Oracle Assets

Contents

A. Defaulting Hierarchy...................................................................................................3A. Assets Setup.................................................................................................................3B. Generation of Accounting CCID.................................................................................4C. Asset Category.............................................................................................................4D. Asset Calendar.............................................................................................................4E. Parent Asset.................................................................................................................4F. Group Asset.................................................................................................................5G. Book Control...............................................................................................................5H. Depreciation Methods..................................................................................................5I. Prorate Convention......................................................................................................6J. Asset Addition.............................................................................................................6K. CIP Assets....................................................................................................................6L. Source Lines................................................................................................................7M. Depreciation Calculation.........................................................................................7N. Depreciation Calculation Steps....................................................................................8O. Depreciation Processing..............................................................................................9P. Group Depreciation...................................................................................................10Q. Asset Reclassification................................................................................................11R. Changing Financial and Depreciation Information of Asset.....................................11S. Asset Transfer............................................................................................................11T. Asset Revaluation......................................................................................................12U. Amortization..............................................................................................................12V. Asset Retirement........................................................................................................12W. Taxes......................................................................................................................13X. GL Transfer...............................................................................................................13Y. Reconciliation with GL..............................................................................................14Z. Physical Inventory.....................................................................................................14AA. Exclusions..............................................................................................................14

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A. Defaulting Hierarchy

Depreciation Rule: Asset Category + Book + In-Service Date Flexfield structures: System Control Asset numbering: System Control In Physical Inventory: Asset Category Asset Depreciation Rules (Method, Life, Convention, Bonus Rule): Asset Category +

Book Asset ARD (for a Book): Asset Category Depreciate (Y, N): (Asset Category.Default Rules + Book) Asset Revaluation Rules: Book Control Group Depreciation: Book Control Allow Mass Changes: Book Control ARD for Retirement accounts, Intercompany accounts, Deferred Depreciation

accounts: Book Control Account Generator account: Book Control Journal Category: Book Control Depreciate if retired in first year: Book Method

A. Assets Setup

Recoverable Cost = Cost – min (Salvage Value, Depreciation Ceiling) Net Book Value = Recoverable Cost – Accumulated Depreciation Tax Recoverable Cost = Min ((Tax Cost – Tax Salvage Value – Investment Tax

Credit Basis Reduction Amount), Depreciation Cost Ceiling)

Define SOB

Define FY Define Asset Calendar Define Asset Book (under SOB, Dep & Prorate Cal)

Define Prorate Map Asset CategoryConvention

Define default Deprn Rule for the Book & Asset Categ

Define default Deprn Method

Q) When depreciating for a particular Book, how does FA know which Prorate Convention to use?A:- Attached to Depreciation Rule

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B. Generation of Accounting CCIDThe workflow based account generator is the driver for accounting for asset transactions. The default accounts are retrieved from one of sources: Book, Asset Category, Asset Assignment

Segment Segment SourceBalancing Asset Assignment.Expense accountNatural account Book Control.Natural Account or Asset CategoryCost centre and unqualified segments

Book Control.Account Generator defaults

Exception: Depreciation expense – all segments taken from Asset Assignment

C. Asset Category Only 1 flexfield structure supported. Maximum 7 segments. One of them has to be

qualified as the major segment. Defines financial treatment (i.e. depreciation) within FA. Dictates asset life and

depreciation method which is used to compute the final output: depreciation per period.

Generally there is one major segment for each balance sheet Natural Account. Minor Categories differentiate different depreciation method and lives fro a given

Major Category.

D. Asset Calendar A Calendar has got multiple Periods Attributes of Calendar: FY Name, Suffix (Fiscal, Calendar, None) Attributes of Period: Date Range The periods may span multiple FYs, but must be within the date range under the

Calendar.FY Name If you use this depreciation calendar in an Asset Book from which to create JEs for

GL, you must make the period names identical to the GL periods.

E. Parent AssetParent and sub-component. Their lives may be linked (Same life or same end date) (through a rule in Asset Category.Default Depreciation Rules form). FA does not automatically perform the same transaction on a subcomponent asset when you perform it on a parent asset.

F. Group AssetCollection of member assets. Group asset cost = Summation of member asset costs. Generally, it is only the accumulated depreciation that is maintained at the Group level. Asset cost is posted to GL for the individual members’ level.

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G. Book Control Control information that affects all assets in a Book. Corporate Book:SOB = m:n Corporate Book:Tax Book, Budget Book = 0:n

H. Depreciation MethodsRecoverable Cost = min ((Cost – Salvage Value – Investment Tax Credit Basis Reduction Amount), Cost Ceiling)

Method types:1. Flat e.g. 20% every year.

