September 27, 2019
The Current State of Complexity with Asset Accounting
Utilities are an asset-intensive industry. Capital investment is not only the revenue driver for utility enterprises, but also ensures safety, reliability and affordability to sustain high quality energy in our daily lives.
SAP’s new flagship solution SAP S/4HANA has certainly reached new heights but with respect to new utility regulatory issues and property and lease accounting matters there are some additional capabilities required to ensure compliance.
Closing the Gaps on Utilities’ Regulatory and Property Accounting Challenges
In order to address the complex asset accounting requirements, many utilities turned in the past to non-SAP systems to cope with these challenges such as addressing the new property and lease accounting requirements. These non-SAP systems attempt to provide the functionality tailored to the utilities industry; however, they also bring a series of challenges.
The nature of asset unitization process requires large amounts of operational and accounting data to be captured in SAP. Then, this data needs to be replicated and reconciled into the non-SAP system in order for the unitization process to occur. The problem is that when the unitization process occurs in the non-SAP system, results need to be pushed back to the ERP system in order to update the general ledger. As a consequence, huge amounts of data exchange and reconciliation has to occur between two separate systems, dramatically decreasing the efficiency of accounting departments, causing data to be out of sync and introducing tremendous maintenance and additional costs within the utility.
A Better Way Forward with SAP S/4HANA®
Transformation to SAP S/4HANA provides a great opportunity to eliminate antiquated non-SAP systems. Working closely with utility customers like NRG, Utegration, LLC developed an SAP S/4HANA-based solution portfolio, Finance4UTM, designed specifically to increase the functionality of S/4HANA and streamline utilities’ finance, regulatory and property and lease accounting functions. The SAP S/4HANA Universal Journal dramatically simplifies the data model across different modules: accounting, costing, vendor, customer, project, and fixed asset information are unified into the same table. The universal journal addresses utility requirements on the capitalization process: reliable and efficient book-keeping, real-time and insightful details on costs, vendors, materials, capital projects to fulfill efficiency, transparency, and compliant requirements of property accounting departments.
Finance4UTM directly leverages and enhances Universal Ledger and the new Fixed Asset module in SAP S/4HANA, using Fiori technology to provide an information hub for property accountants, supporting Field Complete, Unitization, Retire and Removal processes. It enables the asset lifecycle from CWIP (Construction Work in Progress) to CCNC (Construction Completed Not Classified) to PIS (Plant in Service), with depreciation starting from CCNC assets. For regulated Utilities, Finance4UTM automates the classification of assets according to the regulations. Finance4UTM addresses the new lease accounting standard ASC 842, providing comprehensive lease accounting functions including Lease Contract Management, Usage and Payment Schedules, Disclosure Report, ROU (Right of Use) Asset and Liability Recognition and Remeasurement along with direct integration to the SAP S/4HANA payment module.
“We are thrilled and grateful that NRG chose Utegration Finance4UTM – Extended Asset Accounting (previously called Property and Lease Accounting), together with SAP ARO (Asset Retirement Obligation), as part of NRG’s SAP S/4HANA project,” said Bart Thielbar, Utegration CEO. “Utegration has been a key partner for creating this unique and much-improved solution in SAP S/4HANA to address property and lease accounting,” said David Callen, Chief Accounting Officer at NRG. “The ability to work within the native SAP S/4HANA platform is clearly the way forward for not only property and lease accounting, but all regulatory and tax reporting for asset lifecycle accounting,” said Kim Hales, SVP, IT of NRG.
Hear Directly from NRG
You can hear directly from David Callen of NRG in our on-demand webinar, NRG Optimizes Extended Asset Accounting in S/4HANA. Click here to view.
You can also schedule a discussion regarding your utility’s specific regulatory and property accounting challenges. We can show you how to address the gaps, drive the intelligent enterprise and create real, sustainable business value. Contact us today to speak with one of our experts.