This chapter covers the following topics:
The Group Depreciation feature enables you to set up logical groupings of assets based on regulatory requirements and your own business needs. These logical groupings of assets are referred to as Group Assets. You can reduce data entry requirements by defining depreciation parameters for group assets rather than at the individual asset level. Group Depreciation also handles complex transactions for group assets and their member assets.
In many countries, local tax regulations require companies to depreciate assets in a composite or aggregate form, rather individually, for each asset. Group Depreciation addresses the requirements of depreciating assets in a composite or aggregate form.
Due to the large volume of assets in a major corporate enterprises, collections of similar assets are often pooled together to ease financial reporting. A group may contain many individual assets that were placed in service in different years, but only one depreciation amount is maintained for the group. Depreciation is computed and stored at the group level, and is known as Group Depreciation.
Group Depreciation aids accommodating many of the composite or aggregate depreciation requirements imposed by the following global regulatory requirements:
United States Telecomm (FCC) and Utility (FERC) compliance reporting.
United Kingdom: Writing Down Allowance (WDA) compliance reporting.
Canada Capital Cost Allowance (CCA) compliance reporting.
Japanese group asset financial and compliance reporting.
Indian group asset management and compliance reporting.
A group asset is a collection of member assets. Member assets are individual assets that belong to a group asset. You can add member assets to a group asset, or delete member assets from a group asset. You can transfer member assets in or out of a group asset, as well as transfer member assets between group assets. The group asset cost is equal to the sum of all the member asset costs.
Group Asset Cost = Sum of all Member Asset Costs
Generally, the member asset cost is posted to General Ledger for the individual member asset, and the member asset accumulated depreciation is only maintained and reported at the group level. Group assets may contain member assets that were added in different years or accounting periods.
The asset type of the group is used only for group assets. The type of assets supported by each asset type is illustrated in the table below.
| Asset | Asset Type |
|---|---|
| Group Asset | Group |
| Individual Asset * | Capitalized, CIP or Expensed, |
| Member Asset | Capitalized or CIP |
* Individual Asset refers to a standalone asset that does not belong to a group asset.
You can create a group asset using the Asset Workbench or Mass Additions. Creating group assets is very similar to creating individual assets; however, you must select an asset type of Group when creating a group asset.
Note: Bonus methods are not supported for Group and Member Assets.
Navigate to the Book Controls window.
In the Class field, select Corporate. You can only create group assets in a corporate book.
Select the Accounting Rules tabbed region.
Allow Amortized Changes: This option does not affect group or member assets, or individual assets that previously belonged to a group asset. See: Defining Depreciation Books.
You must check the Allow Group Depreciation check box before creating group assets in the book.
If group assets are not allowed in the tax book, mass copy results in the following:
If you allow group assets in the associated corporate book: The group asset will not be copied to the tax book. All member assets will be copied to the tax book as standalone assets.
If you do not allow group assets in the associated corporate book: No group asset is allowed in either the corporate or tax books.
If group assets are allowed in a tax book, mass copy results in the following:
If you allow group assets in the associated corporate book: The group and member assets will be copied to the tax book based on the mass copy options in the Tax Rule tabbed region.
If you do not allow group assets in the associated corporate book: No group asset is allowed in either the corporate or tax books. In Oracle Assets, any asset must exist in the corporate book before being added to the tax book. A group asset is no exception to this rule. Therefore, a group asset must be allowed in the corporate book in order to be copied to the tax book.
Note: Mass Copy does not copy any type of group adjustment, including group reserve transfer, group retirement adjustments, and group unplanned depreciation.
Optionally check the Allow CIP Members in Group Assets check box to enable adding CIP assets to group assets. If this check box is not checked, you will not be able to add a CIP asset to a group asset, even if you have set the default group asset on the Default Depreciation Rules window on the Categories form. If the Allow CIP Members in Group Assets check box is unchecked, the Allow CIP Depreciation in Group Assets check box is disabled.
Once the Allow CIP Members in Group Assets check box is checked and saved, you cannot uncheck it.
You must check the Allow CIP Depreciation in Group Assets check box to depreciate the CIP asset cost for member assets.
Optionally check the Allow Member Asset Tracking check box to enable member asset tracking for the depreciation book. Once the check box is checked and saved, you cannot uncheck it.
You must check the Allow Intercompany Member Asset Assignments check box if you want to allow member assets to have balancing segment values that are different than the balancing segment value of the group asset.
If the check box is unchecked for a particular depreciation book, you cannot set up member asset tracking for that book.
Navigate to the Asset Workbench window.
Select the Additions button to create a new group asset.
In the Asset Number field, optionally enter a unique asset number for the group asset. If no value is entered, the system will automatically assign a numeric number using the asset number sequencing. Group assets use the same automatic number sequencing as individual assets.
In the Description field, enter a description for the group asset. This is a required field.
In the Asset Type field, select Group as the asset type when creating a group asset.
In the Category field, enter a category for the group asset. This is a required field.
In the Units field, accept the default value of 1, or enter the desired value. This is a required field.
Note: You cannot assign group or member assets as parent or child assets.
The Physical Inventory function is not supported for group assets, and you cannot check the Physcial Inventory check box when the asset type is Group.
Select the Continue button to enter information in the Books window for the new group asset.
In the Books window, enter information for the group asset.
Note: For group assets, some financial information, such as current cost, original cost, recoverable cost and net book value cannot be updated.
During the addition period, the group asset year to date depreciation expense and accumulated depreciation can be adjusted after assigning a member asset to the group asset.
In the Book field, enter the corporate book of the new group asset.
Note: You cannot update the Cost field for a group asset.
In the Salvage Value field, there are two options to calculate the salvage value for a group asset. You can select the following:
Percentage: Enter a salvage value percentage for the group asset. The salvage value is calculated as a percentage of group asset cost, as shown in the example below:
Group Asset Salvage Value = Group Asset Cost * Group Asset Salvage Value Percentage.
Sum of Member Assets: The group asset salvage value is the total of all member asset salvage values. You can subsequently change the salvage value type.
In the YTD Depreciation field, enter the year to date depreciation for the group asset. You can only update this field during the addition period of the group asset and if at least one member asset has been assigned to the group asset.
In the Accumulated Depreciation field, enter the accumulated depreciation for the group asset. You can only update this field during the addition period of the group asset and if at least one member asset has been assigned.
Note: You cannot update the Revaluation Ceiling or Revaluation Reserve field for a group asset.
To continue adding your group asset using the Detail Additions process, you must do one of the following:
Choose Continue to continue adding your asset. See: Assigning an Asset (Detail Additions Continued).
Optionally, enter or override depreciation information using the tabbed regions in the Books window. Instructions for adding this information are included in the following tasks.
Select the Depreciation tabbed region
Check the Depreciate check box if this group asset is depreciable. If the Depreciate check box is not checked, depreciation will not be calculated for the group asset.
Check the Disable check box if this group asset is disabled. You can not assign member assets or perform transactions on this group asset after checking this check box. See: Disable Group Assets.
In the Method field, optionally override the default value and enter the depreciation method and associated information.
The Units of Production method is not allowed for group or member assets.
Note: If the Over Depreciate field is set to Allow and Depreciate, you cannot choose the depreciation methods of Calculate, Table, Formula, or Flat-NBV. If the Over Depreciate field is set to Allow, you cannot choose the depreciation methods of Calculate and Table. See: Depreciation Override.
The date placed in service is defaulted to the current period for group assets. For group assets, you can only enter a prior period date placed in service while in the addition period. This date is used to determine the group depreciation start date. This is a required field for group assets. You can only change the group asset date placed in service before the group asset begins depreciating.
The Prorate Convention field displays the defaulted value from the Default Depreciation Rules window.
The Prorate Date will display the depreciation start date of the group asset, which is the same as the date placed in service of the group asset.
The Type field has three options to calculate the depreciation limit for a group asset. These options include the following:
Note: You can use depreciation limits even if you select the Over Depreciate options of Allow or Allow and Depreciate
Null: No depreciation limit is set up for the group asset.
Percentage: Enter a depreciation limit percentage for the group asset.
Sum of Member Assets: The group asset depreciation limit is the total of all member asset depreciation limits.
In the Over Depreciate field, you can specify if the group asset accumulated depreciation can exceed the group asset cost.
The three options available include the following:
Do Not Allow: The group asset accumulated depreciation may not exceed the group asset recoverable cost. The system must check if the accumulated depreciation is greater than the recoverable cost whenever a transaction occurs that affects the group asset cost or accumulated depreciation, such as additions, adjustments, depreciation, retirements, and group reclassifications. Oracle Assets defaults this option.
Allow: The group asset accumulated depreciation can exceed group asset cost, but depreciation will stop for the group asset when the accumulated depreciation is greater than the recoverable cost.
Allow and Depreciate: The group asset accumulated depreciation may exceed the group asset recoverable cost, and depreciation will continue for the group assets until the group asset cost becomes zero.
You may still change the selection in subsequent period if the group asset accumulated depreciation is less than the total group asset recoverable cost at the time of change.
In the Super Group field, optionally enter a super group that you previously defined. See: Transactions: Group Adjustments.
Select the Advanced Rules tabbed region.
Important: You can only update retirement rules information during the addition period of the group asset, and before assigning a member asset.
Retirement Options Region
In the Recognize Gain and Loss field, there are two options available for member asset retirements, which include the following:
Do Not Recognize: The gain and loss is not recognized. This is the default value.
Immediately When Retired: The gain and loss is recognized at retirement. The retirement treatment for the member asset is defaulted from the group asset setup, found in the Retirement tabbed region.
Check the Recapture Excess Reserve check box if you want to indicate that the accumulated depreciation of a group asset can exceed its recoverable cost (NBV less than 0) without triggering the recognition of a gain.
