Project Accounting

The Project Accounting process is used to enter and follow up information on project accounting. Project accounting is an integrated part of IFS Financials and is based on one of the code parts B-J. Projects defined in IFS Project or IFS/Customer Orders are integrated with project accounting in IFS Financials. All projects belong to a project group in IFS Financials, which defaults the behavior of the individual project. The queries and reports in IFS/Project Accounting can show information for all projects, regardless of where they originate from.

The most important features of project accounting are the ability to:

• Follow up on projects over many years.
• Capitalize costs and/or revenues during the lifetime of a project.
• Calculate Revenue Recognition.

Below is a summary of how to use project accounting. Before you do so, review the activities in the Define Financial Basics main process, the activities in Basic Data Requirements (BDR) for Project Accounting, Financials, and the topic descriptions for Project Capitalization and Financial Jobs.

Define Code String—Specify the code part to be used for project accounting in the Code Part Function column.
• Account or Account Types—Check the code part requirements for the accounts that are used for project accounting.
Posting Control—Specify how the posting of project transactions should be controlled. The posting types GP3 Capitalized project cost, GP4 Capitalized project revenue, and GP5 Calculated project cost must be specified. If periodical capitalization is to be used, it is also necessary to specify information for the posting types GP16, GP17 and GP18.
• Project Groups—Enter information on the project groups.
• Project—Enter information for the project, e.g., the project type and reposting rules. This information is defaulted from the selected project group but can be modified for the individual project.

Project Types

Project accounting in IFS/General Ledger makes it possible to use different types of projects. Project types enable you to determine if and how project costs and project revenues should influence results during the lifetime of the project. Select the project type when entering information on a new project. You can use the following types of projects:

• Capitalize Revenues/Expenses
• Capitalize Expenses
• Capitalize Revenues
• No Capitalization
• Project as Code Part

Provided that periodical capitalization is used, the same project can use one project type in the General Ledger and another in one specific Internal Ledger. This can be very useful when a company need to report according to two different accounting principles (GAAP’s).

Capitalize Rev/Exp.

Capitalize Rev/Exp projects can be used for customer projects and for your company’s own production of fixed assets. This project does not affect the result accounts during the lifetime of the project.

• If transaction based capitalization is used, the GL update routine automatically creates reversing entries for all postings to the project’s cost and revenue accounts. The reversing entries are counter posted to the accounts defined for posting types GP4 Capitalized Project Revenue and GP3 Capitalized Project Cost in Posting Control. The code part requirements for the accounts used to posting control must be Mandatory for the code part used for project accounting. These reversing entries are added as new voucher rows to the original voucher.
• If periodical capitalization is used, the original voucher is not affected by the update routine. Instead the corresponding capitalization postings are created in a separate periodical process and posted to a separate voucher. This will also allow you either reverse the original revenue and cost entries or do the reversal against specific lump-sum accounts. This is controlled by the set-up of the posting types GP16 and GP17 in Posting Control.

Queries and reports enable you to follow up on and analyze detailed information on the projects. When a project is reported as ready, a voucher is created which reverses postings for capitalized revenues back to the original accounts. Capitalized costs are also posted back to their original accounts or to the code strings (Reposting Rule) defined for the project.

Capitalize Expenses

Capitalize Expenses projects can be used for long-term projects that are partially invoiced on a continuous basis. Only cost transactions are capitalized. The real costs of the project do not affect the result accounts during the lifetime of the project. Just like for the Capitalize Rev/Exp projects, reversing entries for cost postings for the project are either created automatically in the update routine or in a separate periodical process. When posting revenue for the project, a preliminary cost is estimated on the basis of the contribution margin ratio specified for the project. This preliminary cost is posted to the account defined for posting type GP5 Calculated Project Cost in Posting Control. Counter posting is created for the account specified for the posting type GP3, Capitalized Project Cost. Revenues for the project are not capitalized and remains in the specified revenue account. This means that a preliminary cost estimated on the basis of the project’s contribution margin is applied to the company’s results. When the project is reported as ready, a voucher is created in which this preliminary cost is reversed and the capitalized cost is posted back to the original accounts, or to the code strings (Reposting Rule) defined for the project.

