The capitalization of an asset under construction is an accounting procedure that is required when an in-house produced asset is completed. It also can apply for Projects, programs, buildings, complex assets,.
The acquisition and production costs that were collected on the Asset under Construction are transferred to another asset. From the perspective of the balance sheet, this transfer corresponds to a transfer between two balance sheet items "Assets under Construction" and another balance sheet item (also included in Fixed Assets).
Assets under construction are acquisitions to fixed assets that are not permitted to be capitalized and depreciated immediately. The common way of handling these kinds of acquisitions is:
--> Collect the costs on an independent asset under construction.
The internal order supports action-oriented planning as well as monitoring and allocation of costs.
The internal orders can be used to:
• Receive costs. These costs can be then allocated to others objects with ad hoc drivers
• They are used as a destination in the posting with for example a cost centre, but the order in this case is used just as information.
• Hence Account assignment to an order (with allocation cost element) and settlement to the final asset should be done.
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