D365 Tracking Fixed Asset Capital Work In Progress (CIP)

Hi Folks,

Good Day!

In this blog post, I would like to share my findings and high-level workaround solution for the Capital work in progress treatment for the fixed asset in D365.

What is Capital Work In Progress? 

Capital work in progress account contains all expenses incurred on the asset until it is converted into working condition. All these expenses will become part of the cost of that asset. When an asset is completed and it is ready to work, all costs will transfer to the relevant asset account.

Accounting Treatment: 

When the Capital work in progress account is paid it will be recorded into the Capital work in progress account, below will be the accounting entry

• Debit: Capital Work in Progress Account
• Credit: Payable Account

However once the fixed asset is completed and ready to work, all costs of the fixed asset will be transferred to the relevant asset account, here is the accounting entry

• Debit: Fixed Asset Account
• Credit: Capital Work in Progress Account

Requirement: Record the fixed asset expenses in the capital work in progress account. Once the fixed asset is ready to work, transfer this fixed from CWIP to the actual asset account. 

Workaround/Proposed Solution In D365: 

Fixed Asset Not Placed In Service: 

Firstly, we need to perform the following steps when the asset is not placed in service

1. Create the Book CWIP. 
2. Create one Book Standard. 
3. Create fixed asset group for CWIP.
4. Create purchase order for the CWIP procurement category and acquire the fixed asset, at the time of receiving the fixed asset make sure to select the CWIP fixed asset group. 
5. The business user will receive the purchase order and system will create a fixed asset in the fixed asset master form. 
6. Finance user will invoice the purcahse order and purchase order status is inoviced, at the same time fixed asset sattus will be "acquired" in the fixed asset master.
7. Once the invoice will be recorded for the purchase order, the system will also record the fixed asset acquisition in CWIP Books. The asset is initially linked with the CWIP asset group. The system will debit the CWIP account and offset the Payable account.
8. Now Asset status is "Acquired" for the Book "CWIP". However, the Standard Book status will be "Not Yet acquired"
9. The business user will make sure not to record the Depreciation for the fixed assets listed/linked with the Capital Work In Progress.

Note: In previous releases, there were two valuation concepts for fixed assets - value models and depreciation books. In the Microsoft Dynamics 365 for Operations (1611) release, the value model functionality and depreciation book functionality has been merged into a single concept that is known as a book.

Fixed Asset Placed In Service

1. Once the fixed asset is placed in service, the business user needs to closes out the Capital work in Progres (CWIP) Book for the asset and performs an acquisition transaction by using the Fixed asset acquisition journal for the standard Book.
2. When the fixed asset is available to be used in the service, the business user needs to change the status of CWIP Book to "Closed". Also, the acquisition cost will be copied from CWIP Books and insert or use the same cost for Standard Book.
3. Now, record acquisition transaction for the standard Book. This will debit the actually fixed asset account and credit the Capital work in progress(CWIP) account. 
4. Finally make sure to reconcile the CWIP account.

If you have any question feel free to share. I will make sure to incorporate the Screen Shots in the next blog.

Cheers!

Ali Danish