
Scheduled background jobs

transfer depreciation of all
white goods items to company
code where employee is
posted

Finance Manual
3.1.9 Fixed assets fabricated at central workshop

For detailed process refer Para 3.2, Chapter 9, Workshop Accounting
3.1.10 Adjustment for debit/credit memo issued to vendors

There could be situations where debit or credit memo is issued to the vendor
(generated at the time of LIV) on purchase of asset and asset purchased is
already capitalized in the FI module. In such cases the amount is adjusted in
the price variation account.
Refer accounting entry AE/AA/012 mentioned below:

19**** Vendor acoount Dr/Cr
201451 Price variation Cr/Dr
The capitalized value has to be adjusted with the amount of debit/credit memo
in the fixed asset master.
For credit memo, Asset Accounting section makes the adjustment in SAP using
T-code – ABGL, where year of capitalization and debit/credit memo is same,
and T-code – ABGF, where assets were capitalized in prior years and
debit/credit memo is raised in current year.
For debit memo same transaction code is to be used, with the check box for
reverse entry selected.

10*** Relevant Fixed Asset A/c Dr/Cr.
201451 Price variation Cr/Dr.
Note:
Line item in Price variation account has to be displayed using T-Code FBL3N
and from the material code for capital items, major amounts are to be tracked to
the asset number from the movement of the material through T-Code
MC.9/ME23N.

Finance Manual
3.1.11 Creation of new capital item in SAP on first purchase

At the time of creation of Asset Master for Capital items against a reservation
by indenter, the relevant Census Class should be available in the standard list
of capital item maintained in the system. Standardized list of assets can be
viewed using T-Code – ZFICENSUSCLASS. Creation of new capital item for
which census class is not available in the Asset Master, requires creation of
new census class, its linkage to Fixed Asset GL Code for appropriate
classification and depreciation key for the purpose of depreciation computation
after capitalization. Activities detailed herein result in creation of new Census
Class in standard list of capital items maintained in the asset master. The
detailed process for creating a new census class is given below:
3.1.11.A1 Asset accounting section (in association with the concerned Asset
indenter) requests CAS, for depreciation rate and Accounting
communicates the same to the ICE team Section
3.1.11. A2 Corporate Accounts section allot/intimate depreciation rate CAS

for the particular asset as per Standard list of capital item
and Schedule XIV of the companies act 1956
3.1.11.A3 ICE Team creates new census class and defines the GL ICE Team
code and depreciation key and intimates the Asset
Accounting section

Finance Manual
3.1.12 Dry well asset

Central Accounts Section of the respective unit determines the exploratory
wells to be charged off based on the information from exploration group and the
accounting policy.
Central Accounts Section sends the details of dry wells to Asset accounting
section of the unit. Dry well asset(s) is created by Asset accounting section in
Fixed Asset module using T-code AS01 by specifying the relevant cost centre.
Asset section intimates asset number(s) to the central accounts section after its
creation.
Central Accounts section settles (full settlement) the expenditure incurred on
dry well to the relevant asset created in asset module using T-code - CJ88 in
SAP.
Refer Accounting entry no. AE/AA/013 mentioned below:

70401 Dry Wells-Gross-Expenditure Dr.
70402 Dry Wells-Gross-Depreciation Dr.
70406 Dry Well-Abandonment Dr.
70301 EWIP-Expenditure Cr.
70302 EWIP-Depreciation Cr.
70303 EWIP- Abandonment* Cr.
i. When depreciation run is done in the FA module, 100% of the amount

transferred to dry well asset is charged off to profit & loss account in the same
year in which the asset is capitalised. For details on depreciation run refer Para
3.4.1 mentioned below.
Refer Accounting entry no. AE/AA/014 mentioned below:

209102 Recouped Cost - Dry Wells – Dr.
Expenditure
70411 Dry Wells-Amort-Expenditure Cr.
70412 Dry Wells-Gross-Amort- Depreciation Cr.
70416 Dry Wells-Amortization Fund- Cr.
Abandonment
ii. When the well is declared dry, the well material (except well head for onshore)
capitalized against the well is removed from the asset master using T-code-
ABAVN. For detailed process and accounting entries on deletion of fixed asset
refer Para 3.2.1 mentioned below. Well heads and X-mas tree can be reused in
the another well in which case the internal order of that well is incorporated in
the Asset Master of well head and X-Mas tree

Finance Manual
3.1.13 Survey Asset

T-code AS01 is used for creating Survey assets separately for expenditure and
depreciation, block wise under asset class 70501 and 70502 respectively .After
creation of survey assets, the expenditure and depreciation on survey are
initially booked to field party cost centres and allocated to survey WBS, for each
block, through cost cycles. The survey WBS is settled to survey assets through
WBS settlement. On depreciation run, the survey assets are depreciated at
100% and depicted as recouped cost in P&L account.
3.1.14 DRE Asset

As per the accounting policy of the company, Dry docking charges for Rigs,
Multi purpose survey vessels (MSVs), Geo Technical vessels(GTV),
Rig/equipment mobilisation expenses and other related expenditure are
considered as deferred expenditure and amortised over the period of use not
exceeding five years.
DRE asset is created in asset master using T-code AS 01 for each such jobs
under asset class 140111/140112. The expenditure is initially booked in the
WBS created for this purpose and settled to DRE assets through WBS
settlement periodically.
Depending upon the period in which the DRE assets are to be charged off, the
life of the asset is maintained in the asset master with dep key ZDRE.
The DRE is charged off to DRE written off account when depreciation run is
executed and allocated to the activities during cost cycle run.

