Acquire assets through procurement

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This article describes how to set up the integration between Fixed assets and Accounts payable to automatically create fixed assets from purchase orders or vendor invoices, or automatically post acquisition and acquisition adjustment transactions for fixed assets. One purchasing line creates one asset, regardless of the quantity on the purchasing line. If you need to create multiple fixed assets, you must create multiple purchasing lines.

You can integrate Fixed assets and Accounts payable by using the following methods. You must use the same method for all fixed assets:

• You manually create a fixed asset before you add the fixed asset number to the line on the purchase order or vendor invoice. An acquisition transaction automatically is posted for the asset when you post the vendor invoice. This is the default method.
• You manually create a fixed asset before you add the fixed asset number to the line on the purchase order or vendor invoice. No acquisition transaction posts for the asset when you post the vendor invoice.
• A fixed asset automatically is created when you post a product receipt or vendor invoice that has the Create a new fixed asset checkbox selected. An acquisition transaction automatically posts for the asset when you post the vendor invoice.
• A fixed asset automatically is created when you post a product receipt or vendor invoice that has the Create a new fixed asset checkbox selected. No acquisition transaction posts for the asset when you post the vendor invoice.

Select one of the first two methods if you prefer to manually create fixed assets, and then assign the fixed asset number to the purchase order or vendor invoice. Select one of the last two methods if you prefer a more flexible approach: sometimes you might create fixed assets manually, and sometimes you might automatically create a fixed asset based on the fixed asset information in the line item details.

Whether you manually create fixed assets or use a more flexible approach, you must also decide whether an acquisition transaction can be posted only in Fixed assets, or whether it can be posted when you post a vendor invoice. Some organizations prefer that users manually create acquisition and acquisition transactions in Fixed assets by using manual journal entries or proposals.

This article discusses the details of each method.

Methods for manually creating fixed assets

When you post a vendor invoice that has a fixed asset number entered in the lines, if you select the Allow asset acquisition from Purchasing option on the Fixed assets parameters page, the acquisition posts automatically, and the status of the asset changes to Open.

If an acquisition can't be posted, you can either manually enter an acquisition transaction in Fixed assets, or use an acquisition proposal in the Fixed assets journal to create multiple acquisition transactions at the same time.

Note

If Fixed assets is set up to limit acquisition transaction posting to a specific user group, you must be a member of that user group to post acquisition transactions from invoices.

Methods for automatically creating fixed assets

When you post a product receipt that has the Create a new fixed asset option selected for a line, you create a new fixed asset with a status of Not yet acquired. Then, when you post a vendor invoice with a new fixed asset, you post an acquisition transaction for the new asset and the asset status changes to Open, if Fixed assets is set up to allow for asset acquisitions from Accounts payable, and you're a member of a user group that can post acquisition transactions.

If you didn't select the New fixed asset? option on the purchase line when you posted the product receipt, but you select it when you post the vendor invoice, you create and acquire the new fixed asset with a status of Open, if Fixed assets is set up to allow for creating and acquiring. You don't create an additional asset when you post a vendor invoice if you already created one when you posted the product receipt.

Capitalization threshold

When you use a method where the system automatically creates and acquires the asset, you can set up the system to verify whether the purchase amount of the fixed asset meets a specified capitalization threshold for asset depreciation. If it does, the Depreciation option is selected in the books for the asset when you create it from Accounts payable.

A capitalization threshold is a currency amount that determines whether assets are depreciated if they meet the specified amount. For example, if you purchase an asset and the purchase amount is less than the capitalization threshold, the asset isn't designated to depreciate. If the purchase amount meets or exceeds the threshold, the asset is designated to depreciate.

You can set up the capitalization threshold in the Fixed asset groups page.

Scenario

This scenario discusses a full cycle of a Fixed assets and Accounts payable integration. It shows a sample setup and describes the use of acquisition proposals.