The Limit Net Proceeds to Cost check box is available if Recognize Gain and Loss is set to Do Not Recognize. If the check box is checked, the amount of proceeds (net of cost of removal) that may be added to accumulated depreciation is limited to the recoverable cost of the retiring member asset.
For the Terminal Gain and Loss field, you can choose from three option. The three options available include the following:
Recognize Immediately (default value)
Defer Recognition to End of Fiscal Year
Do Not Recognize
When the last member asset is retired in a group asset, and no additional assets are added into the group asset, the remaining group accumulated depreciation balance is defined as a terminal gain or loss.
Important: You can only update member asset tracking options during the addition period of the group asset, and before assigning a member asset.
Tracking Options Region
In the Tracking Method field, select the Allocate Group Amount option if you want the system to allocate the calculated group depreciation amount to its member assets. The allocation is based on the depreciable basis of the member assets.
If you select Allocate to Fully Retired and Reserved Assets, the system will allocate the group depreciation amount to fully reserved or fully retired member assets.
If Reduce Excess is selected, the excess group depreciation amount will be reduced from the calculated group depreciation amount. This field is selected automatically, if the Allocate to Fully Retired and Reserved Assets check box is not checked.
If Distribute Excess is selected, the excess group depreciation amount will be distributed proportionally among other member assets in the group.
When the amount allocated to the member asset is greater than the depreciation limit of the member asset or the recoverable cost, the excess amount is calculated as the allocated amount over the greater of the following:
The depreciation limit of the member asset.
The recoverable cost of the member asset.
Tracking Options Region
In the Tracking Method field, selecting the Calculate Member Asset Amount option allows you to specify if depreciation is calculated at the member asset level. By selecting this option, the system will calculate depreciation for each member asset.
In the Depreciation By field, enter the member asset depreciation select how member asset depreciation will be calculated. The tow rules available include the following:
Group Method
Member Method
If the Sum Member Asset Depreciation to Group check box is checked, group depreciation is calculated as the sum of all member asset calculated depreciation. If this check box is not checked, group depreciation is calculated using the default group asset depreciation rules.
Select the Continue button to enter the group asset distribution information.
Reduction Rules Region
The Reduction Rate field is only available for group assets. Enter the percentage to use as the reduction rate. The reduction rate is applied when calculating the depreciable basis for the group assets, and is used to satisfy the 50 percent rule in Canada and India.
Note: The Reduction Rate field is enabled only if the depreciation method used has the following depreciable basis rules:
Year End Balance with Positive Reduction Amount
Year End Balance with Half Year Rule
Select Addition to apply the reduction rate to member asset addition transactions.
Select Adjustment to apply the reduction rate to member asset adjustment transactions.
Select Retirement to apply the reduction rate to member asset retirement transactions.
The reduction rate is setup as a default rate for the group asset. You may update the default reduction rate for the member asset when you perform a transaction on the member asset.
In the Assignments window, enter distribution information for a group asset.
In the Units field, enter the number of units for the group asset.
In the Depreciation Expense field, enter a valid depreciation expense account for the group asset. This is a required field. No inter-company asset transfer is allowed for a group asset, unless Allow Intercompany Member Asset Assignment is enabled during book controls setup.
Important: For a group asset with multiple distribution lines, you can only specify different balancing segment values if you checked the Allow Intercompany Member Asset Assignments check box in the Book Controls window.
In the Location field, enter a location for the group asset. This is a required field.
Select the Done button to save the new group asset.
You can add a group asset via QuickAdditions. When assets are added via QuickAdditions, the depreciation rules are defaulted from the category default rules. After you have created the group asset, you can query and change any rule for the group asset on the Asset Workbench before the first member asset is added.
Navigate to the Asset Workbench window.
Select the QuickAdditions button.
Enter a description for the group asset in the Description field.
Enter a category for the group asset in the Category field.
In the Asset Type field, select Group for asset type to create a group asset.
Enter the number of units for the group asset.
Enter a valid book name for the group asset.
The cost is zero for a group asset. No cost amounts are allowed for group assets. The group asset cost is derived from the sum of all member asset costs.
The date placed in service for the group asset is defaulted to the current period. You can enter a prior period date placed in service while in the addition period of the group asset. You cannot change the group asset date placed in service after depreciation has begun.
Check the Depreciate check box if this group asset is depreciable. If the Depreciate check box is not checked, depreciation will not be calculated for the group asset.
The Prorate Convention field displays the defaulted value from the Default Depreciation Rules window.
The Prorate Date will display the depreciation start date of the group asset, which is the same as the date placed in service of the group asset.
In the Depreciation Expense field, enter a valid expense account for the group asset. This is a required field.
Enter a location for the group asset. This is a required field.
Select the Done button to save the new group asset.
In order to search for group, member, or individual assets, you can use the search criteria provided in the Asset Workbench. The steps to query an asset using the Asset Workbench are illustrated in the steps below.
Navigate to the Asset Workbench.
In the Find Assets window, you can find assets by asset detail, book, assignment, source line, or lease information.
In the By Asset Detail region, you can find assets by descriptive information, for example:
In the Asset Number field, enter the group asset number.
In the Description field, enter the description of the group asset.
In the Asset Type field, select Group as the asset type to find group assets.
Important: Do not use the Group asset type when searching for member or individual assets.
In the By Book region, you can find assets by asset book information. For example, in the Group Asset field, enter the number of the group asset that is associated with a member asset.
Note: Do not use the Group Asset field to search for a group asset. You can enter a group asset number in the Group Asset field to find all of the member assets that are associated with the group asset.
In the By Assignment region, you can find assets by accounting information. For example, in the Expense Account field, enter the account number of the asset.
In the By Source Line region, you can find assets by invoice information. For example, in the Invoice Number field, enter the invoice number of the asset.
In the By Lease region, you can find assets by lease information. For example, in the Lessor field, enter the name of the asset lessor.
Select the Find button to execute your search criteria.
A group asset and the associated member assets must belong to the same corporate book.
The depreciation rules defined for the group asset generally supersede those of the associated member assets. Depreciation is generally calculated and stored for the group asset only.
The addition of a member asset will be treated as an amortized cost adjustment to the group asset.
Member asset transactions, such as additions, adjustments and group reclassifications, are treated as amortized adjustments. Expensed adjustments are not allowed for group assets.
The group asset date placed in service is used to determine when depreciation starts for the group asset. This date cannot be updated after depreciation has started for the group asset.
Member assets can be added with a date placed in service that is different than that of its group asset, but a member asset date placed in service may not be older than the date placed in service of the group asset.
If a member asset is added with a prior period date placed in service, the system will treat the member asset addition as an amortized cost adjustment to the group asset from the date placed in service of the member asset. Also, Oracle Assets automatically submits the Process Group Adjustments concurrent program to calculate the prior period depreciation expense for the group asset. You must acknowledge the message containing the request number of the program submission.
When you add a CIP member asset to a group asset, the CIP member asset cost is not added to the group asset until the CIP member asset is capitalized, with one important exception. The exception occurs when you check the Allow CIP Depreciation in the Group Assets check box on the Book Controls window. You may add the CIP member asset cost to the group asset by setting the Depreciate in Group option on the Source Lines window.
Unplanned depreciation is only available for member assets with the Member Asset Tracking option set up for the Calculate Member Asset option.
Cost is stored and tracked at the member asset level and summarized to the group asset.
Accumulated depreciation is generally stored and tracked for the group asset only.
The asset cost is posted to General Ledger in the period the member asset is added. Depreciation expense is posted to General Ledger from the group asset only, even when member asset tracking is enabled.
You can disable a group asset on the Books window of the Asset Workbench by checking the Disable check box on the Depreciation tabbed region of the Books window. Disabling a group asset for one book, does not affect its status in another book. For example, if you disable a group asset in the corporate book, this will not affect its enabled status in the tax book.
Before you can disable a group asset, all of its member assets must be fully retired or removed from the group asset via group reclassification. Also, the cost of a group asset must be zero before it can be disabled.
You can re-enable a disabled group asset at any time.
You can view disabled group assets on the View Financial Information window and the Asset Workbench by selecting the Show Disabled Groups check box on the Find Assets window.
You need to consider the following restrictions when disabling group assets:
You cannot perform any adjustment transactions on a disabled group asset and its member assets in the book in which the group has been disabled.
No depreciation will be calculated for disabled group assets.
You cannot add member assets to disabled group assets.
Disabled group assets are excluded from the group asset list of values on the Asset Workbench, Mass Additions, Mass Change, and Mass Reclassifications windows.
If you try to add an asset to a category in which a disabled group asset is set as the default group asset on the Default Depreciation Rules window on the Categories form, you need to first manually remove the category default. Otherwise, you will receive an error when trying to add an asset via the Asset Workbench or Mass Additions window.
Choose Asset:Asset Workbench from the Navigator window.
Find the group asset you want to disable.
Choose Books to open the Books window.
In the Book field, enter the book in which you want to disable the group asset.
Check the Disable check box on the Depreciation tabbed region to disable this group asset.
Choose Done to save this transaction.
You can re-enable a disabled group asset at any time. After you re-enable a group asset, all functional restrictions are restored. The group asset can be displayed on the Asset Workbench, Mass Additions and Mass Transactions forms. Oracle Assets calculates depreciation for the group asset going forward and you can perform transactions on the group asset and its member assets. You can also set the re-enabled group asset as the default group asset on the Default Depreciation Rules window on the Categories form.
Choose Asset:Asset Workbench from the Navigator window.
Find the group asset you want to re-enable.
Choose Books to open the Books window.
In the Book field, enter the Book in which you want to re-enable the group asset.
Uncheck the Disable check box in the Depreciation tabbed region to re-enable this group asset.
