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[Jimmy Stewart]

We use Project Management and Accounting module in AX2012 R2/CU7 to accumulate costs for internal capital investment projects.  One issue we experience is the time delay in eliminating the project to create the resulting fixed assets.  The major contributing factor to this delay is resolving open commitments against the project.  For example, PO receipts not matched to an invoice do not post to the project until the receipt is matched to an invoice.  If there’s a delay in the vendor submitting an invoice, we can’t match to the PO and therefore cannot close out the project.  How have others tackled this issue?  Is this a configuration issue or a process issue?  Thanks for your help.

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Jimmy Stewart
Director, Financial Operations
Shentel
VA
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[Gary Gong]

Hi, Jimmy,
This is by design!! When you receive the goods, the liability is logged into the Goods Received but not Invoiced Account ( an Accrued Purchases Account). Since you have not received the invoice from the vendor, the Committed Project Cost is open. On the accounting side, everything is fine since the Accrued Liability is correctly reflected. In reality, you have not received the vendor invoice to close out the PO, you can not eliminate the cost to Fixed Assets, which is correct. You have to wait for the vendor invoice to come. If you worry about the Fixed Asset acquired or capitalized in a later fiscal period when you actually receive the invoice and eliminate it to the Fixed Assets, That will require a procedural workaround. This link explains the PO item consumption in details. I hope you remember me (Gary Gong).
https://gfeaxblog.wordpress.com/2018/03/25/ax2012-project-procurement-item-consumption-depending-on-project-management-and-accounting-settings/

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Gary Gong
GS1US
ORLANDO FL
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[Jimmy Stewart]

Thanks Gary…yes, I do remember you.  It’s been a long time!

The problem is how to ensure timely fixed asset creation and setup in the Fixed Asset sub-ledger.  You mention a procedural workaround….currently, we prepare a G/L journal entry to effectively ‘in-service’ the fixed assets in the projects where construction is physically complete and we’re just waiting on final invoices to eliminate the project.  We also manually accrue depreciation expense estimate for these assets as well.  With our quantity of open projects, and the large dollars involved, this manual process is burdensome and the risk of good cut-off at quarter-end/year-end is significant.  Any suggestions are welcome.

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Jimmy Stewart
Director, Financial Operations
Shentel
VA

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[Corey Warawa]

Hi Jimmy.  In situations similar to these we will often create a sub-project and either move (project adjustment) the costs to be capitalized or, alternatively, the outstanding transactions to it (depending on which makes sense from a transaction volume perspective).  Once this has been done we will estimate/eliminate the appropriate project while leaving the other one as is, awaiting the final transactions.  It’s certainly not an optimal solution but it does work.

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Corey Warawa
Functional Architect
Liquor Stores Limited Partnership
Edmonton AB
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[Gary Gong]

Jimmy,
I am thinking along with Corey’s approach by eliminating what you have accumulated at month end to the fixed assets and what is pending on Committed Costs is a matter of accrual for it for the current month. You will perform the elimination again when the pending invoices are posted in the next period. Are you using the Periodic Task -Estimate routines include Eliminate routines)? These periodic routines will allow you to do the work in a mass manner.
Regarding the accrual of Committed Costs allocating to specific depreciation expense or specific fixed assets, this is more philosophic or analytic depending on different CFOs/Controllers/Auditors. It is a matter of how detailed or micro-level you want to do the accrual on each project/fixed assets or a summary level. It is is easy to get the Total of all Committed Costs in projects to be capitalized. You can then derive an estimate of what percentage of the pending capitalization amount for all projects/fixed assets and similarly you will be able to derive the corresponding accrued depreciation expense for the month. Once you have these amounts, it is just a matter of a Reversing Journal Entry with corresponding accounts on a summary level. This will cover the liability of accrual on a summary level without getting into each project/fixed assets before the actual transactions have taken place. In the next period, these actual transactions will take place for you to eliminate them to fixed assets.
This will require a good conversation with the Finance folks in financial reporting area.
Let me know if you need my help!

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Gary Gong
Independent Solution Architect for Dynamics 365 Finance and Operations
ORLANDO FL
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[Colleen Miller]

Gary – Can you share the configuration of the Investment project.  When I test this process, the Investment project will only allow for Elimination to process once.  The Elimination process will not post if there are committed costs against the project.  

Thank you 

Colleen Miller

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Colleen Miller
Finance Consultant
Armanino
Edmonton AB
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[Mark Prouty]

The inability to eliminate projects in timely fashion to recognize revenue (related problem to yours), caused us to change to using Time & Material project types. We no longer use the Fixed Price type projects.

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Mark Prouty
Programmer / Analyst
ANGI Energy Systems
Janesville WI
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