What is present value in SAP FI-AF-ARO - Asset Retirement Obligation Management?

SAP Term: present value

• Component: FI-AF-ARO

• Component Name: Asset Retirement Obligation Management

• Description: The discounted value on a given date of a future payment or series of future payments. The present value calculation is used to determine the provisions level of an asset retirement obligation on a specific date. &Example& You have a settlement value of 10,000 euros, a settlement date of December 31, 2014, and a yearly interest rate 5%. The present value in this case is 7,835.26 euros on January 1, 2010.

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• Key Concepts: 
  Present value is a concept used in finance to calculate the current value of a future payment or series of payments. It is used to compare the value of money today to the value of money in the future. In SAP, present value is used in the FI-AF-ARO Asset Retirement Obligation Management component to calculate the current value of an asset retirement obligation (ARO). 
  
  How to use it: 
  In SAP, present value is used to calculate the current value of an ARO. This calculation is based on the expected cash flows associated with the ARO, as well as the discount rate and time period. The discount rate is used to account for inflation and other factors that may affect the future value of money. The time period is used to determine how long it will take for the ARO to be paid off. 
  
  Tips & Tricks: 
  When calculating present value in SAP, it is important to use an accurate discount rate and time period. This will ensure that the present value calculation is as accurate as possible. Additionally, it is important to consider any changes in inflation or other factors that may affect the future value of money when selecting a discount rate. 
  
  Related Information: 
  For more information on present value and how it is used in SAP, please refer to SAP Help Portal article “Calculating Present Value” (https://help.sap.com/viewer/f9f3d7a8b2e14c6c9f3d7a8b2e14c6c9/latest/en-US/f9f3d7a8b2e14c6c9f3d7a8b2e14c6c9.html).