Oracle R12 Fixed Asset Solution for Dual GAAP Ledgers

Fixed Asset Solution for Dual GAAP Ledgers Using Oracle Release 12

Standard Functionality By: Jeanne Cooper

Sr. Oracle Financials Consultant AST Corporation

September 19, 2014

Specialized. Recognized. Preferred. The right partner makes all

the difference.

1755 Park Street, Suite 100 | Naperville, Illinois 60563 | 1.888.278.0002 | www.astcorporation.com

A p p l i c a t i o n s S o f t w a r e T e c h n o l o g y C o r p o r a t i o n

Fixed Asset Solution for Dual GAAP Ledgers Using Oracle Release 12 Standard Functionality Page i

Contents ABSTRACT .............................................................................. 1

INTRODUCTION ..................................................................... 2

FIXED ASSETS BUSINESS SCENARIO ......................................... 2

SETUP REQUIREMENTS ......................................................... 2 HIGH LEVEL SOLUTION .......................................................... 3

ACCOUNTING PROCESS FLOW ................................................ 4

ACCOUNTING MANAGER SETUPS FOR SECONDARY LEDGER .... 7

FIXED ASSET BOOKS SETUP..................................................... 9

ASSET CATEGORIES .............................................................. 11

HOW TO CAUSE 100% DEPRECIATION IN THE SAME MONTH AN ASSET IS ADDED TO ORACLE ASSETS ............................................... 16

CONCLUSION ....................................................................... 27

Fixed Asset Solution for Dual GAAP Ledgers Using Oracle Release 12 Standard Functionality Page 1

Abstract

Oracle Accounting Setup Manager is the new configuration tool for accounting setups in General Ledger for Oracle E-Business Suite R12. The Accounting Setup Manager can also be used to control the flow of Journal Entries from the Primary Ledger journal entries to secondary ledger for Fixed Assets Subledger, only using the Subledger accounting options for secondary ledger.


Introduction

This paper provides information to help familiarize users with some implementation options to control the flow of Fixed Asset Journal entries as a solution for dual GAAP ledgers. It will also describe the journal entry flow from Fixed Assets to the appropriate Ledger. The necessary setups within the Accounting Setup Manager, Fixed Asset setups for Fixed Asset Book, and Asset Categories will also be provided in detail.

Fixed Assets Business Scenario

Company XYZ has a business requirement where Assets should be depreciated based upon local and corporate depreciation schedules and journal entries created from both schedules should be uploaded into appropriate ledgers.

For example: for fixed assets in China there are different depreciation schedules based upon China GAAP and US GAAP. Assets costed between $250 and $2499 are recognized in China GAAP while in US GAAP, these items are expensed.

To allow the business to perform the Asset Accounting per GAAP rule, Oracle R12 Account Setup Manager allows setups where flow of Asset journal entries can be controlled to a specific ledger.

The solution stated below meets the US GAAP and China GAAP requirements by using the standard Oracle R12 functionality, and meets dual GAAP scenarios including CHINA, KOREA and INDIA.

This paper describes the solution based on the CHINA scenario using the standard R12 functionality.

SETUP REQUIREMENTS

Primary Ledger US GAAP with PRC COA Secondary Ledger PRC GAAP with PRC COA Fixed Asset Corporate Book pointed to Primary Ledger Fixed Asset Tax Book based upon Corporate Book pointed to

Secondary Ledger

Use Accounting Setup Manager to switch off the flow of Primary Ledger journal entries to secondary ledger for Fixed Assets Subledger only using the Subledger accounting options for secondary ledger


HIGH LEVEL SOLUTION


Accounting Process Flow

The following journal entries depict the accounting flow from Purchase Order/Requisition until the item reaches the appropriate ledger. Two accounting flows are displayed: the first for items from 250 to 2,500 USD; the second for items greater than 2,500 USD.