Finance Manual
3.2 Deletions from Fixed Assets

Deletions of Fixed Assets are on account of:
a) Discarding (condemnation & disposal) of Fixed Assets and
b) Replacement of Fixed Assets.
3.2.1 Discarding (condemnation & disposal) of fixed assets

Fixed Assets can be discarded for different reasons that include retirement from
use, damage etc. Condemnation process commences when the indenter
identifies a particular asset that needs to be discarded and forwards a proposal
to the Condemnation Committee. The detailed process for condemnation of the
asset and subsequent disposal is given below:
3.2.1.A1 Capital Indenter identifies a particular asset that needs to be Capital Indenter
discarded and forwards a proposal to the Condemnation
Committee for further assessment. The proposal specifies
the reason for condemnation.
3.2.1.A2 Condemnation Committee reviews the proposal and Condemnation

deliberates whether the asset is to be condemned or not. Committee
Condemnation Committee consists of representative from
MM section, Indenting section and F&A section. Following
factors are considered by the Condemnation Committee
before they recommend the proposal:
a) Book value (WDV method);
b) Reason for condemnation;
c) Balance useful life of the asset; and
d) Alternative use of the asset.
Condemnation Committee forwards the recommendation for

the approval of the competent authority and the copy of the
approved note is received by the indenter.
3.2.1.A3 Indenter on receipt of the approval, prepares Asset Indenter

Condemnation Note (ACN) using T-Code ZFIATN in SAP
and specifies the asset number, location and the custodian
and forwards a copy, duly acknowledged by the disposal

Finance Manual
cell, to the Asset Accounting section

Note:
Hardcopy of original approval is maintained with the indenter
and the copy of the same duly acknowledging receipt of the
condemned item by the disposal cell is forwarded to asset
accounting section.
Asset accounting section shall generate report of ACNs
pending for accounting on periodic basis and follow with
concerned indenters for hard copy of ACN, duly
acknowledged by disposal cell.
3.2.1.A4 Asset Accounting section processes the ACN using the T- Asset
Code ZFIATN wherein a Batch Data Conversion (BDC) is accounting
executed. section

30*** Accumulated depreciation on asset Dr.
(Till the date of discard)
22**** Depreciation Dr.
(From last depreciation run till the date
of discard)
201525 Asset written off Dr.
10*** Relevant Fixed Asset A/c Cr.
30*** Accumulated depreciation on asset Cr.
(Depreciation from last depreciation run
till the date of discard)
Note
i. With the execution of BDC, Asset master will be
removed from the system and will be displayed as
discarded asset in schedule A.
3.2.1.A5 Main Stores creates the disposable inventory in the SAP. Main stores
There is special material codes assigned to asset held for
disposal.
3.2.1.A6 For detailed process on sale of discarded asset, refer Para

3.7, Chapter 10, Sales Accounting.

Finance Manual
Indenter identifies asset to be

discarded & forwards proposal
to Condemnation Committee
Condemnation Committee
reviews the proposal and
deliberates whether the asset
is to be condemned or not
Condemnation Committee
forwards copy of the approved
note to indenter
Indenter prepares ACN in SAP

& forwards an acknowledged
copy to Asset Accounting
section

processes ACN in SAP
wherein BDC document is
created & executed
Main Store creates disposable

inventory in SAP

Finance Manual
3.2.2 Replacement of Fixed Asset
Replacement of complete Asset having census number would involve

discarding of original asset as a first step and then creation of new asset. For
detailed process on discarding of Fixed Assets, refer Para 3.2.1 mentioned
above and for addition of new asset refer Para 3.1 mentioned above.
Replacement of a part of Fixed Assets is charged as repairs and maintenance
to relevant cost centre. In this connection reference is invited to Circular
number 314/2008 issued by CAS. Follow the link provided in Appendix 2.

Finance Manual
3.3 Transfer of Fixed Assets

This section details the process of transfer of Fixed Assets
a) From one Company Code to another; and
b) Transfers within the same Company Code i.e. inter - indenter transfers.
Transfers between two indenters would include change in Indenter-wise asset
records, change in cost centre and reclassification of assets, if required.
Indenter wise Fixed Assets registers are maintained in the system for
controlling purposes. Indenter wise list can be viewed and edited with T- code
ZFISTRV. Indenters should keep the details such as custodian name, location
etc updated when ever there is any change in the location, custodian etc.
3.3.1 Transfer from one unit to the other unit (cross company code transaction)
The process commences with identification of asset to be transferred between
the sending and receiving units. The detailed process narrative is given below:
3.3.1.A1 Indenter in sending unit creates Asset Transfer Note (ATN) Indenter in
in SAP using T-Code – ZFIATN sending unit
3.3.1.A2 Asset Accounting section reviews pending ATNs on Asset

periodical basis by using T-Code – ZFIATN and posts the Accounting
transaction by using T-Code – ABT1N. section
Sending company code

30*** Accumulated depreciation on asset Dr.
(Till the date of transfer)
(From last depreciation run till the date
of transfer) (at the time of dep run)
120104 IUT- Receivable/Payable-Asset Dr.
Transfer (ICE-ICE)
10*** Relevant Fixed Asset A/c (Gross book Cr.
value)
(Depreciation from last depreciation run

Finance Manual
till the date of transfer)) (at the time of

dep run)
Note:
i. Depreciation till the date of transfer is posted in the
books of the transferring unit
ii. IUT entry is generated on posting of transaction
In receiving company code, simultaneously, new asset
number is created with the original inventory number with
the status as Fixed Asset in transit.