Depreciation Rate = Basic Rate * (1 + Adjusting Rate) + Bonus RateAnnual depreciation expense = Depreciation Rate * Depreciation Calculation Basis * Fraction of Year HeldBonus Rate varies by year; to allow for extra depreciation in initial years as allowed by some depreciation authorities

2. TableContains a rate for each Prorate Period (e.g. Month, Day) of the asset’s life. Thus is the pro-rate calendar is Monthly and the asset has a life of 4 years, there will be 4*12 = 48 rates. (Entered as an annual rate, though. System derives depreciation for FY and divides among periods as usual

Rate Table

Year Pro-Rate Periods1 2 3 4 5 6 7 8 9 10 11 12

1 50% 5%2 30% 15%3 15% 30%4 5% 50%

100% 100%

3. CalculatedStraight line methodTable and Calculated methods are also called life based methods. For such methods, Method Life

4. Units of ProductionUsed for assets for which it is better to measure life in terms of quantity of resource you expect to extract e.g. mines or wells.Depreciation Expense = (Production for the period)/Capacity * Recoverable CostProduction interface is available for loading production data into FA.

I. Prorate Convention Determines how much depreciation to take in the first and last year of an asset’s life. First and last year’s depreciation depends upon Prorate period = f(Prorate date) =

f(Prorate Convention, Date Placed in Service)

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For a particular Depreciation Rule, configure one Prorate Convention as Prorate Convention and another (or the same) as Retirement Convention

If you retire an asset before it is fully reserved, FA uses the Retirement Convention to determine how much depreciation to take in the last year of life – based on Retirement Date.

Sample user defined Prorate Convention

Convention Period Prorate Date No of Prorate Periods

Half-Quarter 1-Jan-11 to 16-Feb-11

15-Feb-11 8

Following Half-Year 1-Jan-11 to 30-Jun-11

1-Jul-11 2

Mid Half Year 1-Jan-11 to 30-Jun-11

31-Mar-11 2

J. Asset Addition

Default DPIS is the last date of CP. DPIS can be CP or prior period but not future period.

K. CIP Assets It is not possible to capitalize just a partial amount on one CIP asset. The

capitalization process will be for the full amount of the CIP asset at the time of the transaction.

The journal that gets created for a source line transfer between a CIP asset and a capitalized asset looks like this:

Transfer out from the CIP asset: Dr CIP Clearing account of the CIP asset Cr CIP Cost account of the CIP asset

Transfer in to the capitalized asset: Dr Cost account of the capitalized asset Cr Cost Clearing account if the capitalized assets

To change the cost of a CIP asset, you must either add, update, transfer or retire a source line under Source Lines. The cost of CIP assets cannot be adjusted under Books in the Asset Workbench.

L. Source Lines

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When you are adding CIP assets, you cannot enter the amount in the Assets form. You enter it in the Source Lines. The amount gets populated in the main Assets form.

As for Capitalized assets, you can enter source lines (e.g. Invoice, Supplier) but not the amount.

For source lines of a CIP asset – you can transfer the source line amount to another asset. Also you can retire the source line.

M. Depreciation Calculation

For Calculated depreciation method type: NBV not allowed; Depreciate when Placed in Service flag has no relevance.

Year 1 depreciation will always be pro-rated according to the number of days it was in service in that year, irrespective of depreciation allocation method. This is relevant for both Calculated and Flat methods.

For Calculated method, depreciation for every completed month of Year 1 is the same as that of any other year.

Suppose CP= Feb. Asset added with DPIS and Pro-rate date in Jan with Accumulated Depreciation = 5000. However, Calculate Depreciation for Jan comes as 4600. The balance 400 is expensed off in Feb or amortized, depending upon option.

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N. Depreciation Calculation Steps

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O. Depreciation Processing

For a Book, Run Depreciation Run Create JEs. The latter creates GL JEs, clubbed into Categories.

o You can roll back JEs for CP. This deletes the GL JE batch that was created.o You can create JEs for a prior period too.o You can create JEs for accounting periods in any order, as long as you have

run depreciation for the period and the corresponding GL period is open.o In R12, instead of Create JEs, you run Create Accounting. Subsequent to

this, you may view journals in SLA Inquiry. Year-end: Run depreciation for a book (with Close Period = Y) System closes CP

of Book.Depreciation Calendar and opens the next period If year end, system creates depreciation and pro-rate periods for new year

Once depreciation has been processed for an asset in the current open period, you cannot perform any transactions on the asset in the CP unless depreciation is rolled back (cannot roll back if you close the period). (As per 11i. Process changed I R12).

o In R12, if you make transactions on an asset after depreciation has been processed for the Book, deprecation for that asset will be rolled back. The asset will be picked up during the next depreciation run.