A. Solution for an Asset between the Value of USD 250 and 2500 (250 < 2500 USD)

PO / Requisition will enter the Asset with an Asset Clearing Account in the Charge Account Field for all the USD values between 250 and 2499.99:

AP will match the Invoice to PO o FA Clearing A/C DR o AP Liability A/C CR

(The above journal entry will post to the Primary Ledger)

Mass Additions Create will run and the Asset will be sent to the FA Mass Additions Table of the FA Corporate Book.

FA Accountant will process the Asset in Mass Additions; selecting a location and a special asset category

FA Accountant will post the Mass Additions to Fixed Assets. o Asset Cost A/C DR o FA Clearing A/C CR

(Mass Additions journal entries will be created in the Primary Ledger)

Transfer the Asset to the FA Tax Book by running Periodic Mass Copy. Update the depreciation life in FA Tax book for the Asset based upon Local GAAP depreciation schedules, if necessary.

** The above step is a process change as Periodic Mass Copy normally is run after Depreciation.

FA Accountant verifies the life of the Asset, in the Corporate Book is 1 month.

Run Depreciation for the FA Corporate Book. The asset will be 100% depreciated based upon the life of the Asset of 1 Month.

o Expense Account Dr. (cheat the system as Depreciation Expense Account)

o Asset Cost A/C CR (cheat the system as Accumulated Depreciation Account)

(**The above journal entry will only go to the Primary Ledger since the Corporate Book is pointed to the Primary Ledger and the transfer to secondary journal entries for Assets is switched off.)


Run Depreciation for the FA Tax Book. The asset will be depreciated per Local GAAP Depreciation schedules.

o Depreciation Expense A/C DR o Accumulated Depreciation A/C CR

(The above journal entry will be created in the Secondary Ledger; depreciation journal entries will be created every month until the asset is fully depreciated. The Tax book is pointed to the Secondary Ledger.)

The above Journal entries in Blue text will post to the Primary Ledger. The journal entries in Green italicized text will post to the Secondary Ledger.

B. Solution for an asset equal to or greater than USD 2500 (>=2500 USD)

PO / Requisition will enter the Asset with an Asset Clearing Account in the Charge Account Field.

AP will match the Invoice to PO o FA Clearing A/C DR o AP Liability A/C CR

Mass Additions Create will run and the Asset will be sent to the

FA Mass Additions Table of the FA Corporate Book.

FA Accountant will process the Asset in Mass Additions; selecting location and a normal asset category.

Post Mass Additions to Fixed Assets o Asset Cost A/C DR o FA Clearing A/C CR

(Mass Additions journal entries will be created in the Primary Ledger)

Transfer the Asset to the FA Tax Book by running Periodic Mass Copy. The Tax book will be maintained per Local GAAP Depreciation schedules.

** The above step is a process change as Periodic Mass Copy normally is run after Depreciation.

o Run Depreciation for the FA Corporate Book. The asset will depreciate per US depreciation methods.

o Depreciation Expense A/C DR. o Accumulated Depreciation A/C CR

(The above journal entry will go the Primary Ledger. Depreciation journal entries will be created every month until the Asset is fully depreciated.)

o Run Depreciation for the FA Tax Book. The Asset will be depreciated per Local GAAP Depreciation schedules.


o Depreciation Expense A/C DR. o Accumulated Depreciation A/C CR

(The above journal entry will be created in the Secondary Ledger. Depreciation journal entries will be created every month until the asset is fully depreciated. The Tax book is pointed to the Secondary Ledger.)

The above journal entries in Blue text will post to the Primary Ledger. The journal entries in Green Italicize text will post to the Secondary Ledger


Accounting Manager Setups for Secondary Ledger

The Secondary Ledger provides additional accounting representation of the information present in the Primary Ledger. For Secondary ledger, select Subledger Accounting Options then click on the update icon (Pencil).

Beneath Application, select Assets then click on the Pencil icon in the Update Accounting Options column.


Every time a journal is posted in the Primary ledger, it gets created in the Secondary Ledger.