10*** Relevant Fixed Asset A/c Dr.
120104 IUT- Receivable/Payable-Asset Cr.
Transfer (ICE-ICE)
3.3.1.A3 Once asset is received at the receiving unit, indenter in Indenter in

receiving unit creates Asset Receipt Note using T-Code – receiving unit
ZFIATN
Note: Relevant CC of the receiving unit is mentioned in the
ARN.
3.3.1.A4 Indenter in receiving unit forwards a signed copy of ARN to Indenter in

Asset Accounting section. Status of the pending ARN can receiving unit
also be viewed by asset accounting section by using T-
code– ZFIATN.
Asset accounting section takes the report periodically from
the system for asset transferred by other units not
acknowledged by the indenter at the receiving unit and
follows up with the indenter for clearance of transit.
3.3.1.A5 Asset Accounting section reviews report and changes the Asset
status of asset from Fixed Asset In Transit to FA using T- Accounting
Code – AS02 on receipt of acknowledged copy of ARN. section

Finance Manual
3.3.1B Process flowchart
Indenter creates ATN in SAP

reviews pending ATNs on a
periodical basis & posts
transaction in SAP
Receiving indenter creates

ARN in SAP
Receiving indenter forwards

signed copy of ARN to Asset
Accounting section

extracts report periodically for
asset transferred by units but
not acknowledged by indenter

reviews report & changes
status of asset from FAIT to
FA in SAP on receipt of
acknowledged copy of ARN

Finance Manual
3.3.2 Transfer within the same unit (inter indenter transfer)

Indenter wise asset registers are maintained in FA module and there can be
situations where asset in custody of one indenter is transferred to other indenter
within the same unit. This entails the following activities:
a) Change in indenter code in the asset master;
b) Updation of Cost centre (CC);
The detailed process narrative for inter indenter transfers within the same unit is
given below:
3.3.2.A1 Sending indenter creates Inter Indenter Transfer in SAP Sending

using T-Code- ZFIATN. System generates an automated indenter
mail to the receiving indenter
3.3.2.A2 Receiving indenter acknowledges the receipt of asset by Receiving

using T-Code – ZFIATN after asset has been physically indenter
received.
3.3.2.A3 Sending and receiving indenters forwards signed copy of Sending and
inter indenter transfer to Asset Accounting section. receiving
indenter
3.3.2.A4 Asset Accounting section processes the transaction using T- Asset

Code – ZFIAMCHANGE. Accounting
section

Finance Manual
Sending indenter creates Inter

Indenter Transfer in SAP
Receiving indenter
acknowledges receipt in SAP
after physical delivery of asset
Sending and receiving

indenters forward signed copy
of Inter Indenter Transfer to

updates asset records in SAP

Finance Manual
3.4 Accounting for depreciation/depletion

Fixed Assets are depreciated at specified rates and Producing Properties are depleted
based on Unit of Production (UoP) method. This section has been divided into following
three steps:
a) Accounting for depreciation on Fixed Asset;
b) Capitalization of depreciation on production facilities {GGS, Water/Gas Injection
System, ETP, WWTP, EPS, WHI, Artificial Lift System, GGS cum CTF (part) , flow
lines, production platforms and process platforms (part)}, etc.; and
c) Accounting for depletion on PP.
3.4.1 Accounting for depreciation

Depreciation is accounted for in books of accounts in accordance with the accounting
policies of the company.
Depreciation key is defined for each asset in the asset master, as per rates prescribed
in Schedule XIV to the Companies’ Act. The detailed list can be generated from the
system using T-Code – ZFICENSUSCLASS. Depreciation on each asset is computed
on pro-rata basis (number of days) in the system and posted at the time of depreciation
run in SAP. Depreciation run is done on a monthly basis. The detailed process
narrative for accounting of depreciation is given below:

Finance Manual
3.4.1.A1 Asset Accounting section initially executes depreciation run Asset

using T-code – ZFIDEPKEY for calculation of depreciation Accounting
for assets less than equal to Rs. Five Thousand. section
3.4.1.A2 Asset Accounting section executes a depreciation run in test Asset

mode by using T-code - AFAB and generates a deprun Accounting
report by using the T-Code - SM37 that gives WDV for each section
asset, planned depreciation till date and posted depreciation
till last depreciation run.
Note:
Depreciation is calculated by the system on day basis and
called planned depreciation while the posting takes place
when the deprun is executed in update mode as a period-
end activity. Once depreciation is posted, it is called posted
depreciation.
3.4.1.A3 Asset Accounting section verifies the report for Asset

inconsistencies in terms of asset classification, amount of Accounting
depreciation planned as against already posted till the section
previous month etc. If the verifier observes any
inconsistencies then the requisite changes in rate, date or
asset classification are made in the asset master using the
T-code – AS02. Once the relevant changes are made, the
above procedure is performed again till the time there are no
inconsistencies.
3.4.1.A4 Once all abnormalities are removed, Asset Accounting Asset

section executes the deprun in update mode by using the Accounting
same T-code – AFAB. section
3.4.1.A5 Asset Accounting section verifies the report and posts the Asset
depreciation in the books of account by using T-code – Accounting
SM35 section

030*** Accumulated depreciation A/c Cr.

Finance Manual
Note:
i. After posting, posted depreciation amount reflects the
cumulative depreciation for the period including current
month depreciation.
ii. Depreciation on facilities used for production of Oil &
Gas is allocated to PP. On execution of depreciation
run, the depreciation on facilities gets posted to internal
order type 2ZZ in Fixed Asset module. Detailed process
for settlement of internal order 2ZZ to PP Asset is
covered in Para 3.4.2
iii. Depreciation on Fixed Asset used for exploration &
development activities is allocated to WBS element for
survey, exploration & development wells and finally
gets settled to Survey expenditure, EWIP and DWIP, as
the case may be.
iv. Manual depreciation is generally posted where asset
put to use in the previous financial year is capitalized in
SAP in the current financial year. This is called
unplanned depreciation and is posted in Fixed Asset
module by using T-code – ABAA

