SAP Financial Accounting (SAP FI) Practice Exam

Does assets under construction (AUC) involve line item settlement?

1. No, they do not move during construction

2. Yes, money is moved to a new asset

3. Only partial amounts are settled

4. Yes, but only after completion

The correct answer is: Yes, money is moved to a new asset

In the context of assets under construction (AUC), it is accurate that money is moved to a new asset when the construction is completed. During the construction phase, costs are accumulated in the AUC account, which facilitates tracking and managing expenditures related to the construction project. Once the construction is complete and the asset is ready for use, a settlement process takes place, which involves transferring the total accumulated costs from the AUC account to the appropriate asset account. This transfer signifies that the AUC has now become a tangible asset and can be utilized in the organization’s operations. Thus, the movement of money to a new asset is indicative of finalizing the accounting treatment for these costs, transitioning them from a construction-related holding into an operable asset that can impact financial statements as a depreciable asset going forward. The other contexts in the choices reflect different stages or interpretations of the AUC process, but they do not accurately capture the mechanics of the settlement process once construction is finalized.