When you run depreciation, the depreciation program submits 3 separate requests to:

o Calculate gains and losses for retired assets and catch up depreciation for retired and reinstated assets

o Calculate depreciation expense and adjustments for the period, and close the current period.

o Run the JE reserve ledger report (for Corporate Book) and Tax reserve ledger report (for Tax Book). Shows the Cost, AccDep, YTD, Depreciation Expense of the assets processed)

Unplanned depreciation: Unplanned depreciation is a feature used primarily to comply with special depreciation accounting rules in Germany and the Netherlands. However, you also can use this feature to handle unusual accounting situations in which you need to adjust the net book value and accumulated depreciation amounts for an asset without affecting its cost. Oracle Assets immediately updates the YTD and LTD depreciation and the net book value of the asset. The unplanned depreciation expense you enter must not exceed the current net book value (Cost - Salvage Value - Accumulated Depreciation) of the asset.

Depreciation override: To manually override the calculated default depreciation amounts for standalone and group assets. Need to provide the override amount for each concerned asset in the Depreciation Override window before running depreciation. Also enable the profile option FA: Depreciation Override.

o Instead of the above window, you may also use the Depreciation Override interface.

o Depreciation needs to be run to incorporate the override data. Depreciation Projection and Forecasting Depreciation (What-if Analysis): What-

if Analysis is used to forecast depreciation with changed scenarios. In Depreciation Projection, one is not allowed to change the setup data.

o Need to specify the Asset Category, Value, In-service Date

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Consider the following scenario: Create Accounting Depreciate Adjust asset Create Accounting. In this case, 2 JEs will be generated: for depreciation and for rollback.

Suspend depreciation - Depreciation can be suspended at any time by changing the depreciate flag on the book form to NO. Note that the total depreciation to be taken over the life of the asset (including that incurred in periods the flag was set to NO) ill still be taken over the original life assigned to the asset. If the asset was added with the depreciate flag set to NO, missed depreciation will be caught up in the period the flag is changed to YES. If the asset was added with the depreciate flag set to YES and the flag was later changed to NO, the missed depreciation will be caught up in the last period of the asset's ORIGINAL life; suspending depreciation will not extend the period over which the asset is depreciated. The Depreciate flag can also be set at the category level. If you set the depreciate flag at the asset level, this will override the category depreciate flag which is the default. If the intention is to never have the asset Depreciate then the flag Depreciate flag should be set to 'No' for the life of the asset or the asset can be entered into the system fully reserved.

P. Group Depreciation

Logical grouping of assets, which may be either Capitalized or CIP. You can reduce data entry requirements by defining depreciation parameters for group assets rather than at the individual asset level (also as per local tax regulations in many countries). Group Depreciation also handles complex transactions for group assets and their member assets.

Group asset costs = Sum of all Member Asset Costs

You can only create group assets in a Corporate Book.

Depreciation is computed and stored at the group level, and is known as Group Depreciation.

Generally the member asset cost is posted to GL for the individual member asset, and the member asset accumulated depreciation is only maintained and reported at the group level.

You can transfer member assets in or out of a group asset, as well as transfer member assets between group assets.

Key accounting rules for Group Assets (at Book Controls – Y/N) Allow CIP members in Group Assets Allow CIP Depreciation in Group Assets Allow Member Asset tracking

You may choose to allocate the calculated group depreciation amount to its member assets, depending upon the latter’s depreciable basis; or choose to have depreciation calculated at the member asset level, using either the group asset or the member asset

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depreciation method. Optionally, the total member assets depreciation is summed and used as the depreciation for the group asset. This setting is done at Asset Book (for the Group Asset). However, even if member assets are tracked in FA, JEs are made using the group asset level amounts only.

Q. Asset Reclassification

From one Category to another (change the Category in Assets Workbench). If you reclassify an asset in a period after the period you entered it, FA creates JEs

to transfer the asset cost and Accumulated Depreciation to those of the new Asset Category. This occurs when you create JEs for GL.

Can reclassify group of assets through Mass Reclassification. In that case, you can choose the reclassified assets to inherit the depreciation rules of the new category.

o In the latter case, you need to enable the Book.Allow Mass Changes flag

R. Changing Financial and Depreciation Information of Asset Before running depreciation (in the period in which you added the asset), you can

change any field After you have run depreciation even once during the lifetime of an asset, you can

change any of the following fields: Asset Cost, Salvage Value, Prorate Convention, Depreciation Method, Life, Capacity, UOM, Rate, Bonus Rule, Depreciation and Revaluation Ceilings

If the asset is fully reserved, you cannot change any field. You can change invoice information in the Source Lines Financial information for multiple assets may be changed through the Mass Change

facility. During the change, the user needs to specify whether to amortize the adjustment or

expense it in the CP (whether for manual or mass change). If expensed, FA recalculates using the new information and expenses the entire adjustment amount in the CP. For amortized adjustments, FA spreads the adjustment amount over the asset’s remaining life/capacity.

