when to use refurbishment ?

[Former Member]

Hi ,

We all know refurbishment orders settle cost to material . Hence in balance sheet , the value of material will be shown in inventory account .

Usually euipment are procured initally as project materials , captialised and created as assets . The asset value will also show up in balance sheet .

Now if I create serial numbers for these equipment and use refurbishment process again material value will get shown up in balance sheet .This is redundancy .

I was told that if equipment is already capitalised as assets , refurbishment process can not be used . Is this right ?

NP

[HiteshMistry · Accepted solution]

HI NP,

I think, it is not that you cann't use refurbishment process. You are right that, in refurbishment, value is shown in inventory account, but when you issue material from the stores it gets booked in to the consumption account.

First of all you have to decide where my repairing cost would go, whether it is as expense or would it be capitalised on an asset ? Once you finalize this then you have two options to carry out the repairing process.

1. Create normal maintenance order, define required cost receiver in the settlement rule (Cost center or asset)  & settle directly.

2. Send equipment to stores, create refurbishment order, refurbish equipment & send back to the store, settle the order on Material, issue the equipment to a cost center or an asset.

One advantage of doing through refurbishment process is, as you activate serial no. for equipment you get the history of movement of equipment in serial no. tab. Also you get different history of equipment refurbishment by order list refurbishment order type wise.

But the drawback of using refurbishment process is, if more than one material is available in the store at the time of issuing material back to cost center or an asset then it is not necessary that actual refurbishment cost will be booked, as at that time cost will be booked at moving average price of the material.

Hitesh

[Former Member · Accepted solution]

Hi Hitesh ,

What I understand from IInd option is

1)Create an order for refurbishment and settle cost to material . (If material value will icrease based on refurbishment cost and number of items lying in store )

2)MIGO -issue to cost center  or to asset ? (I have never done it for asset so far)

How will be balance sheet reportingnow ?

In assets what will be the value and in inventory what will be the value ?

[HiteshMistry · Accepted solution]

Hi NP,

Yes it is exactly what you understand. You can issue material to an asset by movement type 241. With this you asset value will increase by value of material.

Hitesh

[Former Member]

Refurbishment process is used to rehabilitate the repairable spares to increase its life & value. Whenever projects spares are bought, based on its usage, we can identify whether it will be done refurbishment or not. Based on that, you can decide.

For the existing components which are already assigned to asset & capitalised, we can create serial number & equipment which can dismantled with goods movement by reducing value from asset. So that, stock will be increased with the reduction in Asset value.

Once after doing Refurbishment, again you can attach that to asset to capitalise.

[Former Member]

Hi Mahesh ,

I need bit more data

1)When we dismantle , how to reduce value of asset ?....detailed steps

2)If you have done this befor can you please explain the step in details?