Set Use Primary Ledger Amounts to No to switch off the flow of all journal entry transactions for assets generated in the Fixed Asset Subledger, from the Primary ledger into the Secondary ledger.


Fixed Asset Books Setup

Corporate Book The Corporate FA book for China will be based upon US GAAP and will be pointed to the Primary Ledger (CHN HUTS PRC PRIMARY).

Assets costed below 2,500 USD will be expensed. The life of the Assets costed below 2,500 USD will be set to 1 month.

Assets costed above 2,500 USD will be depreciated based upon US GAAP depreciation schedule.


Tax Book The Tax FA book for China will be based upon China GAAP and will be pointed to the Secondary Ledger (FA-TEST).

Assets costed above 250 USD will be depreciated based upon China PRC GAAP depreciation Schedule.


Asset Categories

*Note: Two different Asset Categories were created for the same type of asset (i.e. Building).

First asset category TEST.TEST was created for assets costing < 2,500 USD. HUTS Corp Book and HUTS TAX2 Book were added to TEST.TEST Asset Category.


The difference between the HUTS Corp Book and HUTS Tax2 Book is the account numbers used for Depreciation Expense and Accumulated Depreciation.

For an asset costing < 2,500 USD, for the corporate book the:

- Common Expense account number was inserted in the Depreciation Expense Account field

- Asset Cost account number was inserted in the Accumulated Depreciation Expense Account field


For an asset costing < 2,500 USD, the normal Depreciation Expense and Accumulated Depreciation accounts were still used for the Tax Book.

The second Asset Category TEST2.TEST2 was created for assets costing > or = 2,500 USD:

HUTS Corp Book and HUTS TAX2 Book were added to the TEST2.TEST2 Asset Category.


Because the asset cost is > or = 2,500 USD in both books, normal Asset Cost and Accumulated Depreciation account numbers were inserted for HUTS Corp and HUTS TAX2 for the TEST2.TEST2 asset category.


How to Cause 100% Depreciation in the Same Month an Asset is Added to Oracle Assets

As part of the Fixed Asset Solution for Dual GAAP Ledgers, an asset costing < 2,500 USD and posting to the FA Corporate Book must be 100% depreciated in the same month the asset was added. The following procedures describe the setup up steps needed to fully depreciate an asset the same month it is added to the Fixed Asset system.

Background: An asset was manually created for less than 2,500 USD in the FA Corporate Book. The appropriate Asset Category was also selected to cause:

o the Common Expense account to be used in place of Depreciation Expense

o the Asset Cost account to be used in place of Accumulated Depreciation within the Corporate Book for HUTS

From the Navigator, select: Assets > Workbench

The Find Assets window will be displayed. [Enter] the asset number in the Asset Number field, then [click] on the Find button.


The Assets window will be displayed. [Click] on the Books button.

The Books window will be displayed. [Tab] to the yellow highlighted Book field and use the LOV to select the appropriate book (in this scenario it is the HUTS Corp book). Then, [press] the Tab key to view the financial information.


After the financial data appears, [tab] to the Salvage Value field: change the amount to 0 USD.

After the change is made, the Recoverable Cost field should display the same amount as the Current Cost field.


In the Depreciation tab, [click] on the Life Years field. Use the LOV to change the Years to 0 and the Months to 1 as highlighted in the Lifes window below.

Make sure to save the changes when finished.

Return to the Navigator and select: Depreciation > Run Depreciation. [Enter] the Book and Period for which to run Depreciation, then [click] on the Run button.

Note: Only click on the Close Period check box if you want to close the period.


The Journal Entry Reserve Ledger Report is automatically generated after depreciation is completed running. From the Menu Bar, select: View > Requests to review the report. The report displays the current month depreciation amount for Asset # 181056. For this scenario, the total amount of the asset is fully depreciated in the Corporate Book because the asset is less than 2,500 USD.

From the Navigator, select: Create Accounting Entries. This program creates the Fixed Asset Journal Entries which can be transferred to General Ledger.


The Create Accounting Entries program will create the GL import for the Journal Entries.