Finance Manual

initially executes deprun in
SAP for assets less than equal
to Rs. Five Thousand

again executes deprun in test
mode & generates deprun
report in SAP

verifies report for
abnormalities & changes, if
any, are made

executes deprun in update
mode in SAP

verifies the report and posts
depreciation in SAP

Finance Manual
3.4.1.C Unplanned depreciation

Manual depreciation is required to be posted where asset put to use in the previous
financial year(s) is capitalised in SAP in the current financial year. In such cases
system calculates the depreciation from the first day of the current financial year.
Depreciation for the prior year(s) needs to be calculated manually and the shortfall has
to be posted as described below:
Particulars System Manual
Gross value 500000 500000
Date of capitalisation 01.04.06 01.04.06
Dep rate 30% 30%
Dep start date 01.04.08 01.04.06
Dep for the year 2006-07 - 150000
Dep for the year 2007-08 - 105000
Dep for the year 2008-09 150000 73500
Total dep upto 31.03.09 150000 328500
NBV before unplanned dep 350000 171500

31.03.09
Unplanned dep with value 178500 -

date 31.03.09
NBV after unplanned dep as 171500 171500

on 31.03.09
3.4.1.D Write up of Asset

Write up of asset is required when the depreciation actually charged is more than the
depreciation which should have been charged on account of incorrect capitalisation
date etc.
T-code use for the write up is ABZU

Finance Manual
3.4.2 Capitalization of depreciation on facilities

3.4.2.A1 Depreciation on production facilities used for production of Costing Cell

oil and gas is capitalised to PP. Depreciation on assets
utilised for transportation (TOG) purposes is charged off to
P&L account. Therefore, to achieve the same, once the dep-
run has been executed in Fixed Asset module, the Internal
Orders (IO) for this class of assets is settled to PP Asset in
the Costing (CO) module using the T-code – KO88.

70102 Producing Properties-Gross- Dr.
Depreciation
22**** Less allocation-Depreciation Cr.
With regard to this class of assets, the following critical

aspects are considered:
 While creating asset master for this class of assets it is
ensured that Internal Order (IO) number is mentioned in
the relevant field;
 While creating the IO it is ensured that if the asset is
partially used for production purposes and partially for
transportation purposes, then the technical ratio is
calculated and given as a settlement rule in the IO. This
ratio is calculated every quarter in case of Western
offshore to ensure that if there is a change, then the
same is updated in the IO. The IO can be updated for
this ratio using the T-code – KO02.
Guidelines for calculating the technical ratio of usage of
facilities for production purposes as against transportation
purposes is briefly explained below.
Obtain a list of assets (compressors, process equipments,
etc) under this class, duly classified into used for production
purposes and used for transportation purposes, from the
technical officer from the field or the operator. Against each

Finance Manual
of these assets obtain their contract value. The assets which

are used for both purposes are segregated in the ratio of
their usage (obtained from technical section) for production
and transportation. After allocating the common assets, the
final ratio of usage of facilities for production purposes as
against transportation purposes is obtained by adding the
total value.

Finance Manual
3.4.3 Accounting for depletion

Producing Properties (PP) are depleted on Unit of Production method (UoP).
The rate of depletion is computed with reference to an area covered by
individual lease/license/asset/amortization base by considering proved
developed reserves and related capital costs incurred including future
abandonment costs. In case of acquisition, cost of producing properties is
depleted by considering the proved reserves. For the purpose of depletion
computation and posting, group asset is created corresponding to creation of
PP asset in SAP. Since, PP asset is created separately for expenditure,
depreciation and abandonment cost, corresponding group asset is also created
separately for these three items. A different depreciation key 70 is assigned to
group asset that facilitates depletion computation on depreciation run. The
detailed process narrative is given below:
3.4.3.A1 Information with respect to proved developed reserves is Asset

entered by CAS for each unit/field and production is Accounting
uploaded by the Asset Accounting Section in SAP section
periodically using T-Code – ZA025
AA Section runs the program ZFINBVFCLT for calculation of
NBV of facility assets which is used in depletion calculation.
There are two radio buttons available; one for updation of
facility report and second one is for generation of report.
Asset Accounting section executes the T-code AFAR for re-
calculation of depletion.
Thereafter, Asset Accounting section executes the repeat
deprun using T-code AFAB for computation & posting of
depletion on the basis of following variables :
a) Proved developed reserves for oil and oil equivalent
gas in Metric Tonne (MT); (1000 SCM of Gas is equal
to 1 MT of Crude Oil)
b) Cumulative Production for the period for oil and oil
equivalent gas in MT; (1000 SCM of Gas is equal to 1
MT of Crude Oil) and
c) Gross PP plus NBV of facility assets as reduced by the
accumulated depletion and impairment, if any.

Finance Manual

209103 Recouped Cost - Depletion – Dr.
Expenditure
70121 Depletion Fund-Expenditure Cr.
70122 Depletion Fund-Depreciation Cr.
70123 Depletion Fund - Estimated Cr.
Abandonment Costs.
Depletion is computed separately for expenditure,

depreciation & abandonment cost components in PP. The
depletion for each PP account is accounted for in separate
accounts representing depletion on expenditure,
depreciation and abandonment costs respectively.
Note Formula mapped in SAP for calculating depletion is :
Gross PP as Production for

reduced by the the period
accumulated
Depletion = x
depletion+ Proved
NBV of facility developed
assets reserves
3.4.3.A2 Depletion using Unit of Production method is also computed CAS

manually by CAS on a quarterly basis for cross checking.
The difference is analysed for necessary correction by the
unit.
Note: Production for the period is obtained from the un-
codified statement and reserves are taken as per the latest
reserve estimates given by the Reserve estimation
committee.

Finance Manual
3.4.3.A3 In case the depletion amount as calculated by Corporate Asset

Accounts is different from the depletion amount charged in accounting
the books of respective unit, asset accounting section of the section
respective unit, posts the difference as unplanned depletion
using T-code – ZFIPPDEP.
This T-code is normally used for accounting additional
depletion or write back of depletion, for making any
corrections to the depletion postings.
Refer Accounting entry AE/AA/021 mentioned below,

209103 Recouped Cost – Depletion – Dr./Cr.
Expenditure (This is debited if depletion
calculate by corporate accounts is more
than already charged in books of the
unit as per Activity 3.4.3.A1 and vice
versa)
70121 Depletion Fund-Expenditure Dr./Cr.
70122 Depletion Fund-Depreciation Dr./Cr.
70123 Depletion Fund - Estimated Dr./Cr.
Abandonment Costs.