Capitalize Revenues

Capitalize Revenue projects can be used for long-term projects that are partially invoiced in advance on a continuous basis. Only revenue transactions are capitalized. The real revenues of the project do not affect the result accounts during the lifetime of the project. Just like for the Capitalize Rev/Exp projects, reversing entries for revenue postings for the project are either created automatically in the update routine or in a separate periodical process. Costs for the project are not capitalized and remains in the specified cost accounts. Preliminary revenue is calculated in the periodical Revenue Recognition process and applied to the company’s results. The resulting revenue recognition voucher is automatically reversed in the next period. When the project is reported as ready, a voucher is created which reverses postings for capitalized revenues back to the original accounts.

No Capitalization

No Capitalization projects are the simplest form of project accounting. The project’s costs and revenues are not capitalized, but project accounting is still updated. Costs and revenues directly influence the company’s result.

Project as Code Part

Project as Code Part means that it is just used as a standard code part. Project accounting is not updated. This is the only project type that can be used if IFS Financials is not installed.

Project Origin

Project accounting in IFS/Project Accounting uses different types of project origin to distinguish between projects created in IFS Financials, IFS Project, and IFS/Customer Orders. The following origins can be used:

• Financial Project (created in IFS Financials)
• Project (created in IFS Project)
• Job (created in IFS/Customer Orders)

Vouchers

When transactions have been posted to a project, the vouchers must be updated to the general ledger to affect the project accounting. This is done in the Update GL Vouchers window.

Project Capitalization

Project capitalization can be done in two different ways, defined uniquely per project:

• Transaction: The GL update routine checks if a voucher contains cost or revenue postings for projects that should be capitalized, i.e., projects of Capitalize Rev/Exp, Capitalize Expenses or Capitalize Revenue types. If the project should be capitalized, postings to the project work-in-process (WIP) accounts defined in the Posting Control window are created automatically. The postings are added to the original voucher as new voucher rows.
• Periodical: The original voucher is not affected by the update routine. Instead the corresponding capitalization postings are created in a separate periodical process and posted to a separate voucher from the function group PPC.

Complete Project

When a project is finished it must be reported as complete. For projects of Capitalize Rev/Exp, Capitalize Expenses or Capitalize Revenue types, a voucher is created with postings from the project work-in-process (WIP) accounts back to the original cost and revenue accounts, or to the code strings (Reposting Rule) defined for the project. The default voucher type from function group P will be used in the normal case. The date of the project completion is set as the voucher date, but can be modified. The voucher is placed in the hold table for updating.

Provided that periodical capitalization is used, it is also possible to do one or more partial completions for capitalization projects.

For more information on how to complete/close a project that has Job as the project origin, see the topic description for Financial Jobs or the activity description for Complete Project.

Add investment transactions can be created at project completion to update fixed asset balances with changes in value caused by the project. These transactions can be modified after project completion.

The completion of a project can be rolled back, meaning that the project status will be switched back to Active and the project will be possible to use again. When the completion of a project is being rolled back, a new voucher belonging to the P function group will be created. This voucher will be an exact opposite of the voucher created when the project was completed.

A completed project can also be reopened. The project status will be switched back to Active and the project will be possible to use again. There is however no reversing voucher created. During this process, the project type and other settings for the project can be changed. This can be very useful when receiving warranty claims against a delivered customer project.

Project Accounting—Follow-up

The Project Analysis folders in IFS/Project Accounting contain three query windows each for General Ledger and Internal Ledger, which can be used to follow up on projects:

• Projects Analysis window displays detailed information for each separate project.
• Project Analysis window displays information on several projects at once.
• Structure Projects Analysis window displays information on several projects at once, according to a user defined accounting structure.

In all these windows it’s possible to zoom-in on selected code parts and drill-down to underlying voucher rows.

The GL Project Analysis folder also contains a report for follow-up on projects, i.e. the Project Balance Report. This report contains information on balances for one or more projects. Projects which were completed prior to a specified date can be excluded. The balances can also be compared to budget.

As one of the code parts in the code string is being used for project accounting, follow-up reports for projects can also be designed in IFS/Report Generator.