Depreciation Calculation (Oracle Assets Help)


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Depreciation Calculation

Run the depreciation program independently for each of your depreciation books. The depreciation program calculates depreciation expense and adjustments, and updates the accumulated depreciation and year-to-date depreciation.

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

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

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

Run the reserve ledger report

Depreciation Calendar

The depreciation calendar determines the number of accounting periods in your fiscal year.

Prorate Calendar

The prorate calendar determines what rate Oracle Assets uses to calculate annual depreciation by mapping each date to a prorate period, which corresponds to a set of rates in the rate table.

Period Close

Oracle Assets automatically closes the book's current period and opens the next when you run the depreciation program. You cannot have more than one open period for a given depreciation book.

Year-End Processing

You can close the year independently in each depreciation book. The depreciation program automatically resets year-to-date amounts on a book the first time the depreciation program is run on that book in a fiscal year. Oracle Assets automatically creates the depreciation and prorate periods for your new year when you run depreciation for the last period of the previous fiscal year.

Attention: Verify the depreciation and prorate periods that Oracle Assets creates before you enter transactions in the new year.

Suspend Depreciation

You can suspend depreciation by unchecking Depreciate in the Books window. If you suspend depreciation of an asset when you add the asset, Oracle Assets expenses the missed depreciation in the period you start depreciating the asset.

For table and calculated methods, Oracle Assets calculates depreciation expense for the asset based on an asset life that includes the periods you did not depreciate it. If you suspend depreciation after an asset has started depreciating, Oracle Assets catches up the missed depreciation expense in the last period of life.

For flat-rate methods, Oracle Assets continues calculating depreciation expense for the asset based on the flat-rate. For flat-rate methods that use net book value, Oracle Assets uses the asset net book value at the beginning of the fiscal year in which you resume depreciation. The asset continues depreciating until it becomes fully reserved.

Recoverable Cost

For depreciation methods with a calculation basis of cost, Oracle Assets calculates depreciation using the recoverable cost. The recoverable cost is calculated as the lesser of either the cost less the salvage value less the investment tax credit basis reduction amount, or the cost ceiling. Oracle Assets depreciates the asset until the accumulated depreciation equals the recoverable cost.

Adjustments

The following are some examples of financial adjustments you can expense or amortize:

Recoverable Cost Adjustments

Depreciation Method Adjustments

Life Adjustments

Rate Adjustments

Capacity Adjustments

For more information about amortized and expensed adjustments and how they affect depreciation calculation, see Amortized and Expensed Adjustments.

Prior Period Transactions

Prior Period Additions

If you enter an asset with a date placed in service before the current accounting period, Oracle Assets automatically calculates the missed depreciation and adjusts the accumulated depreciation on the next depreciation run.

If you provide accumulated depreciation when you add the asset, Oracle Assets does not recalculate the accumulated depreciation. It accepts the amount you entered.

For table and calculated methods, even if the entered accumulated depreciation differs from what Oracle Assets would have calculated, Oracle Assets does not depreciate the asset beyond the recoverable cost. If the accumulated depreciation is too low, Oracle Assets takes additional depreciation in the last period of the asset's life so that the asset becomes fully reserved. If the asset's accumulated depreciation is too high, Oracle Assets stops depreciating the asset when it becomes fully reserved, effectively shortening the asset life.

Prior Period Transfers

If you back date an asset transfer, Oracle Assets automatically reallocates depreciation expense by reversing some of the depreciation charged to the "from" account, and redistributing it proportionally to the "to" accounts. Retroactive transfers do not impact the total depreciation. You cannot backdate a transfer to a prior fiscal year.

Prior Period Retirements / Reinstatements

If you back date a retirement, Oracle Assets automatically adjusts the depreciation for the year by the appropriate amount, resulting in a one-time adjustment in depreciation expense for the period. Oracle Assets then computes the gain or loss using the resulting net book value. You cannot backdate a retirement to a previous fiscal year, nor can you reinstate a retirement performed in a previous fiscal year.

Prior Period Amortized Adjustments

If you back date an amortized adjustment, Oracle Assets automatically calculates depreciation from the retroactive amortization start date, and adds the retroactive depreciation to the current period.

Credit Assets

You can enter a credit asset as an asset with a negative cost, and Oracle Assets credits depreciation expense and debits accumulated depreciation each period for the life of the asset.

Depreciation Projections

Oracle Assets estimates depreciation expense for the periods for which you project depreciation based on the financial information for your existing assets at the start of that period. The projection includes additions, transfers, and reclassification transactions you perform in the current period. It ignores other asset transactions you make in the current period, such as the depreciation adjustment for retroactive additions and retroactive transfers you enter in the current period. The program also ignores fully reserved and fully retired assets.

If you do not start your projection beyond the current period, the projection does not include your most recent transactions. For example, if the current period in your corporate book is JUL-92, and you request an annual projection starting with JAN-92, Oracle Assets projects depreciation expense based on the financial information for your existing assets as of the start of January 1992. The projection does not include some of the transactions you entered between January and June 1992. If instead you request an annual projection starting with JAN-93, Oracle Assets projects depreciation expense based on the financial information for your existing assets as of the start of July 1992.