Finance Manual
Asset accounting section

calculates NBV of facility
assets which is used in
depreciation calculation
Asset Accounting section at

units executes repeat deprun
in SAP for computation &
posting of depletion
Depletion recomputed by CAS

manually on a quarterly basis
for cross checking
Asset accounting section of

the respective unit, posts the
difference (if any) as
unplanned depletion in SAP

Finance Manual
3.5 Physical verification procedures

3.5.1 Physical verification policy
Physical verification of Fixed Asset is conducted by a separate stock verification team at
each location in accordance with the physical verification policy of the Company. Policy
specifies the frequency and criteria for conducting physical verification:
In case of Fixed Asset, coverage & frequency is based on the classification of assets
into category A, B, C and for self verification by indenter
a) Category A includes individual asset with gross book value greater than Rs. One Crore.
These items are physically verified annually.
b) Category B includes individual asset with gross book value between Rs. Ten Lacs to
Rs. One Crore. These items are physically verified annually.
c) Category C includes individual asset with gross book value less than Rs. Ten Lacs.
These are further divided into sub-categories i.e. C1, C2 and C3 for the purpose of
verification.
C1 - Asset with gross book value greater than Rs. One lac but less than Rs. Ten Lacs
C2 - Asset with gross book value greater than Rs. Fifty Thousand but less than equal to
Rs. One Lac.
C3 - Asset with gross book value greater than Rs. Ten Thousand but less than equal to
Rs. Fifty Thousand
These items are physically verified every third year by rotation.
d) Self verification by indenter includes:
 Verification of Fixed Asset with gross book value less than equal to Rs. Ten
Thousand that are verified every year and
 All F&F items irrespective of their value are verified once in two years.
Refer Circular number IM/01/2008 issued by ED-CCF. Link provided in Appendix 2.

Finance Manual
3.5.2 Generation of discrepancy report and settlement of discrepancies

This section describes the process flow for physical verification including generation of
discrepancy reports if any deficit or surplus is identified and finally settlement of
discrepancy.
3.5.2.A1 Stock verification team generates item wise report of assets Stock
by indenter using T-Code – ZFIVERIABC on a particular verification
date for conducting physical verification. The list specifies team
the asset number, inventory number, location, gross book
value and WDV of each asset.
3.5.2.A2 Stock verification team conducts the physical verification for Stock
each indenter and identifies the status of each asset as verification
available or not available (deficit). Stock verification team team
updates asset verification status in SAP to Y (Available) or D
(Deficit) by using T-Code - ZFIVERIABC.
3.5.2.A3 Stock verification team executes BDC in SAP using T-Code Stock
– ZFIVERIABC that updates the status in the asset master. verification
In case of any error T-Code SM35 is used to update the team
status.
3.5.2.A4 Stock verification team generates a discrepancy report by Stock

using T-Code – ZFIVERIABC and forwards a signed copy to verification
respective indenters to confirm the discrepancies with a team
copy to Asset Accounting Section. Indenter should
reconcile/locate the discrepant assets and intimate to the
physical verification team for updation in the master. Asset
Accounting Section should follow up with the indenter for
settlement of such discrepancies.
3.5.2.A5 In case of unreconciled/unsettled deficit, respective indenter Indenter

forwards a proposal for write off to competent authority with
proper justification. On approval of proposal by competent
authority, indenter forwards one copy of approval note to
stock verification team and another copy to the Asset
Accounting section.
Note:
For write off, similar process is followed as in the case of

Finance Manual
condemnation of Fixed Asset given in Para 3.2.1.
3.5.2.A6 In case of any surplus, it should be reconciled with the

deficit at any other location.

Finance Manual
3.5.1B Process flowchart
Stock verification team

generates item wise report of
assets by indenter

conducts verification &
updates status of each asset
in SAP

executes BDC in SAP to
update status in asset master

generates discrepancy report
in SAP & forwards a copy to
respective indenter
Surplus Deficit
Asset accounting section Indenter forwards proposal for

reconciles surplus with deficit write off to competent
at any other location authority.
On approval, indenter
forwards a copy of ‘approval
note’ to stock verification team
& Asset Accounting section

processes ‘approval note’ in
SAP & removes asset record

Finance Manual
3.6 Preparation of Schedule A (Fixed Asset schedule)

After completion of periodical closing activities, Schedule A (fixed asset schedule) can
be drawn from the system using T- code OARP. The requisite variant has been created
in the system (OARP->Asset history sheet) separately for gross block, accumulated
depreciation and impairment. It must be ensured that there is no difference between FI
and asset accounting by running T- code ABST2.
3.7 Year-end/beginning activities

To execute any report using T-Code OARP after change of calendar year, T-code
st st
AJRW is executed, ideally on 1 January /1 working day of calendar year. T- code
AJAB is executed for year end closing after completion of annual accounts each
financial year. This T- code is run to freeze the asset balances after which no
transaction can take place in the closed financial year.