S. Asset Transfer Between employees, depreciation expense accounts, locations Make the transfer between asset lines in the Assignments page of asset addition

(intra-asset transfer of the concerned assignments) Mass transfer: Includes inter-asset transfer of assignments – within the purview of a

Book You can transfer from the Source Line of one Capitalized/CIP asset to that of

another. Transfer may be to a prior period, but must be within the current FY (transfer to

future period not allowed). In that case, FA adjusts the depreciation expense accordingly.

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T. Asset Revaluation You can revalue al Categories in a Book, all assets in a Category, or individual

assets. The first two are through Mass Revaluation Revaluation is done on the basis of Revaluation rules, or Revaluation % (+ or -)

entered directly in the Mass Revaluation form. Revaluation is not done for fully retired assets, or assets with pending retirements. Create Mass Revaluation definition Run Revaluation

U. Amortization

If Amortization Start Date is retroactive, the 1st period when amortization starts will accommodate the catch up depreciation of the prior periods as well.

You can amortize only increase in cost - not decrease.

V. Asset Retirement

Difference between price received and NBV during the sale is posted to a Gain/Loss on Sale account, an IS account.

When you retire by units, the cost retired is prorated – you need to specify the units for each assignment line that you are retiring

Accounting entrieso Cr Asset Cost

Dr Accumulated DepreciationDr NBV Retired

o Dr Proceeds of Sale ClearingCr Proceeds of Sale

o Cr Cost of Removal ClearingDr Cost of Removal Gain

o Dr Revaluation ReserveCr Revaluation Reserve Retired Gain

o For prior period retirementsDr Depreciation ExpenseCr Accumulated Depreciation

When you reinstate an asset, FA reverses the above JEs. It also recovers depreciation not charged while the asset was in a retired state.

FA uses Prorate Convention to determine how much depreciation to take in the first and last year of an asset’s life. However, if you retire an asset before it is fully reserved, FA uses the Retirement Convention to determine how much depreciation to take in the year based on the retirement date.

CIP assets can be retired too. They need to be retired in full. You cannot change details of an asset while retirement is pending.

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W. Taxes

There are usually two major tax issues – Income Tax and Property Tax. Income Tax is handled by GL, which uses asset value and depreciation figures from FA. Property Tax is the major tax reporting requirement addressed by FA (through Tax Book and Location flexfield). Property Tax reports show all assets within a given geography.

How to account for differences in depreciation recognized between Depreciation Book and Tax Book

Say depreciation expense in TB is $5000 more than in DB. Create the following manual JEs: In GL, enter a JE:

Dr Net Depreciation Expense Adjustment 5000Cr Deferred Depreciation Expense 5000

Say I-T rate is 40%. To account for the tax implications, enter a JE:Dr I-T Payable Adjustment 2000Cr Deferred I-T 2000

Security by Book

Security Profile Hierarchy Asset Organization

Responsibility (AP & FA)

The forms where the above linkages are made are as below:o SP to Hierarchy: Security Profileo Hierarchy to Asset Org: Organization Hierarchyo SP to Responsibility: Profile option FA: Security Profile

Need to run Security List Maintenance A higher level organization can access the Books of its subordinates as well. But the

reverse is not true. You cannot assign one book to two different organizations.

X. GL Transfer

Oracle Assets does not create journal entries when you perform asset transactions.  Oracle Assets creates journal entries only when you use the Create Journal Entries form. 

While transferring to GL, journals are summarized to code combination ids within journal categories.

The gl_interface table is not populated.  In Oracle Assets, the Create Journals process inserts rows directly into GL_JE_BATCHES, GL_JE_HEADERS and GL_JE_LINES tables as unposted batches. 

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You can run the Create Journal Entries program once per accounting period after you run the depreciation program.  When you choose a book in the Create Journal Entries form, the QuickPick for the Accounting Period Name field lists all the accounting periods for which you have not yet created journal entries for your general ledger.

Y. Reconciliation with GL

Account Analysis with Payables Details Vso Cost Summary Vs Cost Detailo CIP Summary Vs CIP Detailo Reserve Summary Vs Reserve Detail

Z. Physical Inventory

The steps in the process are as follows:1. In the Physical Inventory window, load Physical Inventory data2. Run Physical Inventory Comparison (compares with assets for which In Physical

Inventory = Y)3. Reconcile

AA. Exclusions1. Asset Revaluation2. Integration with Projects3. Create Accounting4. Impairment5. Lease

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