Choose Done to save this transaction.
You can assign a member asset to a group asset using the following three options:
You can use the Asset Workbench to assign an asset to a group asset.
You can use an asset category that is assigned to a group asset.
You can use Prepare Mass Addition to assign an asset to a group asset.
If you create an asset in the period of addition, you can assign the asset to a group asset by manually entering the group asset number in the Asset Workbench. The asset is added as a member asset of the group asset you manually specified.
Note: The Depreciate check box for a member asset has no impact on the group asset depreciation calculation. In General, the Depreciate check box for a member asset has no impact on the group asset depreciation calculation. However, if you have set up the Member Asset Tracking option to be Calculate Member Asset Amount for the group asset, the system will not calculate member asset depreciation when the Depreciate check box is not checked for the member asset.
Detail Additions: Enter the group asset number under the Group Asset tabbed region in the Books window.
QuickAdditions: Enter the group asset number in the Book region of the QuickAdditions window.
Prepare Mass Additions: Enter the group asset number in the Mass Additions window.
If this member asset belongs to a group asset, the Group Asset field will display the group asset number. The group asset number can be numeric or character based.
The Description field is a display only field. When a valid group asset number is displayed, the group asset description will automatically display the description of the group asset.
The Reduction Rate field is enabled for the member asset whenever it is enabled for the group asset, and it defaults to the reduction rate setup of the group asset. However, you can override the default reduction rate for each transaction. The reduction rate is enabled on the Asset Workbench Books window in the Advanced Rules tabbed region. Refer to the group asset advanced rules for details on the reduction rate default setup. See: Define Advanced Rules.
After a group asset is created, you can enter the group asset number in the category default rules. All new assets for this category will be member assets of the group asset entered in the category. These member assets will inherit the group asset membership as part of the default rules. You can change the group asset membership by using the Asset Workbench or Mass Change. See: Changing Financial and Depreciation Information.
When you add a member asset to a group asset, the cost of the member asset is added to the group asset cost as an amortized adjustment.
Group Asset Cost = Sum of all Member Asset Costs
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with Cost basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 20% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 10,000 |
| Date Added to Group Asset A | 01-Jan-2000 |
| Amortization Start Date: | 01-Jan-2000 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 20,000 |
| Date Added to Group Asset A: | 01-Feb-2000 |
| Amortization Start Date: | 01-Feb-2000 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| Jan-2000 | Feb-2000 | Mar-2000 | Apr-2000 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 20,000 | 10,000 |
| Asset 2 | 20,000 | 20,000 | 20,000 | |
| Group A Cost | 10,000 | 30,000 | 30,000 | 30,000 |
| Group A Depreciation Expense | 166.67 | 500* | 500 | 500 |
| Group A Accumulated Depreciation | 166.67 | 666.67 | 1,166.67 | 1,666.67 |
* Group A Depreciation Expense in Feb-2000 = Group A Cost * Annual Depreciation Rate / Periods per Year = 30,000 * 20% / 12 = 500
The journal entries created in the addition period include the following:
In Jan-2000, journal entries for Asset 1:
| Account Description | Debit | Credit |
|---|---|---|
| Asset 1 Cost | 10,000.00 | |
| Asset 1 Cost Clearing | 10,000 |
In Feb-2000, journal entries for Asset 2:
| Account Description | Debit | Credit |
|---|---|---|
| Asset 2 Cost | 20,000.00 | |
| Asset 2 Cost Clearing | 20,000 |
If you checked the Allow Intercompany Member Asset Assignments check box for the book, and the balancing segment values are different for the group and member assets, the following journal entries are created.
In Jan-2000, the journal entries for Asset 1 are as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Company 01 Asset 1 Cost | 10,000.00 | |
| Company 02 Asset 1 Cost Clearing | 10,000 | |
| Company 02 Intercompany AR | 10,000.00 | |
| Company 01 Intercompany AP | 10,000 |
When you back date a member asset addition, it is treated as an amortized adjustment to the group asset in a prior period. Included below is an example of a prior period member asset addition.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 30% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
Member assets added with prior period date placed in service
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 10,000 |
| Date Added to Group Asset A | 01-Jan-2000 |
| Amortization Start Date: | 01-Jan-2000 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 20,000 |
| Date Added to Group Asset A | 01-Mar-2000 |
| Amortization Start Date: | 01-Feb-2000 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| Jan-2000 | Feb-2000 | Mar-2000 | Apr-2000 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 20,000 | 10,000 |
| Asset 2 | 20,000 | 20,000 | ||
| Group A Cost | 10,000 | 30,000 | 30,000 | 30,000 |
| Group A Depreciation Expense | 250 | 250 | 1.250* | 750 |
| Group A Accumulated Depreciation | 250 | 500 | 1,750 | 2,500 |
* Group A Depreciation Expense in Mar-2000
= Periodic Depreciation Expense in Mar-2000 + Catchup Expense For Asset 2 Through Feb-2000 = [30,000 * 30% / 12] + [20,000 * 30% / 12] = 1,250
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 30% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
Member assets added with prior period date placed in service
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 10,000 |
| Date Added to Group Asset A | 01-Jan-2000 |
| Amortization Start Date: | 01-Jan-2000 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 20,000 |
| Date Added to Group Asset A | 01-May-2000 |
| Amortization Start Date: | 01-Feb-2000 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 60,000 |
| Date Added to Group Asset A | 01-Jul-2000 |
| Amortization Start Date: | 01-Mar-2000 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Jan-2000 | 10,000 | 250 | 250 |
| Feb-2000 | 10,000 | 250 | 250 |
| Mar-2000 | 10,000 | 250 | 250 |
| Apr-2000 | 10,000 | 250 | 250 |
| May-2000 | 30,000 | 2,250* | 3,250 |
| Jun-2000 | 30,000 | 750 | 4,000 |
| Jul-2000 | 90,000 | 8,250** | 11,750 |
| Aug-2000 | 90,000 | 2,250 | 14,000 |
* Group A Depreciation Expense in May-2000 = Periodic Depreciation Expense in May-2000 + Catchup Expense for Asset 2 Through Feb-2000 = [30,000 * 30% / 12] + [30,000 * 30% * 3 /12 - (250 + 250 + 250)] = 2,250
** Group A Depreciation Expense in Jul-2000 = Periodic Depreciation Expense in Jul-2000 + Catch Up Expense For Asset 3 Through Mar-2000 = [90,000 * 30% / 12] + [90,000 * 30% * 4 /12 - (250 + 250 + 1,750 + 750)] = 8,250
You can add a CIP member asset to a group asset, but the CIP member asset cost is not added to the group asset cost until the CIP member asset is capitalized. An exception to this is explained in the following section.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 CIP Asset Asset 2 Capitalized Asset |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 30% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 10,000 |
| Date Added to Group Asset A | 01-Jan-2000 |
| Date Place in Service: | 01-Jan-2000 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 20,000 |
| Date Added to Group Asset A | 01-Mar-2000 |
| Date Place in Service: | 01-Mar-2000 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| Jan-2000 | Feb-2000 | Mar-2000 | Apr-2000 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 10,000 | 10,000 |
| Asset 2 | 20,000 | 20,000 | ||
| Group A Cost | 0 | 0 | 20,000 | 20,000 |
| Group A Depreciation Expense | 0 | 0 | 500* | 500 |
| Group A Accumulated Depreciation | 0 | 0 | 500 | 1,000 |
* Group A Depreciation Expense for Mar-2000 = Group A Cost * Annual Depreciation Rate / Periods per Year = 20,000 * 30% / 12 = 500
You can add CIP member assets to a group asset, but the costs of the CIP member assets will not be included in the group asset cost unless you enabled the Allow CIP Depreciation in Group Asset check box, found in the Book Controls window.
If the Allow CIP Depreciation in Group Asset check box is checked, you can elect to depreciate the CIP member asset cost when the CIP member asset is assigned to a group asset. This is accomplished by checking the Depreciate check box on the Source Line window of the CIP member asset. See: Source Lines.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 CIP Asset Asset 2 Capitalized Asset |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 30% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
| Allow CIP Depreciation in Group Asset: | Yes |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 10,000 |
| Date Added to Group Asset A | 01-Jan-2000 |
| Date Place in Service: | 01-Jan-2000 |
| Depreciate in Group Check Box: | Checked: 01-Feb-2000 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 20,000 |
| Date Added to Group Asset A | 01-Mar-2000 |
| Date Place in Service: | 01-Mar-2000 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| Jan-2000 | Feb-2000 | Mar-2000 | Apr-2000 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 10,000 | 10,000 |
| Asset 2 | 20,000 | 20,000 | ||
| Group A Cost | 0 | 10,000 | 20,000 | 20,000 |
| Group A Depreciation Expense | 0 | 250* | 500 | 500 |
| Group A Accumulated Depreciation | 0 | 250 | 750 | 1,250 |
* Group A Depreciation Expense in Feb-2000 = Group A Cost * Annual Depreciation Rate / Periods per Year = 30,000 * 30% / 12 = 250
Adjusting the member asset costs will have an indirect impact on the associated group asset. Since the group asset cost is equal to the sum of all member asset costs, changing the cost of a member asset will result in changing the group asset cost. Changing the salvage value of a member asset may also affect the group asset when the Use Sum of Member Asset salvage value option is selected for the group asset.
When you perform a cost adjustment to a member asset, the cost of the member asset is updated for the adjustment amount. The cost adjustment is treated as an amortized adjustment to the group asset. The cost adjustment will be treated as a current period transaction for the member asset. You can enter a prior period amortization start date for the member asset cost adjustment. The amortization start date entered for the member asset is restricted to dates between the date placed in service of the member asset and the current period date.