Finance Manual
4 Process documentation
Activity
S. No Document Name Document retention
reference
3.1.1.A1
1 3.1.2.A4 Reservation Main Store
3.1.4.A1
2 3.1.2.A8 SES Indenter
3 3.1.2.A8 Commissioning Note Asset accounting section
4 3.1.3.A1 Commissioning Certificate Asset accounting section
5 3.1.7 Concurrence F&A section
6 3.1.10 Debit/Credit memo F&A section
7 3.2.1.A2 Recommendation / Approval Note Indenter
8 3.2.1.A3 Asset Condemnation Note Main Store
9 3.3.1.A1 Asset Transfer Note Asset Accounting section
10 3.3.1.A3 Asset Receipt Note Asset Accounting section

11 3.3.2.A1 Inter-Indenter Transfer Asset Accounting section
12 3.5.2.A4 Discrepancy Report Stock Verification Team
Stock Verification team &

13 3.5.2.A5 Approval Note

Finance Manual
5 Accounting Entries
Activity A/c Dr/

Number A/c Name Amount
ref Code Cr
3.1.1.A4
AE/AA/001 & 10*** Fixed Assets Dr. XXX
3.1.2.A7
907/8** CIOS Cr. XXX
(Goods issue to Assets)
40701 to
AE/AA/002 3.1.2.A8 Relevant AUI Accounts Dr. XXX
40854
190117 SR/IR A/c – services Cr. XXX
(SES created for commissioning charges on AUI)
AE/AA/003 3.1.2.A9 10*** Fixed Assets Dr. XXX

40701 to
Relevant AUI Accounts Cr. XXX
40854
(Settlement of commissioning charges to Fixed asset)
AE/AA/004 3.1.3.A3 703** EWIP Dr. XXX

703** DWIP Dr. XXX
Relevant Fixed Assets A/c (like
10*** Dr. XXX
buildings)
Capital work in progress (in
50*** Dr. XXX
case of incomplete jobs)
209998/
99/2299 Allocation
Cr. XXX
98/99/24 expense/depreciation
9998
(WBS settlement to asset)
Mat Consumed-Stores-Drill
AE/AA/005 3.1.4.A2 210101 Dr. XXX
Pipes - Imported
210103 Dr. XXX
Pipes - Indigenous
210105 Mat Consumed-Stores-Casing Dr. XXX

Finance Manual
Activity A/c Dr/

ref Code Cr
Pipes - Imported
- Mat Consumed-Stores-
210107 Dr. XXX
Casing Pipes - Indig
Mat Consumed-Stores-Oth
210109 Dr. XXX
Pipes & Pipe Fitting-Import
210111 Dr. XXX
Pipes & Pipe Fitting-Indig
Mat consumed- Tubings-
210157 Dr. XXX
Import
210159 Mat consumed – Tubings- Indg Dr. XXX
Mat Consumed-Stores-Well
210161 Dr. XXX
Heads - Imported
210163 Dr. XXX
Heads
CA-Stores-Drilling Pipes-
90201 Cr. XXX
Imported new
CA-Stores-Drilling Pipes-
90203 Cr. XXX
Indigenous new
CA-Stores- Casing Pipes -
90205 Cr. XXX
Imported new
CA-Stores- Casing Pipes -
90207 Cr. XXX
Indigenous new
CA-Stores- Other Pipes & Pipe
90209 Cr. XXX
Fittings-Import new
CA-Stores- Other Pipes & Pipe
90211 Cr. XXX
Fittings-Indig new
CA-Stores- Tubings- Pipes &
90257 Cr XXX
fittings- Imp-
CA-Stores- Tubings- Pipes&
90259 Cr XXX
fittings- Indg
CA-Stores- Well Head & X'mas
90261 Cr. XXX
Tree – Imported new
CA-Stores- Well Head & X'mas
90263 Cr. XXX
Tree - Indig new

Finance Manual
Activity A/c Dr/

ref Code Cr
(Issue of well materials to WBS elements of

exploratory & development, initially charged to various
consumption heads)
AE/AA/006 3.1.4.A5 10405 F/A-P&M-Well Heads Dr. XXX

10404 F/A-P&M-Drill Strings Dr. XXX
210101 Cr. XXX
Pipes – Imported
210103 Cr. XXX
Pipes – Indigenous
210109 Cr. XXX
Pipes &Pipe Fitting-Import
210111 Cr. XXX
Pipes & Pipe Fitting-Indig
210161 Cr. XXX
Heads – Imported
210163 Cr. XXX
Heads
(Well material used in exploratory & development
drilling capitalized in the books of accounts)
10101/ Freehold land/

AE/AA/007 3.1.5 Dr. XXX
****** Vendor Cr. XXX
(Capitalisation of land acquired directly from
landowner)
AE/AA/008 3.1.5 a. At the time of making deposits with SPLAO

Deposits-Deposit With SPLAO
for Land Acquisition
101123 (if deposit is for permanent Dr. XXX
acquisition of land & use fund
centre where funds are kept)
Deposits-Deposit With Govt.
101120 Dr. XXX
Authorities

Finance Manual
Activity A/c Dr/

ref Code Cr
19**** Vendor (SPLAO) Cr. XXX
19**** Vendor (SPLAO) Dr. XXX

09**** Bank clearing A/c Cr. XXX
b. On adjustment of deposits
10101/ Freehold land/
Dr. XXX
101123 Deposits-Deposit With SPLAO
Cr. XXX
for Land Acquisition
Deposits-Deposit With Govt.
101120 Cr. XXX
Authority
Sub-asset number (Insurance

AE/AA/009 3.1.7 10*** Dr. XXX
spare)
90*** Stores/spares inventory Cr. XXX
(Capitalization of insurance spares)
AE/AA/010 Employees E-Payments

3.1.8 190426 Dr. XXX
(a) Payable A/C
100411/
Advance A/c Cr. XXX
100414
(Creation of Sub asset number of white good in
system)
AE/AA/010 010801 / Asset number (White Good)/

3.1.8 Dr. XXX
(b) 010802 Asset number (LAPTOP)
100411/
Advance A/c Cr. XXX
100414
AE/AA/011
3.1.8 120102 IUT-Receivable/Payable Cr. XXX
(a)
229913/
Receiving Co Code A/c Dr. XXX
229914

Finance Manual
Activity A/c Dr/

ref Code Cr
120102 IUT-Receivable/Payable Dr. XXX

229913/
DDN A/c Cr. XXX
229914
(Transfer of depreciation to company code where
employee is currently posted)
Recovery on a/c of White