Review the Journal Import Execution Report, for Status of Success and to ensure there are no errors.


Change to the appropriate GL Responsibility to review the Fixed Asset Journal Entries, in GL. Select: Journal > Enter. Use the Find Journals window to locate the journal entry.

The Journals window will appear. Because the Asset #181056 amount is < 2,500 USD in the Primary Ledger, the following journal entry was created:

- Debit: The Common Expense account (instead of Depreciation Expense) 2,100.00 USD

- Credit: The Asset Cost account (instead of Accumulated Depreciation) 2,100.00 USD


The Financial Inquiry window in Fixed Assets displays the asset for both books.

In HUTS Corporate (Corporate Book), the asset, for < 2,500 USD has been fully depreciated.


In the HUTS TAX2 (Tax Book), the asset, for < 2,500 USD has remaining life.


Subledger Accounting Fixed Assets SolutionFA

Cor

pora

te B

ook

( Lin

ked

to P

rimar

y Le

dger

)

No

Is Asset < 2,500 USD (M)

FA Accountant processes new assets, selecting

usual Asset Category & Location for Assets > or =

to 2,500 USD (M)

During Month End close, FA

Accountant processes any

remaining assets in Mass Additions

(M)

Asset added to Mass Additions table in Fixed

Assets (A)

FA Accountant processes new assets, selecting a special

Asset Category & Location for Assets <

2,500 USD (M)

Yes

FA Accountant will post Mass

Additions to Fixed Assets (A)

FA Accountant will run Periodic Mass Copy to transfer

assets from the FA Corporate Book to

the FA Tax Book (A)

B

B

In the FA Corporate Book, FA Accountant verifies the life of the asset (


Subledger Accounting Fixed Assets SolutionSe

cond

ary

Ledg

erFA

Tax

Boo

k(L

inke

d to

Sec

onda

ry L

edge

r)Pr

imar

y Le

dger For the FA Corporate

Book, FA Accountant will run Accounting Entries and journal

entries will be received in the Primary Ledger

(A)

Page 1

Page 1

FA Accountant will update the depreciation life in FA Tax Book for the new assets based

upon Local GAAP Depreciation Schedule, if

necessary (M)

For the FA Tax Book, FA Accountant will run

Depreciation (A)

FA Accountant will Create Journal Entries and send

journal entries to Secondary Ledger (A)

For the FA Tax Book, FA Accountant will run

Accounting Entries and journal entries will be

received in the Secondary Ledger (A)


Conclusion

This document provided an overview of the Fixed Asset solution for Dual GAAP Ledgers. It highlighted the accounting journal entry flow, covered the necessary setups for Accounting Setup Manager and Fixed Assets (Asset Books and Asset Categories) and provided detail steps on how to fully depreciate an asset the same month it was added.

Fixed Asset Solution for Dual GAAP Ledgers Using Oracle Release 12 Standard Functionality September, 2014 AST Corporation 1755 Park Street, Suite 100 Naperville, Illinois 60563 Phone: 888-278-0002 Fax: 630-778-1179 www.astcorporation.com Copyright 2014 AST Corporation AST Corporation is a privately held company founded in 1995 to serve commercial and public sector organizations in utilizing the full potential of their investment in Oracle Applications and Technologies. We have built our practice by providing top quality full life cycle and turn-key consulting services for Oracle Applications implementation and upgrade projects, among other specific services. Our mission is to insure that you, as a valued client, receive the highest level of expertise and personalized service for your Enterprise Applications. We endeavor to help you realize the full benefit from your investment in software applications and integrate them seamlessly to your business processes.

AbstractIntroductionFixed Assets Business ScenarioSetup RequirementsHigh Level Solution

Accounting Process FlowAccounting Manager Setups for Secondary LedgerFixed Asset Books SetupAsset CategoriesHow to Cause 100% Depreciation in the Same Month an Asset is Added to Oracle AssetsConclusion

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Oracle R12 Fixed Asset Solution for Dual GAAP Ledgers

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