If the salvage value is expressed as a percentage of cost, the salvage value will be changed proportionally during the cost adjustment. If the salvage value is expressed as an amount, it will not be affected by the cost adjustment.
The steps below explain the various calculations involved in a member asset cost adjustment.
The group asset depreciable basis is increased or decreased by the sum of all the member asset cost adjustment amounts.
The adjustment is an amortized adjustment, and the adjustment amount is amortized evenly over the amortization period of the group asset.
The system calculates the periodic depreciation amount using the adjusted cost of the group asset.
The journal entries created are as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Member Asset Cost | xxxx | |
| Member Asset Cost Clearing | xxxx | |
| Group Asset Depreciation Expense | xxxx | |
| Group Asset Accumulated Depreciation | xxxx |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 30% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Adjustment: | 10,000 |
| Period Performed: | Mar-2000 |
| Amortization Start Date: | 01-Mar-2000 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| Jan-2000 | Feb-2000 | Mar-2000 | Apr-2000 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 20,000 | 20,000 |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 40,000 | 40,000 |
| Group A Depreciation Expense | 750 | 750 | 1,000* | 1,000 |
| Group A Accumulated Depreciation | 750 | 1,500 | 2,500 | 3,500 |
* Group A Depreciation Expense in Mar-2000 = Group Asset Cost * Annual Depreciation Rate / Periods per Year = 40,000 * 30% / 12 = 1,000
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Straight Line with Cost Basis Life: 1 Year |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Adjustment: | 10,000 |
| Period Performed: | Mar-2000 |
| Amortization Start Date: | 01-Mar-2000 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| Jan-2000 | Feb-2000 | Mar-2000 | Apr-2000 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 20,000 | 20,000 |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 40,000 | 40,000 |
| Group A Depreciation | 2,500 | 2,500 | 3,500 | 3,500 |
| Group A Accumulated Depreciation | 2,500 | 5,000 | 8,500 | 12,000 |
Group A Depreciation Expense in Mar-2000 = (Cost - Accumulated Depreciation) / Remaining Life = (40,000 - 5,000) / 10 = 3,500
The journal entries created are as follows:
Create Member Asset 1 cost adjustment journal entries in Mar-2000:
| Account Description | Debit | Credit |
|---|---|---|
| Member Asset 1 Cost | 10,000 | |
| Member Asset 1 Cost Clearing | 10,000 |
Create group depreciation expense journal entries in Mar-2000:
| Account Description | Debit | Credit |
|---|---|---|
| Group Depreciation Expense | 3,500 | |
| Group Accumulated Depreciation | 3,500 |
When you back date a member asset cost adjustment, it is treated as a prior period amortized adjustment to the group asset. Multiple dated adjustments may occur when member asset cost adjustments are backdated to prior periods.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 30% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Adjustment: | 10,000 |
| Period Performed: | Mar-2000 |
| Amortization Start Date: | 01-Feb-2000 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| Jan-2000 | Feb-2000 | Mar-2000 | Apr-2000 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 20,000 | 20,000 |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 40,000 | 40,000 |
| Group A Depreciation | 750 | 750 | 1,250 | 1,000 |
| Group A Accumulated Depreciation | 750 | 1,500 | 2,750 | 3,750 |
Group A Catchup Expense for Feb-2000 = 40,000 * 30% / 12 - 750 = 250
Group A Depreciation Expense in Mar-2000 = 40,000 * 30% / 12 = 1,000
The journal entries created for the group asset depreciation expense in Mar-2000 are as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Group Depreciation Expense | 1,250 | |
| Member Asset Cost Clearing | 1,250 |
There are two types of group asset adjustments that directly impact a group asset, these include the following:
Changing the depreciation rules of the group asset: The list of depreciation rules that can impact a group asset include the following:
Depreciate check box
Depreciation method
Salvage value rule
Depreciation limit
Super group rule
Group Asset Adjustment: You can make adjustments directly to a group asset by changing the accumulated depreciation amount of the group asset.
You can change the depreciation method of a group asset in the Books window.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (Cost: 10,000; dpis: 01-Jan-2000), Asset 2 (Cost: 20,000; dpis: 01-Jan-2000) |
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 30% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Original Depreciation Rate: | 30% |
| Depreciation Rate Change: | 50% |
| Period Performed: | Mar-2000 |
| Amortization Start Date: | 01-Mar-2000 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| Jan-2000 | Feb-2000 | Mar-2000 | Apr-2000 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 10,000 | 10,000 |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 30,000 | 30,000 |
| Group A Depreciation | 750 | 750 | 1,250 | 1,250 |
| Group A Accumulated Depreciation | 750 | 1,500 | 2,750 | 4,000 |
Group A Depreciation Expense in Mar-2000 = Group Asset Cost * Annual Depreciation Rate / Periods per Year = 30,000 X 50% / 12 = 1,250
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (cost: 10,000; dpis: 01-Jan-2000), Asset 2 (cost: 20,000; dpis: 01-Jan-2000) |
| Depreciation Method: | Straight Line with Cost Basis Life: STL 3 years |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Original Depreciation Method: | Straight Line with Cost Basis Life: 3 years |
| Depreciation Method Change / Date Changed: | Straight Line with Cost Basis Life: 5 years |
| Year Performed: | FY-2001 |
| Amortization Start Date: | 01-Jan-2001 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| FY-2000 | FY-2001 | FY-2002 | FY-2003 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 10,000 | 10,000 |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 30,000 | 30,000 |
| Group A Depreciation | 10,000 | 5,000 | 5,000 | 5,000 |
| Group A Accumulated Depreciation | 10,000 | 15,000 | 20,000 | 25,000 |
Group A Depreciation Expense in FY 2001 = (Cost - Accumulated Depreciation) / Remaining Life = (30,000 - 10,000) / 4 = 5,000
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 20% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Monthly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 10,000 |
| Date Added to Group Asset A | 01-Jan-2000 |
| Date Place in Service: | 01-Jan-2000 |
| Asset Setup Item | Asset Setup Information |
|---|---|
| Cost Added: | 20,000 |
| Date Added to Group Asset A | 01-Jan-2000 |
| Date Place in Service: | 01-Jan-2000 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Original Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost Rate: 20% |
| Depreciation Method Change | Changed to Straight Line (STL) Life: 4 Year |
| Year Performed: | FY-2002 |
| Amortization Start Date: | 01-Jan-2002 |
The table below contains the annual cost and calculated amounts for the group and member assets.
| FY-2000 | FY-2001 | FY-2002 | FY-2003 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 10,000 | 10,000 |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 30,000 | 30,000 |
| Group A Depreciation | 6,000 | 6,000 | 9,000 | 9,000 |
| Group A Accumulated Depreciation | 6,000 | 12,000 | 21,000 | 30,000 |
Group A Depreciation Expense in FY 2002 = (Cost - Accumulated Depreciation) / Remaining Life = (30,000 - 12,000) / 2 = 9,000
Group A four year life begins 01/01/2000, and becomes fully reserved at the end of 2003.
You can calculate the group asset salvage value by using the following methods:
Percentage: You can enter a salvage value percentage for the group asset. The salvage value is calculated using the following formula:
Group Asset Salvage Value = Group Asset Salvage Value Percentage * Aggregated Group Cost.
When you change the salvage value of any member asset, it has no effect on the group asset salvage value.
Sum of Member Asset: The group asset salvage value is equal to the sum of all member asset salvage values.
Group Asset Salvage Value = Sum of all Member Asset Salvage Values
Changing the salvage value of a member asset will result in the group asset changing by the same amount.
The following table contains asset setup information used in this example.
| Asset | Date Placed in Service | Cost | Salvage Value |
|---|---|---|---|
| Asset 1 | 01/01/2000 | 10,000 | 2,000 |
| Asset 2 | 01/01/2000 | 20,000 | 3,000 |
| Group Asset A | 01/01/2000 | 30,000 | 1,500 |
Group A Salvage Value = 5% X 30,000 = 1,500
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Salvage Value Percentage: | Change Group A Salvage Value to 10% |
| Period Performed: | 01-Mar-2000 |
| Amortization Date: | 01-Mar-2000 |
| Group A Salvage Value: | 3,000 |
The following table contains asset setup information used in this example.
| Asset | Date Placed in Service | Cost | Salvage Value |
|---|---|---|---|
| Asset 1 | 01/01/2000 | 10,000 | 4,000 |
| Asset 2 | 01/01/2000 | 20,000 | 1,000 |
| Group Asset A | 01/01/2000 | 30,000 | 5,000 |
Group A Salvage Value = 4,000 + 1,000 = 5,000
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Salvage Value: | Change Asset 1 Salvage Value to 2,000 |
| Period Performed: | 01-Mar-2000 |
| Amortization Date: | 01-Mar-2000 |
| Group A Salvage Value: | 3,000 |
The following table contains asset setup information used in this example.
| Asset | Date Placed in Service | Cost | Salvage Value |
|---|---|---|---|
| Asset 1 | 01/01/2000 | 10,000 | 2,000 |
| Asset 2 | 01/01/2000 | 20,000 | 1,000 |
| Group Asset A | 01/01/2000 | 30,000 | 1,500 |
Group A Salvage Value = 5% X 30,000 = 1,500
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Salvage Value: | Change Group A Salvage Value Type to Sum of Member Assets |
| Period Performed: | 01-Mar-2000 |
| Amortization Date: | 01-Mar-2000 |
| Group A Salvage Value: | 3,000 |
A transfer reserve allows you to move part of the accumulated depreciation from one group asset to another, and is treated as a current period amortized adjustment. When you select the Transfers Reserve button, a dialog box prompts you to enter the transfer amount and the receiving group asset. When you enter these values and select the Done button, the following journals are created for the current period:
| Account Description | Debit | Credit |
|---|---|---|
| Source Group Asset Accumulated Depreciation | xxxx | |
| Target Group Asset Accumulated Depreciation | xxxx |
You can enter an unplanned depreciation amount for a group asset using the Asset Workbench. An unplanned depreciation adjustment is treated as a current period amortized adjustment. Unplanned depreciation is available if the group asset is depreciating with the Flat Rate depreciation method.