AE/AA/011 190310/
3.1.8 Goods or recovery on a/c of Dr. XXX
(b) 190314
Laptops
Account Receivable White
100292 /
Goods or Account Receivable Cr. XXX
100293
–Laptop
(On separation from service or completion of the
specified period the balance lying against white goods
is recovered)
Account Receivable White

AE/AA/011 100292 /
3.1.8 Goods or Account Receivable Dr. XXX
(c) 100293
–Laptop
F/A Furniture & Fixture Emp.
10801 /
F/A or Furniture & Fixture -Lap Cr. XXX
10802
Top
30801 / Accu. Dep. F&F or
Dr. XXX
(Retirement of the white good asset in case of
separation from service or completion of the specified
period)
AE/AA/011
3.1.8 201525 Asset written off Account Dr. XXX
(d)
F/A Furniture & Fixture Emp.
10801 /
F/A / Furniture & Fixture -Lap Cr. XXX
10802
Top
30801 / Accu. Dep. F&F or
Dr. XXX

Finance Manual
Activity A/c Dr/

ref Code Cr
(Retirement of the white good asset in case of Demise

of employee)
19***/ Vendor A/c/ Relevant Fixed

AE/AA/012 3.1.10 Dr. XXX
10**** Asset A/c
201451 Price variation Cr. XXX
(Adjustment for Debit/Credit memo issued to vendor
for capital goods)
AE/AA/013 3.1.12 70401 Dry Wells-Gross-Expenditure Dr. XXX

70402 Dry Wells-Gross-Depreciation Dr. XXX
70406 Dry Well-Abandonment Dr. XXX
70301 EWIP-Expenditure Cr. XXX
70302 EWIP-Depreciation Cr. XXX
70303 EWIP- Abandonment* Cr. XXX
(Transfer of expenditure on dry wells from EWIP to
Dry well asset)
Recouped Cost - Dry Wells –

AE/AA/014 3.1.12 209102 Dr. XXX
Expenditure
70411 Dry Wells-Amort-Expenditure Cr. XXX
Dry Wells-Gross-Amort-
70412 Cr. XXX
Depreciation
Dry Wells-Amortization Fund-
70416 Cr. XXX
Abandonment
(Dry well expenditure transferred to P&L on dep-run)
Accumulated depreciation on
AE/AA/015 3.2.1.A4 30*** asset Dr. XXX
(Till the date of discard)
Depreciation
22**** (From last depreciation run till Dr. XXX
the date of discard)
201525 Asset written off Dr. XXX

Finance Manual
Activity A/c Dr/

ref Code Cr
10*** Relevant Fixed Asset A/c Cr. XXX

asset
30*** (Depreciation from last Cr. XXX
depreciation run till the date of
discard)
(Asset condemned/discarded)
AE/AA/016 3.3.1.A2 30*** asset Dr. XXX
Depreciation
22**** (From last depreciation run till Dr. XXX
the date of transfer)
IUT- Receivable/Payable-
120104 Dr. XXX
Asset Transfer (ICE-ICE)
Relevant Fixed Asset A/c
10*** Cr. XXX
(Gross book value)
asset
30*** (Depreciation from last Cr. XXX
depreciation run till the date of
transfer))
(Asset transferred to other unit – in the books of
sending unit)
AE/AA/017 3.3.1.A2 10*** Relevant Fixed Asset A/c Dr.

30*** asset Cr.
IUT- Receivable/Payable-
120104 Cr.
Asset Transfer (ICE-ICE)
(Asset received from other unit – in the books of
receiving unit)
AE/AA/018 3.4.1.A5 22**** Depreciation Dr. XXX

Finance Manual
Activity A/c Dr/

ref Code Cr
030*** Accumulated depreciation A/c Cr. XXX

(On posting of depreciation)
Producing Properties-Gross-
AE/AA/019 3.4.2.A1 70102 Dr. XXX
Depreciation
22**** Less allocation-Depreciation Cr. XXX
(Capitalization of depreciation on facilities)
Recouped Cost - Depletion -

AE/AA/020 3.4.3.A1 209103 Dr. XXX
Expenditure
70121 Depletion Fund-Expenditure Cr. XXX
70122 Depletion Fund-Depreciation Cr. XXX
Depletion Fund - Estimated
70123 Cr. XXX
Abandonment Costs.
(On posting of depletion)
Recouped Cost - Depletion –

Expenditure (This is debited if
depletion calculate by
Dr./
AE/AA/021 3.4.3.A3 209103 corporate accounts is more XXX XXX
Cr.
than already charged in books
of the unit as per Activity
3.4.3.A1 and vice versa)
Dr./
70121 Depletion Fund-Expenditure XXX XXX
Cr.
Dr./
70122 Depletion Fund-Depreciation XXX XXX
Cr.
Depletion Fund - Estimated Dr./
70123 XXX XXX
Abandonment Costs. Cr.
(On posting on adjustment to depletion based on
revised computation received from Corporate
Accounts section, DDN)

Finance Manual
6 Information system and reporting
S. Report Report used

Appendix
N Report Name Frequency generation by/ circulated
reference
o process to
1 Asset history sheet Quarterly/Annua T-code – Unit AAC for Refer format
l OARP* preparation of for un-
(Provides details of
Fixed Asset codified
additions, Separate
schedule for statements
deletions, report for
financial prepared at
movement, any movement in
reporting unit level
other adjustments gross block
to fixed assets & and
accumulated accumulated
depreciation) depreciation
2 Carrying value for Yearly T-code – Unit AAC for Refer format
impairment working OARP* impairment for un-
provisioning codified
Select
statements
business
prepared at
area wise
unit level
details
3 Depreciation on Quarterly T-code - Prepared by Refer format

facility ZFINBVFCLT asset for un-
accounting codified
section for statements
usage of central prepared at
accounts unit level
* T-code – OARP in SAP provides access to various asset related report that includes asset
details (Fixed asset register), Asset retirement details, movement of fixed asset etc.

