What is capitalization method in SAP FI-AA - Asset Accounting?

SAP Term: capitalization method

• Component: FI-AA

• Component Name: Asset Accounting

• Description: A method that specifies the basis for valuation used for the capitalization of a fixed asset. For newly acquired assets, the typical basis for valuation is the acquisition and production costs.

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• Key Concepts: 
  The capitalization method in SAP FI-AA Asset Accounting is a way of recording the cost of an asset over its useful life. It is used to determine the amount of depreciation that should be charged to an asset each year. The capitalization method is based on the concept of matching costs with revenues. 
  
  How to use it: 
  The capitalization method is used to calculate the depreciation of an asset over its useful life. The amount of depreciation charged each year is determined by the capitalization method. The capitalization method can be set up in SAP FI-AA Asset Accounting by entering the asset’s useful life, purchase price, and other relevant information. 
  
  Tips & Tricks: 
  When setting up the capitalization method in SAP FI-AA Asset Accounting, it is important to ensure that the useful life and purchase price are accurate. This will ensure that the correct amount of depreciation is charged each year. 
  
  Related Information: 
  The capitalization method is closely related to the straight-line depreciation method, which is another way of calculating the depreciation of an asset over its useful life. The straight-line depreciation method is simpler than the capitalization method, but it may not be as accurate in some cases.