When you select the Unplanned Depreciation button, a dialog box prompts you to select a type and enter an amount. When you enter these values and select the Done button, the following journals are created:
| Account Description | Debit | Credit |
|---|---|---|
| Group Asset Depreciation Expense | xxxx | |
| Group Asset Accumulated Depreciation | xxxx |
Note: Unplanned Depreciation is entered at the group asset level.
For project related assets, it may be more convenient to enter the cost of removal and proceeds of sale against the group, rather than apportioning the amounts to the individual member assets. Also, at the time of the individual asset retirements, the costs of removal and proceeds of sales are not always known. This requires entering the cost of removal and proceeds of sale directly to the group asset, independent of any retirement transactions.
Note: You cannot enter the cost of removal and proceeds of sale directly to a group asset in the period it was added.
To enter the cost of removal and proceeds of sale directly to the group asset, select the Adjust Retirement button. In the resulting dialog box, enter the cost of removal and proceeds of sale for the group asset, and select the Done button. The following journal entries are created:
| Account Description | Debit | Credit |
|---|---|---|
| Group Asset Accumulated Depreciation | <Cost of Removal> | |
| Cost of Removal | <Cost of Removal> | |
| Proceeds of Sale | <Proceeds of Sale> | |
| Group Asset Accumulated Depreciation | <Cost of Removal> |
While in the first period of the asset's life, you may enter or adjust the group asset accumulated depreciation balance on the books window, after a member asset has been assigned to the group asset. However, no journal entries will result from this reserve adjustment. This functionality is intended, and provided to facilitate migration from legacy systems. If you have enabled the member asset tracking selection for the group asset, you cannot enter a or update the accumulated depreciation for the group asset.
The Super Group function is designed to assist compliance with the telecommunication industry regulations that specify classifying group assets together.
You can use the Super Group function to override depreciation rules, including the depreciation methods, depreciation rates, and depreciation limit, on a group asset. The depreciation expense of each group asset is tracked and stored individually.
Navigate to the Super Groups window.
In the Name field, enter a name for the super group.
In the Description field, enter a description for the super group.
Check the Enabled check box to enable the super group.
In the Book field, enter the name of the corporate or tax book of the super group.
In the Periods From fields, enter the range of periods in which the depreciation method and depreciation limit rules are effective. You can specify as many depreciation rule ranges of as you wish. If you do not enter an end date, Oracle Assets will uses the entered set of depreciation rules indefinitely.
You can add a new range of valid depreciation rules by entering an end period for the current record, saving, and then enter a new range of valid depreciation rules.
Enter the depreciation method, basis, and adjusted rates. You can only enter a depreciation method that has a method type of Flat and a calculation basis of Cost.
Enter a depreciation limit percentage in the Depreciation Limit field. You can enter a positive or a negative depreciation limit.
You can assign a super group to a group asset in the Advanced Rules tabbed region of the Books window. You can only assign a super group to one group asset within an asset book. When you assign a super group to a group asset, the group asset depreciation expense is calculated using the depreciation method and rules specified for the super group The group asset depreciation expense is calculated according to the following formula:
Group Asset Depreciation = Group Asset Cost * Super Group Annual Depreciation Rate /Periods per Year
The group asset depreciation amount is limited by the depreciation limit percentage that you entered during the setup of the super group.
A group reclassification occurs when you change the group membership of an asset using the Asset Workbench. The group asset membership is changed when you modify the group asset field, which is found in the Group Asset tabbed region in the Books window.
A group reclassification occur in the following scenarios:
Add a standalone asset into a group asset
Transfer a member asset from a source group asset to a target group asset (transfer between group assets)
Remove a member asset from a group asset
Oracle Assets provides the following two ways to process a group reclassification:
Asset Workbench
Mass Change
All group reclassifications of member assets are treated as amortized adjustments to the group asset, and you cannot backdate the group reclassification prior to the last group reclassification date or the last retirement transaction you have performed on this asset.
To transfer a member asset between source group assets, both group assets must have member asset tracking enabled. You cannot transfer a member asset from a source group asset containing member asset without tracking enabled, to a destination group asset with member asset tracking enabled.
You must check the Allow Intercompany Member Asset Assignment check box on the Book Controls window to transfer a member asset between group assets with different balancing segment values.
When you use the Calculate transfer type, the system will calculate the group reclassification based on the group amortization start date entered. The date in the Group Amortization Start Date field is defaulted to the date placed in service of the member asset. You can update the group amortization start date to any date from the current period date to its date placed in service.
When a prior period date is entered as the group amortization start date, the transaction is treated as a backdated group reclassification. This requires calculating the depreciation expense for the prior periods, and making the appropriate adjustments to the source and destination group assets.
When you make a prior period group reclassification, the system subtracts the depreciation expense from the source group asset and adds a depreciation adjustment expense, or catchup expense, to the destination group asset. This ensures that the financial impact of having the member asset in the wrong group has been reversed.
The journal entries created are as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Source Group Accumulated Depreciation | <Source Group Depreciation> | |
| Source Group Depreciation Expense | <Source Group Depreciation> | |
| Destination Group Depreciation Expense | <Destination Group Depreciation> | |
| Destination Group Accumulated Depreciation | <Destination Group Depreciation> |
The destination group asset depreciation expense is calculated using the destination group asset depreciation method. The amount is added to the destination group asset accumulated depreciation balance. This type of transfer is treated as a back dated amortized adjustments for both the source and destination group assets.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (Cost: 30,000; DPIS: Q3-2000) Asset 2 (Cost: 20,000; DPIS: Q3-2000) |
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 20% |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group B |
| Member Assets: | Asset 3 (Cost: 50,000; DPIS: Q1-2000) Asset 4 (Cost: 30,000; DPIS: Q1-2000) |
| Depreciation Method: | Straight Line 2 Years |
| Group DPIS / Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Reclassification: | Transfer Asset 1 from Group A to Group B |
| Period Performed: | Q1-2001 |
| Group Amortization Start Date: | Q3-2000 |
| Transfer Type: | Calculate |
The table below contains the quarterly cost and calculated amounts for Group Asset A.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | - | - | - |
| Q2-2000 | - | - | - |
| Q3-2000 | 50,000 | 2,500 | 2,500 |
| Q4-2000 | 50,000 | 2,500 | 5,000 |
| Q1-2001 | 20,000 | <2,000> | 3,000 |
| Q2-2001 | 20,000 | 1,000 | 4,000 |
| Q3-2001 | 20,000 | 1,000 | 5,000 |
| Q4-2001 | 20,000 | 1,000 | 6,000 |
The table below contains the quarterly cost and calculated amounts for Group Asset B.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | 80,000 | 10,000 | 10,000 |
| Q2-2000 | 80,000 | 10,000 | 20,000 |
| Q3-2000 | 80,000 | 10,000 | 30,000 |
| Q4-2000 | 80,000 | 10,000 | 40,000 |
| Q1-2001 | 110,000 | 25,000 | 65,000 |
| Q2-2001 | 110,000 | 15,000 | 80,000 |
| Q3-2001 | 110,000 | 15,000 | 95,000 |
| Q4-2001 | 110,000 | 15,000 | 110,000 |
In Q1-2001, depreciation is calculated as follows:
Group A
Periodic Depreciation + Catchup Expense Up to Q3-2000
= [(50,000 - 20,000) * 20% / 4] + [(50,000 - 20,000) * 20% / 4 * 2 - (2,500 + 2,500)] = <2,000>
Group B Periodic Depreciation + Catchup Expense up to Q3-2000
= [(110,000 - 20,000) / 6] + [(110,000 - 20,000) / 6 * 2 - (10,000 + 10,000)] = 25,000
The system creates journal entries in Q1-2001 as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Group A Accumulated Depreciation | 2,000 | |
| Group A Depreciation Expense | 2,000 | |
| Group B Depreciation Expense | 25,000 | |
| Group B Accumulated Depreciation | 25,000 |
When you add a standalone asset into a group asset, the system uses the group asset amortization start date to calculate any required catchup expenses. The catchup expense for a standalone asset is calculated using the depreciation method of the standalone asset. It is deducted from the standalone asset accumulated depreciation balance before it is added to a group asset. The remaining accumulated depreciation balance of the standalone asset is added to the group asset when it becomes a member asset. Also, the cost of the member asset is added to the cost of the group asset.
The catchup depreciation expense is calculated using the group asset depreciation method. The catchup depreciation amount is added to the group asset accumulated depreciation balance in the current period of the transfer. This type of transfer is treated as a backdated amortized adjustment to the group asset.
