What is inflation adjustment split in SAP FI - Financial Accounting?

SAP Term: inflation adjustment split

• Component: FI

• Component Name: Financial Accounting

• Description: An inflation adjustment in which the SAP System splits the amount between two separate accounts, one that represents the general inflation rate, and one that represents the price level change for that G/L account. &EXAMPLE& A company adjusts the balance of a G/L account for platinum, UNI 2000000, using a specific index, with a net change in the inflation rate of 20%, which works out at UNI 400,000. The general inflation rate, however, is running at 15% UNI 300,000. This means that of the UNI 400,000 increase in the value of the company's stocks, UNI 300,000 of this can be accounted for by the general increase in prices. It therefore posts UNI 300,000 to the G/L account for inflation and UNI 100,000 to the G/L account for unrealized gains losses on precious metals.

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• Key Concepts: 
  Inflation adjustment split is a feature in SAP Financial Accounting (FI) that allows users to adjust the value of an asset or liability for inflation. This adjustment is based on the inflation rate of the country in which the asset or liability is located. The adjustment is made by splitting the value of the asset or liability into two parts: one part that is adjusted for inflation and one part that is not. 
  
  How to use it: 
  In order to use the inflation adjustment split feature, users must first enter the inflation rate for the country in which the asset or liability is located. This rate can be found on various websites or from government sources. Once the rate has been entered, users can then adjust the value of the asset or liability by splitting it into two parts: one part that is adjusted for inflation and one part that is not. 
  
  Tips & Tricks: 
  When using the inflation adjustment split feature, it is important to remember that only assets and liabilities located in countries with an inflation rate should be adjusted. Additionally, it is important to ensure that the correct inflation rate has been entered for each asset or liability. 
  
  Related Information: 
  For more information about SAP Financial Accounting (FI) and its features, please visit SAP's website at www.sap.com/fi. Additionally, there are many online resources available that provide detailed information about SAP FI and its features, including tutorials and user guides.