SAP Financial Accounting (SAP FI) Practice Exam

What is the primary reason for settling AUC to a "real" asset?

1. To allow for further depreciation calculations

2. To change the ownership of the asset

3. To consolidate financial statements

4. To track asset lifecycle

The correct answer is: To allow for further depreciation calculations

The primary reason for settling an Asset Under Construction (AUC) to a "real" asset is that it allows for further depreciation calculations. When an asset is in the construction phase, it is not yet operational and therefore does not contribute to depreciation. Once the asset is completed and settled, it is moved to a status where it can begin to generate value for the organization. This transition is essential for moving from a construction phase to active use, at which point depreciation can be calculated based on the asset’s useful life and cost. Subsequently, this ensures that the asset is accurately reflected in the financials, contributing to the overall financial health and reporting of the organization. While changing ownership, consolidating financial statements, and tracking asset lifecycle are important considerations in asset management, they are not the primary purpose of settling AUC to a "real" asset. The immediate concern upon completion of construction is generally to start the depreciation process on that asset, which reinforces the validity of the chosen answer.