The table below contains the annual cost and calculated amounts for the group and member assets.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Asset: | Asset 1 (Cost: 20,000; DPIS: Q3-2000) |
| Depreciation Method: | Flat Rate of 20% with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group B |
| Member Assets: | Asset 3 (Cost: 50,000; DPIS: Q1-2000), Asset 4 (Cost: 30,000; DPIS: Q1-2000) |
| Depreciation Method: | Straight Line 2 years |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Reclassification: | Add Asset 1 to Group B |
| Period Performed: | Q1-2001 |
| Group Amortization Start Date | Q4-2000 |
| Transfer Type: | Calculate |
The table below contains the quarterly cost and calculated amounts for Asset 1.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | - | - | - |
| Q2-2000 | - | - | - |
| Q3-2000 | 20,000 | 1,000 | 1,000 |
| Q4-2000 | 20,000 | 1,000 | 2,000 |
| Q1-2001 | 20,000 | <1,000> | 0 |
| Q3-2001 | 20,000 | - | 0 |
| Q4-2001 | 20,000 | - | 0 |
The table below contains the quarterly cost and calculated amounts for Group Asset B.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | 80,000 | 10,000 | 10,000 |
| Q2-2000 | 80,000 | 10,000 | 20,000 |
| Q3-2000 | 80,000 | 10,000 | 30,000 |
| Q4-2000 | 80,000 | 10,000 | 40,000 |
| Q1-2001 | 100,000 | 17,600 | 58,600 |
| Q2-2001 | 100,000 | 13,800 | 72,400 |
| Q3-2001 | 100,000 | 13,800 | 86,200 |
| Q4-2001 | 100,000 | 13,800 | 100,000 |
In Q1-2001, Group Reclassification is calculated as follows:
Asset 1 Catch Up Expense = -20,000 * 20% / 4 = <1,000>
Asset 1 Accumulated Depreciation Transferred to Group B = 2,000 - 1,000 = 1,000
Group B Depreciation = Periodic Depreciation + Catchup Expense for Q4-2000 = [(100,000 - 30,000 - 1,000) / 5] + [(100,000 - 30,000 - 1,000) / 5 - 10,000] = 18,000
The system creates journal entries in Q1-2001 as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Asset 1 Accumulated Depreciation | 1,000 | |
| Asset 1 Depreciation Expense | 1,000 |
| Account Description | Debit | Credit |
|---|---|---|
| Asset 1 Accumulated Depreciation | 1,000 | |
| Group B Accumulated Depreciation | 1,000 |
| Account Description | Debit | Credit |
|---|---|---|
| Group B Depreciation Expense | 17,600 | |
| Group B Accumulated Depreciation | 17,600 |
If Asset 1 and Group Asset B have different balancing segment values, and you enabled allow intercompany member asset assignments, Oracle Assets creates intercompany balancing journal entries for Q1-2001 as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Company 01 Asset 1 Accumulated Depreciation | 1,000 | |
| Company 01 Asset 1 Depreciation Expense | 1,000 |
| Account Description | Debit | Credit |
|---|---|---|
| Company 01 Asset 1 Accumulated Depreciation | 1,000 | |
| Company 02 Group B Accumulated Depreciation | 1,000 |
| Account Description | Debit | Credit |
|---|---|---|
| Company 02 Group B Depreciation Expense | 17,600 | |
| Company 02 Group B Accumulated Depreciation | 17,600 |
| Account Description | Debit | Credit |
|---|---|---|
| Company 02 Intercompany AR | 1,000 | |
| Company 01 Intercompany AP | 1,000 |
When you remove the group assignment of a member asset (removing the member asset from the group), the group amortization start date is generally defaulted to the date placed in service of the member asset. However, if the member asset has already performed a group reclassification, the group amortization start date will default to the last group reclassification amortization start date.
You cannot backdate a group reclassification transaction for a member asset before its last group reclassification amortization start date or its last retirement date.
All group reclassifications of member assets are treated as amortized adjustments to the member and the group asset. You cannot perform an expensed adjustment for a standalone asset if it was formerly a member asset, which experienced amortized adjustments while part of a group asset.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (cost: 20,000; dpis: Q1-2000), Asset 2 (cost: 30,000; dpis: Q3-2000) |
| Depreciation Method: | Straight Line 2 years |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Asset: | Asset 2 (cost: 20,000; dpis: Q3-2000) |
| Depreciation Method: | Straight Line 3 years |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Reclassification: | Remove Asset 2 from Group B |
| Period Performed: | Q1-2001 |
| Group Amortization Start Date: | Q3-2000 (Restricted to the DPIS of Asset 2) |
| Transfer Type: | Calculate |
The table below contains the quarterly cost and calculated amounts for Group Asset A.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | 20,000 | 2,500 | 2,500 |
| Q2-2000 | 20,000 | 2,500 | 5,000 |
| Q3-2000 | 50,000 | 7,500 | 12,500 |
| Q4-2000 | 50,000 | 7,500 | 20,000 |
| Q1-2001 | 20,000 | <7,500> | 12,500 |
| Q2-2001 | 20,000 | 2,500 | 15,000 |
| Q3-2001 | 20,000 | 2,500 | 17,500 |
| Q4-2001 | 20,000 | 2,500 | 20,000 |
The table below contains the quarterly cost and calculated amounts for Asset 2.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | - | - | - |
| Q2-2000 | - | - | - |
| Q3-2000 | 30,000 | - | 0 |
| Q4-2000 | 30,000 | - | 0 |
| Q1-2001 | 30,000 | 7,500 | 7,500 |
| Q2-2001 | 30,000 | 2,500 | 10,000 |
| Q3-2001 | 30,000 | 2,500 | 12,500 |
| Q4-2001 | 30,000 | 2,500 | 15,000 |
In Q1-2001, depreciation is calculated as follows:
Group A Depreciation = Periodic Depreciation + Catchup Expense for Q1-2000 = [(20,000 - 5,000) / 6] + [(20,000 - 5,000) / 6 * 2 - (7,500 + 7,500)] = <7,500>
Asset 2 Depreciation = 30,000 / 12 * 3 = 7,500
The system creates journal entries in Q1-2001 as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Group A Accumulated Depreciation | 7,500 | |
| Group A Depreciation Expense | 7,500 |
| Account Description | Debit | Credit |
|---|---|---|
| Asset 2 Depreciation Expense | 7,500 | |
| Asset 2 Accumulated Depreciation | 7,500 |
When the group amortization start date is in the current period, the transaction results in a current period transfer of accumulated depreciation. There is no need to adjust depreciation amounts that have already been taken for the member asset or the group asset. The transfer is processed in the current period by removing the calculated accumulated depreciation amount from the source group asset, and adding it to the accumulated depreciation balance of the destination group asset. The journal entries created are as follows:
Source
| Account Description | Debit | Credit |
|---|---|---|
| Group Accumulated Depreciation | <Source Group Depreciation> | |
| Group Depreciation Expense | <Source Group Depreciation> |
Destination
| Account Description | Debit | Credit |
|---|---|---|
| Group Depreciation Expense | <Destination Group Depreciation> | |
| Group Accumulated Depreciation | <Destination Group Depreciation> |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (cost: 20,000; dpis: Q1-2000) Asset 2 (cost: 20,000; dpis: Q1-2000) |
| Depreciation Method: | Flat Rate of 20% with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group B |
| Member Assets: | Asset 3 (cost: 50,000; dpis: Q1-2000), Asset 4 (cost: 30,000; dpis: Q1-2000) |
| Depreciation Method: | Straight Line 2 years |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Reclassification: | Transfer Asset 1 from Group A to Group B |
| Period Performed: | Q1-2001 |
| Group Amortization Start Date: | Q1-2001 |
| Transfer Type: | Calculate |
The table below contains the quarterly cost and calculated amounts for Group Asset A.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | 40,000 | 2,000 | 2,000 |
| Q2-2000 | 40,000 | 2,000 | 4,000 |
| Q3-2000 | 40,000 | 2,000 | 6,000 |
| Q4-2000 | 40,000 | 2,000 | 8,000 |
| Q1-2001 | 20,000 | 1,000 | 5,000 |
| Q2-2001 | 20,000 | 1,000 | 6,000 |
| Q3-2001 | 20,000 | 1,000 | 7,000 |
| Q4-2001 | 20,000 | 1,000 | 8,000 |
The table below contains the quarterly cost and calculated amounts for Group Asset B.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | 80,000 | 10,000 | 10,000 |
| Q2-2000 | 80,000 | 10,000 | 20,000 |
| Q3-2000 | 80,000 | 10,000 | 30,000 |
| Q4-2000 | 80,000 | 10,000 | 40,000 |
| Q1-2001 | 100,000 | 14,000 | 58,000 |
| Q2-2001 | 100,000 | 14,000 | 72,000 |
| Q3-2001 | 100,000 | 14,000 | 86,000 |
| Q4-2001 | 100,000 | 14,000 | 100,000 |
In Q1-2001, Group Reclassification is calculated as follows:
Member Asset 1 Accumulated Depreciation Transferred Out = (40,000 - 20,000) * 20% / 4 * 4 = 4,000
Group Asset A Depreciation Expense = New Cost * Annual Depreciation Rate / Periods per Year = (40,000 - 20,000) * 20% / 4 = 1,000
Group Asset B Depreciation Expense = (New Cost - Recalculated Accumulated Depreciation) / Remaining Life = [(80,000 + 20,000) - 4,000 - 40,000] / 4 = 14,000
The system creates journal entries in Q1-2001 as follows:
Group Reclassification:
| Account Description | Debit | Credit |
|---|---|---|
| Group A Accumulated Depreciation | 4,000 | |
| Group B Depreciation Expense | 4,000 |
Periodic Depreciation:
| Account Description | Debit | Credit |
|---|---|---|
| Group A Depreciation Expense | 1,000 | |
| Group A Accumulated Depreciation | 1,000 | |
| Group B Depreciation Expense | 14,000 | |
| Group B Accumulated Depreciation | 14,000 |
If you use a transfer type of Enter, you must manually enter the accumulated depreciation amount you wish to transfer. You may enter the transfer accumulated depreciation amount on the Depreciation Reserve field in the Group Asset tabbed region on the Books form.
You can optionally enter the Source Prior Year Reserve and Destination Prior Year Reserve amounts if the transfer type is Enter. These Prior Year Reserve amounts are used to calculate the depreciation expenses if you have a depreciation method with NBV as the calculation basis. However, they do not impact depreciation calculation if your depreciation method is Cost basis.
