Depreciation Rules (Books) (Oracle Assets Help)


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Depreciation Rules (Books)

This section describes selected fields on the Books window.

Book

An asset can belong to any number of depreciation books, but must belong to only one corporate depreciation book. You must assign a new asset to a corporate depreciation book before you can assign it to any tax books. You can only assign the asset to a book for which you defined the asset category. Oracle Assets defaults financial information from the asset category, book, and date placed in service.

Each book can have independent accounts, an independent calendar, and independent depreciation rules. You can specify for which general ledger set of books a depreciation book creates journal entries.

The asset can also have different financial information in each book. For example, you can make the asset cost in your tax book different from the cost in your financial reporting book. The depreciation books are independent, so you can run depreciation for each book on a different schedule.

You can change financial and depreciation information for an asset in a book. You can choose whether to amortize or expense the adjustment. See: Amortized and Expensed Adjustments.

You can add an asset to a tax book using the Books window. To copy a group of assets to a tax book, use Mass Copy. See: Tax Book Maintenance.

Cost

Current Cost

The current cost can be positive, zero, or negative. Oracle Assets defaults a cost of zero for construction-in-process (CIP) assets and you cannot change it. Oracle Assets automatically updates the cost to the sum of the invoice line costs after you add invoice lines to a CIP asset using the Mass Additions process. You can also change the cost of a CIP asset manually by entering non-invoiced items or transferring invoice lines between assets in the Source Lines window.

If this is a capitalized leased asset, and you previously calculated the cost to capitalize for the lease in the Lease Payments window and you have not override the result of the capitalization test, Oracle Assets automatically enters the Cost to Capitalize amount in the Current Cost field, and you can change it.

Original Cost

Oracle Assets displays the original cost of the asset and updates it if you make a cost adjustment in the period you added the asset. After the first period, Oracle Assets does not update the original cost.

Recoverable Cost

The recoverable cost is the portion of the current cost that can be depreciated. It is the current cost less the salvage value less the Investment Tax Credit basis reduction amount. If you specify a depreciation cost ceiling, and if the recoverable cost is greater than that ceiling, Oracle Assets uses the cost ceiling instead.

Depreciation Amounts

Depreciation

You normally enter zero accumulated depreciation for new capitalized assets. If you are adding an asset that you have already depreciated, you can enter the accumulated depreciation as of the last depreciation run date for this book, or let Oracle Assets calculate it for you. If you enter a value other than zero, Oracle Assets uses that amount as the accumulated depreciation as of the last depreciation run date.

If you enter too little accumulated depreciation, Oracle Assets takes the extra depreciation in the last period of the asset's life. If you enter too much accumulated depreciation, the asset becomes fully reserved before the end of its life.

If you enter zero accumulated depreciation, Oracle Assets calculates the accumulated depreciation for you based on the date placed in service. You can have a different accumulated depreciation for each depreciation book.

Enter the amount of depreciation taken in the current fiscal year, if any, for the year-to-date depreciation. If the asset is placed in service in the current fiscal year, the accumulated depreciation amount and the year-to-date depreciation amount must be the same.

For Oracle Assets to recognize an asset as fully reserved when you add it, enter an accumulated depreciation amount equal to the recoverable cost.

You cannot change the accumulated depreciation after the period in which you added the asset. You can, however, change the depreciation taken for prior fiscal years in your tax books using the Tax Reserve Adjustments window.

You cannot enter year-to-date or life-to-date depreciation when you add a units of production asset. Instead, enter the asset with zero accumulated depreciation, and enter the total life-to-date production as production for the current period to catch up depreciation.

Depreciation Ceiling

You can enter a ceiling only for assets in tax depreciation books for which you allow ceilings. Allow ceilings for a tax book in the Book Controls window. Valid depreciation ceiling types are:

Expense Ceilings: Limit the annual depreciation expense that Oracle Assets takes on an asset.

Cost Ceilings: Limit the recoverable cost used to calculate annual depreciation expense.

Salvage Value

The salvage value cannot exceed the asset cost, and you cannot enter a salvage value for credit (negative cost) assets.

Investment Tax Credit

The Investment Tax Credit (ITC) check box displays whether you claimed an ITC on an asset. You cannot claim an Investment Tax Credit on an asset unless it is using a life-based depreciation method. Allow ITC for a tax book in the Book Controls window and the category in the Asset Categories window. Assign ITC to an asset in a tax book in the Investment Tax Credits window.

Net Book Value

The net book value is defined as:

Net Book Value = Current Cost - Accumulated Depreciation

Revaluation Amounts

You can only enter revaluation amounts if you allow revaluation in the Book Controls window.

Revaluation Reserve

If you are adding an asset, enter the revaluation reserve, if any. You cannot update the revaluation reserve after the period you added the asset. After that, Oracle Assets updates the revaluation reserve when you perform revaluations.

Revaluation Reserve = Existing Revaluation Reserve + Change in Net Book Value due to current revaluation

Revaluation Ceiling

If you try to revalue the asset cost above the ceiling, Oracle Assets uses the revaluation ceiling instead.

Depreciation Method

The depreciation method you choose determines the way in which Oracle Assets spreads the cost of the asset over the time it is in use. You specify default depreciation rules for a category and book in the Asset Categories window. You can use predefined Calculated, Table, units of Production, or Flat-rate type methods, or define your own in the Methods window.

Depending on the type of depreciation method you enter in the Books window, Oracle Assets provides additional fields so you can enter related depreciation information. For example, if you enter a Calculated or Table depreciation method, you must also enter a life for the asset. In contrast, for a units of production depreciation method, you must enter a unit of measure and capacity. The table below illustrates information related to the depreciation types:

Calculated and table methods must be set up with the same number of prorate periods per year as the prorate calendar for the book. The depreciation method must already be defined for the life you enter.

You cannot choose a units of production depreciation method in a tax book if the asset does not use a units of production method in the associated corporate book.

Date Placed In Service

If the current date is in the current open period, the default date placed in service is the calendar date you enter the asset. If the calendar date is before the current open period, the default date is the first day of the open period. If the calendar date is after the current open period, the default date is the last day of the open period. Accept this date, or enter a different date placed in service in the current accounting period or any prior period. You cannot enter a date placed in service before the oldest date placed in service you specified in the System Controls window.

The asset category, book, and date placed in service determine which default depreciation rules Oracle Assets uses. If the asset category you entered is set up for more than one date placed in service range for this book, the date placed in service determines which rules to use.

If you enter a date placed in service in a prior period and zero accumulated depreciation, Oracle Assets automatically calculates catchup depreciation when you run depreciation, and expenses the catchup depreciation in the current period.

The date placed in service for CIP assets is for your reference only. Oracle Assets automatically updates this field to the date you specify when you capitalize the asset using the Capitalize CIP Assets window.

Prorate Convention and Prorate Date

Oracle Assets uses the prorate convention to determine how much depreciation to take in the first and last years of asset life.

Oracle Assets determines the prorate date from the date placed in service and the prorate convention. It uses this date to determine how much depreciation to take during the first and last years of asset life.

Amortization Start Date

When you choose to amortize an adjustment, Oracle Assets uses the Amortization Start Date to determine the amount of catchup depreciation to take in the current open period. The remaining depreciation is spread over the remaining life of the asset.

The amortization start date defaults according to the rules described for the Date Placed in Service. You can change the default date to another date in the current period or a previous period.