In this scenario, the system is set up as follows:

• Automatically create assets during product receipt or vendor invoice posting, but set up Fixed assets to prevent posting acquisition transactions from Accounts payable.
• Specify accounts in the Account type field for the Fixed asset receipt and Fixed asset issue account types in the Item groups page.
• Set the capitalization threshold for the computers group (COMP) to 1,500.
• Enter a purchase order for a new laptop that an employee uses, post the purchase order, verify that the shipping clerk posts a product receipt, post the vendor invoice, and then verify that the accountant updates the laptop asset to a status of Open.

To begin, use the Purchase order page to enter details for the laptop, which costs 1,600. Select the New fixed asset? option on the Fixed assets FastTab of the purchase order lines, select COMP as the fixed asset group, and save the purchase order.

When the laptop is received, a shipping clerk enters and posts a product receipt to record the receipt of the laptop. The laptop asset is created and has a status of Not yet acquired. The amount exceeds the capitalization threshold. Therefore, select the Depreciation option in the books for the laptop asset. The following transactions occur.

Description	Account	Debit	Credit
Purchase, Product receipt purchase	Uninvoiced receipts	1,600.00
Purchase, Product receipt purchase offset	Accrued purchases		1,600.00

Next, post the vendor invoice for the laptop. The laptop status doesn't change because Fixed assets is set up to prevent an asset acquisition transaction from being posted when a vendor invoice is posted. The Create a new fixed asset option is selected when the vendor invoice is posted. Therefore, the Fixed asset receipt account is used. The Fixed asset issue account isn't used because no acquisition is posted. It is used later when your organization's accountant posts an acquisition transaction in Fixed assets by using acquisition proposals.

The following transactions occur.

Description	Account	Debit	Credit
Purchase, Product receipt purchase offset	Accrued purchases	1,600.00
Vendor balance	Accounts payable		1,600.00
Purchase, Fixed asset receipt	Computer expense	1,600.00
Purchase, Product receipt purchase	Uninvoiced receipts		1,600.00

Finally, the accountant reviews all fixed assets that have a status of Not yet acquired. Therefore, the new laptop asset is reviewed. The accountant then opens the Acquisition proposal page from the Fixed assets journal lines, and creates acquisition transactions for all assets that have an invoice but that still have a status of Not yet acquired. When the journal is posted, the status of the laptop asset changes to Open. The Fixed asset issue account is credited and the asset acquisition account is debited.

The following are variations for this scenario:

• If Fixed assets is set up to allow for asset acquisition transactions to be posted when vendor invoices are posted, the accountant doesn't have to use acquisition proposals in Fixed assets because the acquisition transaction is created. Also, different accounts are updated when you post the vendor invoice. Instead of Computer expense, the Fixed asset receipt inventory account is debited, and two additional transactions occur: the asset acquisition account is debited and the Fixed asset issue inventory account is credited.
• If the Create a new fixed asset option isn't selected when the product receipt is posted, no asset is created at that time. If you select the Create a new fixed asset option before you post the vendor invoice, the asset is created and has a status of Not yet acquired, or a status of Open if you also post acquisition transactions when vendor invoices are posted.
• If the laptop cost is 1,400 instead of 1,600, the capitalization threshold isn't reached. Therefore, the asset is created and the Depreciation option is cleared.
• If an invoice register is used, use the Invoice approval journal page after the invoice register is posted to retrieve the voucher, link the purchase order to the vendor invoice, select the Create a new fixed asset option, and then post the vendor invoice. If you're a member of a user group that can create acquisition transactions, the acquisition is created and the asset has a status of Open.
• If only a partial quantity is received, no asset acquisition is created for the first vendor invoice because of user group restrictions. The only way that an acquisition can be posted for the second vendor invoice that finishes the quantity ordered is if an acquisition transaction is already entered for the first vendor invoice, and you're a member of the user group that can post acquisitions.

For more information, see Fixed assets integration.