Transfers with a type of Enter can only include accumulated depreciation amounts, and are always treated as current period transfers. No adjustments are made to the depreciation expense already taken for the member or group asset. Oracle Assets simply transfers the accumulated depreciation amount you entered.
For example, a current period transfer is processed when the manually entered accumulated depreciation amount is removed from the source group asset and added to the destination group asset. The resulting journal entries are as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Source Group Accumulated Depreciation | < Entered Transfer Amount> | |
| Destination Group Accumulated Depreciation | <Entered Transfer Amount> |
When removing a member asset out of a group, the entered reserve amount is limited to the recoverable cost of the member asset removed from the group.
The member asset recoverable cost is calculated according to the following formula:
Member Asset Recoverable Cost = Member Asset Cost - Member Asset Salvage Value
When adding a standalone asset into a group, the Enter transfer type is disallowed.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (cost: 20,000; dpis: Q1-2000), Asset 2 (cost: 20,000; dpis: Q1-2000) |
| Depreciation Method: | Flat Rate of 20% with cost basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group B |
| Member Assets: | Asset 3 (cost: 50,000; dpis: Q1-2000), Asset 4 (cost: 30,000; dpis: Q1-2000) |
| Depreciation Method: | Flat Rate of 50% with cost basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Reclassification: | Transfer Asset 1 from Group A to Group B |
| Period Performed: | Q1-2001 |
| Transfer Type: | Enter |
| Accumulated Depreciation: | 2,000 |
The table below contains the quarterly cost and calculated amounts for Group Asset A.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | 40,000 | 2,000 | 2,000 |
| Q2-2000 | 40,000 | 2,000 | 4,000 |
| Q3-2000 | 40,000 | 2,000 | 6,000 |
| Q4-2000 | 40,000 | 2,000 | 8,000 |
| Q1-2001 | 20,000 | 1,000 | 7,000 |
| Q2-2001 | 20,000 | 1,000 | 8,000 |
| Q3-2001 | 20,000 | 1,000 | 9,000 |
| Q4-2001 | 20,000 | 1,000 | 10,000 |
The table below contains the quarterly cost and calculated amounts for Group Asset B.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | 80,000 | 10,000 | 10,000 |
| Q2-2000 | 80,000 | 10,000 | 20,000 |
| Q3-2000 | 80,000 | 10,000 | 30,000 |
| Q4-2000 | 80,000 | 10,000 | 40,000 |
| Q1-2001 | 100,000 | 12,500 | 54,500 |
| Q2-2001 | 100,000 | 12,500 | 67,000 |
| Q3-2001 | 100,000 | 12,500 | 79,500 |
| Q4-2001 | 100,000 | 12,500 | 92,000 |
In Q1-2001, depreciation is calculated as follows:
Group A = (40,000 - 20,000) x 20% / 4 = 1,000
Group B = (80,000 + 20,000) * 50% / 4 = 12,,500
The system creates journal entries in Q1-2001 as follows:
Group Reclassification:
| Account Description | Debit | Credit |
|---|---|---|
| Group A Accumulated Depreciation | 2,000 | |
| Group B Accumulated Depreciation | 2,000 |
Periodic Depreciation:
| Account Description | Debit | Credit |
|---|---|---|
| Group A Depreciation Expense | 1,000 | |
| Group A Accumulated Depreciation | 1,000 |
| Account Description | Debit | Credit |
|---|---|---|
| Group B Depreciation Expense | 12,500 | |
| Group B Accumulated Depreciation | 12,500 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Asset: | Group A |
| Member Assets: | Asset 1 (Cost: 20,000; DPIS: Q1-2000), Asset 2 (Cost: 40,000; DPIS: Q1-2000) |
| Depreciation Method: | Straight Line 2 years |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Asset: | Asset 2 |
| Depreciation Method: | Straight Line 2 years |
| Depreciation Calendar: | Quarterly |
Note: All group reclassifications of member assets are treated as amortized adjustments to the member and the group asset. You cannot perform an expensed adjustment to a standalone asset if it was formerly a member asset, which experienced amortized adjustments while part of a group asset.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Reclassification: | Transfer Asset 2 from Group A to Group B |
| Period Performed: | Q1-2001 |
| Group Amortization Start Date: | Q1-2001 |
| Transfer Type: | Enter |
| Accumulated Depreciation: | 15,000 (This amount will be limited to Asset 2 Recoverable Cost = 40,000) |
The table below contains the quarterly cost and calculated amounts for Group Asset A.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | 60,000 | 7,500 | 7,500 |
| Q2-2000 | 60,000 | 7,500 | 15,000 |
| Q3-2000 | 60,000 | 7,500 | 22,500 |
| Q4-2000 | 60,000 | 7,500 | 30,000 |
| Q1-2001 | 20,000 | 1,250 | 16,250 |
| Q2-2001 | 20,000 | 1,250 | 17,500 |
| Q3-2001 | 20,000 | 1,250 | 18,750 |
| Q4-2001 | 20,000 | 1,250 | 20,000 |
The table below contains the quarterly cost and calculated amounts for Group Asset 2.
| Calendar Period | Cost | Depreciation | Accumulated Depreciation |
|---|---|---|---|
| Q1-2000 | 40,000 | - | - |
| Q2-2000 | 40,000 | - | - |
| Q3-2000 | 40,000 | - | 0 |
| Q4-2000 | 40,000 | - | 0 |
| Q1-2001 | 40,000 | 6,250 | 21,250 |
| Q2-2001 | 40,000 | 6,250 | 27,500 |
| Q3-2001 | 40,000 | 6,250 | 33,750 |
| Q4-2001 | 40,000 | 6,250 | 40,000 |
In Q1-2001, depreciation is calculated as follows:
Group Asset A = (New Cost - Recalculated Accumulated Depreciation) / Remaining Life = (60,000 - 40,000 - 30,000 + 15,000) / 4 = 1,250
Member Asset 2 = (40,000 - 15,000) / 4 = 6,250
The system creates journal entries in Q1-2001 as follows:
Group Reclassification:
| Account Description | Debit | Credit |
|---|---|---|
| Group A Accumulated Depreciation | 15,000 | |
| Asset 2 Accumulated Depreciation | 15,000 |
Periodic Depreciation:
| Account Description | Debit | Credit |
|---|---|---|
| Group A Depreciation Expense | 1,250 | |
| Group A Accumulated Depreciation | 1,250 | |
| Asset 2 Depreciation Expense | 6,250 | |
| Asset 2 Accumulated Depreciation | 6,250 |
You can use retirement rules to control how member asset retirement gain and loss is calculated. The retirement rules are set up for the group asset, and apply to all of the member assets assigned to the group asset. The group asset retirement rules cannot be changed after a member asset is assigned to the group asset.
Retirement transactions are performed at the member asset level only. When you retire a member asset, the member asset will inherit the retirement rules from the group asset. The two group asset retirement rule types include the following:
Do Not Recognize Gain and Loss
Recognize Gain and Loss at the time of retiring a member asset
You can only retire a member asset in the current period, and you cannot perform a prior period retirement of a member asset. The member asset retirement is based on the retirement date entered, and the retirement prorate date must be in the current period. If you supply a retirement prorate convention, it is ignored and the current period is always taken as the period of retirement.
When you retire a member asset using the Do Not Recognize Gain And Loss option, the gain and loss are not recognized at the time of the retirement. This type of retirement treatment is available for member assets only, and is not available for individual asset retirement.
For member asset retirements, the proceeds of sales for the retiring asset is added to the group accumulated depreciation, and the cost of removal is deducted from the group asset accumulated depreciation balance. The retired cost of the member asset is subtracted from the group accumulated depreciation balance. Also, the cost of the member asset is retired and deducted from the group asset cost, and the gain and loss are not recognized.
When you complete a member asset retirement using the Do Not recognize Gain and Loss retirement rule, Oracle Assets completes the retirement by automatically completing the following steps:
The retirement will result in the following system generated journal entries:
| Account Description | Debit | Credit |
|---|---|---|
| Book Level Proceeds of Sale (Proceeds) | XX | |
| Group Accumulated Depreciation (Proceeds) | XX | |
| Group Accumulated Depreciation (Retired Asset Cost) | XX | |
| Member Asset Cost (Retired Asset Cost) | XX | |
| Group Accumulated Depreciation (Cost of Removal) | XX | |
| Book Level Cost of Removal (Cost of Removal) | XX |
The gain and loss is not recognized.
The retiring member asset salvage value will be subtracted from the group asset salvage value if the Use Sum of Member Asset option is enabled. Otherwise, the group asset salvage value will be recalculated using the new group asset cost and group salvage value percentage.