Finance Manual
7 References
7.1 ICAI standards and guidelines :
(a) Accounting Standard - 10 Accounting for Fixed Assets issued by Institute of
Chartered Accountants of India (ICAI)
(b) Accounting Standard - 6 Depreciation Accounting issued by Institute of
Chartered Accountants of India (ICAI)
(c) Accounting Standard -11 The effect of changes in foreign exchange rates
(Revised 2003) issued by Institute of Chartered Accountants of India (ICAI)
(d) Guidance note on accounting of Oil & Gas producing activities issued by
Institute of Chartered Accountants of India (ICAI)
(e) Accounting Standard Interpretation (ASI) 2, Accounting for Machinery Spares
(AS 2, Valuation of Inventories and AS 10, Accounting for Fixed Assets)

Finance Manual
8 Appendix
8.1 Appendix 1: Glossary of terms used
S. No Term Definition
8.1.1 Fixed Asset Fixed assets are assets that

- are used directly or indirectly in production or supply of
goods and/or services
- have been purchased or constructed with the intention
for being used on a continuing basis
- are not intended for sale in the ordinary course of
business
- have a useful life and cost sufficient to justify
capitalization rather expensing off
Fixed asset can be classified into tangible and
intangible assets
8.1.2 Internal Order Internal Order is a cost object used in the

Company to capture depreciation relating to well
materials (1ZZ type) and facilities (2ZZ type).
8.1.3 Intangible assets An intangible asset is an identifiable non monetary asset,

without physical substance held for use in the production
or supply of goods or services and from which future
benefits are expected to flow to the enterprise
8.1.4 Asset under Assets that requires installation and/or commissioning

installation (other than those capitalized through WBS route in
Project systems module in SAP). For e.g. Air conditioning
unit
8.1.5 Fixed Asset The fixed asset register is a register or database giving
Register the details relating to each asset. Maintenance of fixed
asset register is statutorily required under Section 227
(4A) of the Companies Act
8.1.6 Gross book value Cost of fixed asset comprising of its purchase price;
including import duties and non-refundable taxes & levies
; and any cost attributable to bringing the asst into its pre-
forwarded location and condition for its intended use

Finance Manual
S. No Term Definition
8.1.7 Producing A field/ property where commercial production of oil and

Property gas has commenced.
8.1.8 Depreciation Depreciation is a measure of the wearing out,

consumption or other loss of value of a depreciable asset
arising from use, efflux of time or obsolescence through
technology and market changes. Depreciation is allocated
so as to charge a fair proportion of the depreciable
amount in each accounting period during the expected
useful life of the asset.
8.1.9 Depletion Depletion is the reduction in value of an asset resulting

from production in relation to natural resources or wasting
assets. As the resources are extracted, its value will be
reduced or exhausted
8.1.10 Purchase Order A purchase order is a confirmation of material/Fixed

Asset to be purchased by the division containing all
relevant details like purchase price, delivery conditions,
terms of payment etc.
8.1.11 Purchase A purchase Requisition is a request prepared by the

Requisition concerned User Department for the material/ fixed asset
to be purchased.
8.1.12 Written Down Fixed asset less Accumulated depreciation

Value (WDV)
8.1.13 Work Breakdown A Work Breakdown Structure is a results-oriented family

Structure (WBS) tree that captures all the work of a project in an organized
way in Projects Systems module of SAP

Finance Manual
8.2 Appendix 2: Relevant Circulars
Circular No. 314/2008 (CAS)
Circular No. IM/01/2008 (ED-CCF)
Circular No. CA-385/2012 (CA)

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Chapter 8

Contents Page Reference

1.1 Process overview 8.7

1.2 Process objectives 8.8

2.1 Fixed assets 8.9

2.2 Intangible Assets 8.9

2.3 Depreciation and Amortisation 8.9

2.4 Producing Properties 8.9

2.5 Depletion of Producing Properties 8.10

3 Process narratives & flowcharts

3.1 Additions to fixed assets 8.11

3.1.8 Capitalization of white goods/Laptops issued to 8.30

Private & Confidential 8.2

Contents Page Reference

3.1.10 Adjustment for debit/credit memo issued to 8.34

3.1.12 Dry well asset 8.36

3.1.13 Survey Asset 8.37

3.1.14 DRE Asset 8.37

3.2 Deletions from fixed assets 8.38

3.3 Transfer of fixed assets 8.42

3.4 Accounting for depreciation/depletion 8.47

3.5 Physical verification procedures 8.58

3.6 Preparation of Schedule A (Fixed asset schedule) 8.62

3.7 Year end/ beginning activities 8.62

4. Process documentation 8.63

Private & Confidential 8.3

Contents Page Reference

5. Accounting entries 8.64

6. Information system and reporting 8.72

7.1 ICAI standards and guidelines (accounting standards, 8.73

8.1 Appendix 1: Glossary of terms used 8.74

8.2 Appendix 2: Relevant Circulars 8.76

Private & Confidential 8.4

Acronym Meaning of the term

ACN Asset Condemnation Note

Private & Confidential 8.5

Acronym Meaning of the term

Private & Confidential 8.6

Private & Confidential 8.7

1.2 Process objectives

Private & Confidential 8.8

Private & Confidential 8.9

Private & Confidential 8.10

3. Process narratives & flow charts

3.1.1 ‘Ready to use’ assets (excluding land)

Private & Confidential 8.11

3.1.1.A Process narrative

S. No Activities including controls Responsibility

3.1.1.A1 Authorised capital indenter creates the reservation in SAP Authorised

3.1.1.A2 After creating the reservation, these details automatically Asset

3.1.1.A3 Asset Accounting section runs the report pending Asset

GL code Account description Dr/Cr

Private & Confidential 8.12

3.1.1.B Process flowchart

Authorised capital indenter

SAP Report pending

Asset Accounting section

Main Store issues material

Private & Confidential 8.13