Previous  Next          Contents  Index  Navigation  Glossary  Library

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. See: Unplanned Depreciation (German Globalizations)

You can enter unplanned depreciation amounts by asset and book for any current period during the useful life of an asset, except for the period in which you added the asset. You can enter unplanned depreciation for an asset in both the corporate and/or tax books. When you enter unplanned depreciation, Oracle Assets immediately updates the year-to-date and life-to-date 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. If necessary, you can enter multiple unplanned depreciation amounts, both positive and negative, in a single period, provided that the net amount does not exceed the current net book value of the asset. Thus, it is possible to enter unplanned amounts which back out depreciation taken in prior periods, including previously entered unplanned depreciation amounts.

When you enter unplanned depreciation expense, you can choose in which period to begin amortization of the asset's remaining net book value. You can begin amortization in the current or a subsequent period, or you can choose not to amortize the remaining net book value. Note that if you do not amortize the unplanned depreciation or make an amortized adjustment in a subsequent period, the asset will be fully reserved before the end of the useful life. If you choose to amortize in a subsequent period, simply enter an unplanned depreciation amount of zero, and check the Amortize from Current Period check box. Oracle Assets will begin to amortize the remaining net book value as of that period

Oracle Assets uses the unplanned depreciation amount, in addition to regular depreciation, to calculate depreciation for the period in which you entered the unplanned depreciation. When you create journal entries for the general ledger, Oracle Assets posts the expense due to unplanned depreciation to the account you selected when you entered the unplanned depreciation for the asset.

Enable Function Security

You can enable or disable unplanned depreciation entry by responsibility if you want to allow or restrict user access to this function. See: Function Security in Oracle Assets.

View Unplanned Depreciation Amounts

You can use the Financial Information inquiry windows to view the effects of the unplanned depreciation amounts you enter. Oracle Assets includes unplanned depreciation amounts in the current and prior period accumulated depreciation, year-to-date depreciation, and net book value amounts of the asset. The View Depreciation History window includes unplanned depreciation amounts in the depreciation expense per period for each asset and book. Note that unplanned depreciation amounts appear as ADJUSTMENT transactions.

If you want to view unplanned depreciation amounts separately, use the Transaction Detail window. In this window, you can view the unplanned depreciation type and the unplanned depreciation expense account for each unplanned amount.

Restrictions

You cannot enter unplanned amounts in the period you add the asset. In this case, you can change the year-to-date and life-to-date accumulated depreciation for the asset before running depreciation.

You cannot enter unplanned depreciation for assets shared between balancing segments. In other words, you cannot allocate unplanned depreciation amounts to specific distributions of an asset. Oracle Assets posts the unplanned depreciation expense only to the depreciation expense account you enter in the Unplanned Depreciation window.

You can enter unplanned depreciation for assets depreciating under the straight-line method only. You cannot change the depreciation method from straight-line to any other method for assets with unplanned depreciation.

You cannot make expensed adjustments to assets for which you have previously entered unplanned depreciation and have since amortized the amount. You may, however, perform expensed adjustments to the asset until you choose to amortize the unplanned depreciation amount. In addition, you cannot perform prior period retirements to assets having unplanned depreciation amounts. In addition, you cannot perform a mass change for assets that have unplanned depreciation.

Examples

Example 1: Unplanned Depreciation

You place an asset in service with a life of five years, and a cost of 120,000 DM. The depreciation method is straight-line. There is no salvage value. The calendar has four periods per year.

Year of Life Net Book Value (Start of period) Depreciation Expense Unplanned Depreciation Accumulated Depreciation
Yr 1, Q1 120,000 6,000 0 6,000
Yr 1, Q2 114,000 6,000 0 12,000
Yr 1, Q3 108,000 6,000 0 18,000
Yr 1, Q4 102,000 6,000 0 24,000
Yr 2, Q1 96,000 6,000 0 30,000
Yr 2, Q2 90,000 6,000 0 36,000
Yr 2, Q3 84,000 6,000 0 42,000

In Year 2, Quarter 4 you enter an unplanned depreciation amount of DM10,000. You choose NOT to amortize the unplanned amount this period. Oracle Assets continues depreciating the asset taking the regular depreciation expense in subsequent periods until you choose to amortize the unplanned depreciation or make an amortized adjustment.

If you do not amortize the unplanned depreciation or make an amortized adjustment in a subsequent period, the asset will be fully reserved before the end of the useful life.

Year of Life Net Book Value (Start of period) Depreciation Expense Unplanned Depreciation Accumulated Depreciation
Yr 2, Q4 78,000 6,000 10,000 58,000
Yr 3, Q1 62,000 6,000 0 64,000
Yr 3, Q2 56,000 6,000 0 70,000
Yr 3, Q3 50,000 6,000 0 76,000
Yr 3, Q4 44,000 6,000 0 82,000
Yr 4, Q1 38,000 6,000 0 88,000
Yr 4, Q2 32,000 6,000 0 94,000
Yr 4, Q3 26,000 6,000 0 100,000
Yr 4, Q4 20,000 6,000 0 106,000
Yr 5, Q1 14,000 6,000 0 112,000
Yr 5, Q2 8,000 6,000 0 118,000
Yr 5, Q3 2,000 2,000 0 120,000

Example 2: Unplanned Depreciation Amortized from Following Period

You place an asset in service with a life of five years, and a cost of 120,000 DM. The depreciation method is straight-line. There is no salvage value. The calendar has four periods per year.

