In SAP Asset Accounting, which sequence of steps correctly describes how to perform line item settlement of an asset under construction (AuC) to one or more completed assets?

Introduction / Context:
Assets under construction, often called AuC, are used in SAP to collect costs for long running investment projects, such as building a plant or installing complex equipment. When the asset is ready for use, the collected costs must be settled from the AuC to one or more final fixed assets. This question checks whether you understand the correct sequence of steps for line item settlement in Asset Accounting and how distribution rules control which costs are moved to which receiver assets.

Given Data / Assumptions:

- The organization uses AuC master records to collect investment related line items. - At completion, costs from the AuC must be capitalized on one or more final assets, such as buildings or machinery. - SAP supports line item settlement, where individual postings on the AuC are settled according to distribution rules. - The question asks for the correct chronological sequence of key steps.

Concept / Approach:
In line item settlement, the system does not simply look at the total balance of the AuC. Instead, it evaluates individual cost line items and applies predefined distribution rules that tell the system which portion of each line item should go to which receiver asset. The project or asset accountant first selects the relevant line items for settlement, then defines or maintains distribution rules, and finally executes the settlement run. Only those items that have a valid distribution rule are actually settled to the receiver assets.

Step-by-Step Solution:
Step 1: In the AuC transaction, the user selects the asset under construction and calls the line item settlement function. Step 2: The user marks the specific cost line items that should be settled in the same proportion to the same receiver or receivers. Step 3: For these selected line items, the user defines distribution rules that specify receivers, such as a building asset, and the settlement percentage or amount for each receiver. Step 4: The user runs the settlement posting, which creates accounting documents that credit the AuC and debit the receiver assets, but only for line items that have at least one valid distribution rule. Step 5: After settlement, the AuC balance for those items becomes zero, and the receiver assets now contain the capitalized costs in their acquisition values.

Verification / Alternative check:
You can verify this process by examining the line item report for the AuC before and after settlement. Before settlement, all project costs appear on the AuC. After settlement with proper distribution rules, the settled line items are marked as settled, and the corresponding acquisition postings appear on the receiver assets. If a line item has no distribution rule, it remains unsettled, which confirms that settlement is controlled by the steps described in the correct option.

Why Other Options Are Wrong:
Option b is wrong because posting settlement before defining distribution rules would not tell the system where to send the costs. Option c is incorrect because you cannot simply define distribution rules at company code level once and expect all line items to settle automatically without manual selection or review; settlement is driven by specific rules on specific AuC objects. Option d is wrong because SAP explicitly supports line item settlement, which is especially useful when different parts of the AuC costs must be settled to different assets or cost objects.

Common Pitfalls:
One common mistake is forgetting to maintain distribution rules for some line items, which leaves costs stranded on the AuC. Another pitfall is settling everything to a single receiver when the project actually produces multiple assets, which can distort asset values and depreciation. Users also sometimes confuse balance settlement with line item settlement and do not realize that line item settlement offers more detailed control. Understanding the proper sequence of selecting line items, defining distribution rules, and executing settlement helps avoid these issues.

Final Answer:
The correct description of line item settlement is to select the AuC line items, define distribution rules for those items, and then execute settlement so that only items with a distribution rule are posted to the receivers. Therefore, the correct option is Select the AuC line items, define distribution rules for those items, and then execute settlement so that only items with a distribution rule are settled to the specified receivers.