SAP for ATLAM
CASE STUDY: SAP FOR ATLAM
Case Summary
Akademi Teknikal Laut Malaysia (ATLAM) was established on August 1981 and privatized on January 1997. ATLAM was wholly owned organization of MICT Berhad. The mission of ATLAM was to facilitate value added learning and provide excellent services to its client. In year 2001, the management had been asked to upgrade accounting system with the PETRA group-wide SAP system. SAP was an integrated business application package that covered most functions of an organization. Before year 2001, ATLAM relied on a customized single-user system which solely is used to enter accounting entries. The system is unable to generate financial report. Finance manager of ATLAM, Zulkifli Osman had to assess the risk associated with the decision. Implementation of SAP system seems to be giving big impact on the company’s financial status. Firstly, the implementation of SAP system will increase expenditure drastically which is around RM5,000,000. Besides that, the cash flow of ATLAM at December 2001 was a deficit.
Issues & Solutions of the Case
i) Recognition SAP System as an asset in accounting
Long-lived nonmonetary assets are the assets which are nonmonetary and provide the benefits to the entity for several years. Generally, SAP system is categorized as long-lived nonmonetary assets because it will provides the accounting services for ATLAM for several years. Tangible asset is an asset that has physical substance. For intangible asset, it has not physical substance such as intellectual property or goodwill (Anthony, Hawkins & Merchant, 2011).
SAP system basically fulfill the characteristic of intangible asset which it doesn’t have physical substance. However, SAP system is a tangible asset. According to Governmental Accounting Standards Board (GASB) Statement No. 42, Accounting of Costs of Computer Software Developed or Obtained for Internal Use., if purchased computer software package costs more than $100,000, it must be capitalized.
Case Summary
Akademi Teknikal Laut Malaysia (ATLAM) was established on August 1981 and privatized on January 1997. ATLAM was wholly owned organization of MICT Berhad. The mission of ATLAM was to facilitate value added learning and provide excellent services to its client. In year 2001, the management had been asked to upgrade accounting system with the PETRA group-wide SAP system. SAP was an integrated business application package that covered most functions of an organization. Before year 2001, ATLAM relied on a customized single-user system which solely is used to enter accounting entries. The system is unable to generate financial report. Finance manager of ATLAM, Zulkifli Osman had to assess the risk associated with the decision. Implementation of SAP system seems to be giving big impact on the company’s financial status. Firstly, the implementation of SAP system will increase expenditure drastically which is around RM5,000,000. Besides that, the cash flow of ATLAM at December 2001 was a deficit.
Issues & Solutions of the Case
i) Recognition SAP System as an asset in accounting
Long-lived nonmonetary assets are the assets which are nonmonetary and provide the benefits to the entity for several years. Generally, SAP system is categorized as long-lived nonmonetary assets because it will provides the accounting services for ATLAM for several years. Tangible asset is an asset that has physical substance. For intangible asset, it has not physical substance such as intellectual property or goodwill (Anthony, Hawkins & Merchant, 2011).
SAP system basically fulfill the characteristic of intangible asset which it doesn’t have physical substance. However, SAP system is a tangible asset. According to Governmental Accounting Standards Board (GASB) Statement No. 42, Accounting of Costs of Computer Software Developed or Obtained for Internal Use., if purchased computer software package costs more than $100,000, it must be capitalized.
References: Anthony, R. N., Hawkins, D. & Merchant, K. (2010) Accounting: Texts and Cases. Asia: McGraw-Hill/Irwin Accounting for internal software. (1998) Retrieved from http://www.fasab.gov/pdffiles /fasab10.pdf Morah, C. (n.d) In Investopedia. Retrieved from http://www.investopedia.com/ask/answers /09/computer-software-intangible-asset.asp Axiata Group Berhad (2012) Annual Report. Retrieved from http://axiata.listedcompany. com/misc/ar2012.pdf Green Packet Berhad (2012) Annual Report. Retrieved from http://www.greenpacket.com /downloads/annualreports/Green_Packet_AR_2012.pdf