You enter an unplanned depreciation of 10,000 DM in Year 2, Quarter 4, but you choose to amortize the unplanned depreciation expense over the remaining life of the asset, starting in the period following the unplanned depreciation.

Year of Life Net Book Value (Start of period) Depreciation Expense Unplanned Depreciation Accumulated Depreciation
Yr 2, Q1 96,000 6,000 0 30,000
Yr 2, Q2 90,000 6,000 0 36,000
Yr 2, Q3 84,000 6,000 0 42,000
Yr 2, Q4 78,000 6,000 10,000 58,000
Yr 3, Q1 62,000 *5,167 0 63,167
Yr 3, Q2 56,833 5,167 0 68,334
Yr 3, Q3 51,666 5,167 0 73,501
Yr 3, Q4 46,499 5,166 0 78,667
Yr 4, Q1 41,333 5,167 0 83,834
Yr 4, Q2 36,166 5,167 0 89,001
Yr 4, Q3 30,999 5,167 0 94,168
Yr 4, Q4 25,832 5,166 0 99,334
Yr 5, Q1 20,666 5,167 0 104,501
Yr 5, Q2 15,499 5,167 0 109,668
Yr 5, Q3 10,332 5,167 0 114,835
Yr 5, Q4 5,165 5,165 0 120,000

* Depreciation Expense Per Period = Net Book Value / Remaining Periods in Life

For Year 3, Quarter 1 = 62,000 / 12 = 5,167 DM

The asset is fully reserved at the end of the useful life.

Example 3: Upward and Downward Unplanned Depreciation

Using the asset from the previous example, you enter another unplanned depreciation of -5,000 DM in Year 4, Quarter 4, which partially reverses the previous unplanned depreciation. Oracle Assets amortizes the unplanned depreciation amount from the current period since you chose to amortize the unplanned depreciation from Year 2, Quarter 4 (See Example 2) for the same asset.

Year of Life Net Book Value (Start of period) Depreciation Expense Unplanned Depreciation Accumulated Depreciation
Yr 4, Q1 41,333 5,167 0 83,834
Yr 4, Q2 36,166 5,167 0 89,001
Yr 4, Q3 30,999 5,167 0 94,168
Yr 4, Q4 25,832 *6,166 <5,000> 95,334
Yr 5, Q1 24,666 6,167 0 101,501
Yr 5, Q2 18,499 6,167 0 107,668
Yr 5, Q3 12,332 6,167 0 113,835
Yr 5, Q4 6,165 6,165 0 120,000

* Depreciation Expense Per Period = Net Book Value / Remaining Periods in Life

For Year 5, Quarter 1 = 24,666 / 4 = 6,167 DM

The asset is fully reserved at the end of the useful life.

Example 4: Amortized Adjustment after Unplanned Depreciation

You place an asset in service with a life of five years, and a cost of 120,000 DM. The depreciation method is straight-line. There is no salvage value. The calendar has four periods per year.

You enter an unplanned depreciation in Year 1, Quarter 3, which you amortize from the following period, and then perform an amortized cost adjustment of 30,000 DM in Year 2, Quarter 1. The new cost is 150,000 DM and there is no catchup depreciation since this is an amortized adjustment.

Year of Life Net Book Value (Start of period) Depreciation Expense Unplanned Depreciation Accumulated Depreciation
Yr 1, Q1 120,000 6,000 0 6,000
Yr 1, Q2 114,000 6,000 0 12,000
Yr 1, Q3 108,000 6,000 10,000 28,000
Yr 1, Q4 92,000 **5,412 0 33,412
Yr 2, Q1 *116,588 ***7,287 0 40,699
Yr 2, Q2 109,301 7,287 0 47,986
Yr 2, Q3 102,014 7,287 0 55,273
Yr 2, Q4 94,727 7,286 0 62,560

Yr 3, Q4 65,580 7,286 0 91,708

Yr 4, Q4 36,433 7,286 0 120,856

Yr 5, Q4 7,286 7,286 0 150,000

* Cost adjustment of 30,000 DM; new cost is 150,000 DM

** Depreciation Expense Per Period = Net Book Value / Remaining Periods in Life

For Year 1, Quarter 4, the depreciation expense per period is 92,000 / 17 = 5,412 DM

*** Depreciation Expense = (New Cost - Accumulated Depreciation)/ Remaining Periods in Life

For Year 2, Quarter 1, the new depreciation expense is (150,000 - 33,412) / 16 = 7,287 DM

Oracle Assets includes the unplanned depreciation amount when it calculates the accumulated depreciation.

Note: If you choose to amortize unplanned depreciation in the current period, and then perform a cost adjustment on the same asset in the same book, Oracle Assets automatically amortizes the cost adjustment as well as the unplanned depreciation amount. You cannot expense the cost adjustment.

Note: If you choose to expense an unplanned depreciation amount, and then perform an expensed cost adjustment, Oracle Assets will override the unplanned depreciation amount to expense the cost adjustment. You can re-enter the unplanned depreciation for the asset later if necessary.

See Also

Entering Unplanned Depreciation for an Asset

Unplanned Depreciation (German Globalizations)

         Previous  Next          Contents  Index  Navigation  Glossary  Library