When you retire a member asset, the recognize gain and loss treatment is defaulted from the group asset retirement rules setup.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (Cost = 10,000; DPIS = FY2000) Asset 2 (Cost = 20,000; DPIS = FY2000) |
| Depreciation Method: | Flat Rate with NBV Basis Depreciation Basis Rule: Transaction Period Basis |
| Depreciation Rate: | 20% |
| Depreciation Calendar: | Yearly |
| Retirement Setup: | Recognize Gain and Loss = Do Not Recognize Recapture Excess Reserve = No Limit Proceeds to Cost = No Terminal Gain and Loss = Recognize Immediately |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Retire Date: | Retiring Asset 1 in FY2002 |
| Cost Retired: | 10,000 |
| Proceeds of Sale: | 6,000 |
| Cost of Removal: | 1,000 |
The table below contains cost and calculated amounts for the group and member assets.
| FY-2000 | FY-2001 | FY-2002 | FY-2003 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | - | - |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 20,000 | 20,000 |
| Group A Depreciation | 6,000 | 4,800 | 2,840 | 2,272 |
| Group A Accumulated Depreciation | 6,000 | 10,000 | 8,640 | 10,912 |
| Group A NBV | 24,000 | 19,200 | 11,360 | 9,088 |
FY 2002 Depreciable NBV Basis = Recoverable Cost - Accumulated Depreciation before Depreciation = 20,000 - (10,800 + 6,000 - 10,000 - 1,000) = 14,200
FY 2002 Depreciation = 14,200 * 20% = 2,840
FY 2002 Accumulated Depreciation = FY2001 accumulated depreciation + proceeds - cost retired - cost of removal + FY2002 depreciation
= 10,800 + 6,000 - 10,000 - 1,000 + 2,840 = 8,640
The system creates the following retirement journal entries:
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | 6,000 | |
| Group Accumulated Depreciation | 6,000 | |
| Group Accumulated Depreciation | 10,000 | |
| Asset 1 Cost | 10,000 | |
| Group Accumulated Depreciation | 1,000 | |
| Cost of Removal | 1,000 |
If the balancing segment value of the retired member asset is different than the balancing segment value of the group asset, the system creates journal entry balancing segment values to balance the journal entry batch posted to General Ledger. The journal entries created include the following:
| Account Description | Debit | Credit |
|---|---|---|
| Company 01 Proceeds of Sale | 6,000 | |
| Company 01 Group Accumulated Depreciation | 6,000 |
| Account Description | Debit | Credit |
|---|---|---|
| Company 01 Group Accumulated Depreciation | 10,000 | |
| Company 02 Asset 1 Cost | 10,000 |
| Account Description | Debit | Credit |
|---|---|---|
| Company 01 Group Accumulated Depreciation | 1,000 | |
| Company 01 Cost of Removal | 1,000 |
| Account Description | Debit | Credit |
|---|---|---|
| Company 02 Intercompany AR | 10,000 | |
| Company 01 Intercompany AP | 10,000 |
When you select the Limit Net Proceeds to Cost option in the group asset Retirement tabbed region, all the member assets are subject to the group asset retirement rule. The Limit Proceeds to Cost option is available only if the Recognize Gain and Loss value is Do Not Recognize.
When the Limit Net Proceeds to Cost option is enabled, the member asset net proceeds amount is limited to the retiring member recoverable cost. The net proceeds (Proceeds of Sale _ Cost of Removal) from the disposition are added to the group asset accumulated depreciation balance until it is equal to the recoverable cost of the retiring member asset. Any additional amounts are recognized as a gain. The gain is posted to the NBV Retired Gain account.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (Cost = 10,000; DPIS = FY2000) Asset 2 (Cost = 20,000; DPIS = FY2000) |
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 20% |
| Depreciation Calendar: | Yearly |
| Retirement setup: | Recognize Gain and Loss = Do Not Recognize Recapture Excess Reserve = No Limit Proceeds to Cost = Yes Terminal Gain and Loss = Recognize Immediately |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Retire Date: | Retiring Asset 1 in FY2002 |
| Cost Retired: | 10,000 |
| Gain / Loss recognition: | Do Not Recognize |
| Proceeds of Sale: | 30,000 |
| Cost of Removal: | 5,000 |
The table below contains cost and calculated amounts for the group and member assets.
| FY-2000 | FY-2001 | FY-2002 | FY-2003 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | - | - |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 20,000 | 20,000 |
| Group A Depreciation | 6,000 | 6,000 | 4,000 | 4,000 |
| Group A Accumulated Depreciation | 6,000 | 12,000 | 16,000 | 20,000 |
FY 2002 Depreciation = 20,000 * 20% = 4,000
FY 2002 Accumulated Depreciation = 12,000 - 10,000 +10,000 + 4,000 = 16,000
The system creates the following retirement journal entries:
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | 30,000 | |
| Cost of Removal | 5,000 | |
| Group Accumulated Depreciation | 10,000 | |
| NBV Retired Gain | 15,000 | |
| Group Accumulated Depreciation | 10,000 | |
| Asset 1 Cost | 10,000 |
If the Recapture Excess Reserve option is selected on the group asset Retirement tabbed region, all the member assets are subject to the retirement rules selected for the group asset. The Recapture Excess Reserve option allows you to indicate if the excess of the group asset accumulated depreciation over its recoverable cost should be recaptured and recognized as a gain.
If the Recapture Excess Reserve option is selected, the proceeds from retirement can only be added to the group accumulated depreciation balance until it is equal to the group asset recoverable cost (Cost - Salvage Value); any additional amounts are recognized as a gain. The gain will be posted to the NBV Retired Gain account specified in the Book Controls window.
Note: The Recapture Excess Reserve option is only available if the Over Depreciation field is set to Do Not Allow.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (Cost = 10,000; DPIS = FY2000) Asset 2 (Cost = 20,000; DPIS = FY2000) |
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 20% |
| Depreciation Calendar: | Yearly |
| Retirement Setup: | Recognize Gain and Loss = Do Not Recognize Recapture Excess Reserve = Yes Limit Proceeds to Cost = No Terminal Gain and Loss = Recognize Immediately |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Retire Date: | Retiring Asset 1 in FY2002 |
| Cost Retired: | 10,000 |
| Gain / Loss recognition: | Do Not Recognize |
| Proceeds of Sale: | 30,000 |
| Cost of Removal: | 5,000 |
The table below contains cost and calculated amounts for the group and member assets.
| FY-2000 | FY-2001 | FY-2002 | |
|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | - |
| Asset 2 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 20,000 |
| Group A Depreciation | 6,000 | 6,000 | 0 |
| Group A Accumulated Depreciation | 6,000 | 12,000 | 20,000 |
FY 2002 Group A Accumulated Depreciation Before Recapture = 12,000 + 30,000 - 10,000 - 5,000 = 27,000
FY 2002 Group A NBV before Recapture = Group Cost - Group Accumulated Depreciation = 20,000 - 27,000 = <7,000>
Recapture = 7,000
Group A Accumulated Depreciation after Recapture = <7,000> + 7,000 = 0
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | 30,000 | |
| Group Accumulated Depreciation | 30,000 | |
| Group Accumulated Depreciation | 10,000 | |
| Asset Cost 1 | 10,000 | |
| Group Accumulated Depreciation | 5,000 | |
| Cost of Removal | 5,000 |
The system creates journal entries for retirement as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Group Accumulated Depreciation | 7,000 | |
| NBV Retired Gain | 7,000 |
When you use the Recognize Gain and Loss Immediately When Retired Option, the gain and loss are recognized when the member asset is retired, and the cost and accumulated depreciation of the retiring member asset is removed from the group asset. The accumulated depreciation of the retiring member asset must be determined in order to calculate the gain or loss recognized. Included below are the major steps involved in immediately recognizing gains or losses for member asset retirements:
To recognize a loss, the system creates the following journal entries:
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | (Proceeds of Sale) | |
| Group Accumulated Depreciation | (Retiring Asset Accumulated Depreciation) | |
| NBV Retired Loss | (Loss) | |
| Asset Cost | Retiring Asset Cost) | |
| Cost of Removal | (Cost of Removal) |
To recognize a gain, the system creates the following journal entries:
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | (Proceeds of Sale) | |
| Group Accumulated Depreciation | (Retiring Asset Accumulated Depreciation) | |
| Asset Cost | Retiring Asset Cost) | |
| Cost of Removal | (Cost of Removal) | |
| NBV Retired Loss | (Gain) |
The cost, salvage value and accumulated depreciation of the retired member asset are removed from the group asset.
The gain and loss are recognized when the member asset is retired.
The system calculates accumulated depreciation for the retiring member asset as follows:
Retiring Member Asset Accumulated Depreciation = Member Asset Cost /(Group Asset Cost * Group Asset Accumulated Depreciation)
Optionally, you can enter the accumulated depreciation retired for the retired member asset by using the asset Retirement window. The Retiring Reserve Amount field is enabled only if the Recognize Gain and Loss Immediately option is enabled. The accumulated depreciation amount you enter is used to calculate gain and loss on the retiring member asset.
The retiring accumulated depreciation amount is restricted to values between zero and the lesser of the following:
The recoverable cost for the retiring member.
The accumulated depreciation balance of the group asset, if member asset tracking is not enabled.
However, if member asset tracking is enabled, the amount is restricted to values between zero and the member asset accumulated depreciation.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (Cost = 10,000; DPIS = FY2000) Asset 2 (Cost = 20,000; DPIS = FY2000) |
| Depreciation Method: | Flat Rate of with NBV Basis Depreciable Basis Rule: Use Transaction Period Basis |
| Depreciation Rate: | 20% |
| Depreciation Calendar: | Yearly |
| Retirement Setup: | Recognize Gain and Loss = Immediately When Retired Recapture Excess Reserve = No Limit Proceeds to Cost = No Terminal Gain and Loss = Recognize Immediately |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Retire Date: | Retiring Asset 1 in FY2002 |
| Cost Retired: | 10,000 |
| Proceeds of Sale: | 6,000 |
| Cost of Removal: | 1,000 |
| Retiring Reserve Amount: | Null |
The table below contains cost and calculated amounts for the group and member assets.
| FY-2000 | FY-2001 | FY-2002 | FY-2003 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | - | - |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 20,000 | 20,000 |
| Group A Depreciation | 6,000 | 4,800 | 2,560 | 3,072 |
| Group A Accumulated Depreciation | 6,000 | 10,800 | 9,760 | 7,712 |
| Group A NBV | 24,000 | 19,200 | 10,240 | 12,288 |
Asset 1 Accumulated Depreciation at FY 2001 = 10,000 / 30,000 * 10,800 = 3,600
In FY2002, Group A is calculated as follows:
Depreciable Basis in FY 2002 = 20,000 - (10,800 - 3,600) = 12,800
Depreciation = 12,800 * 20% = 2,560
Accumulated Depreciation = FY2001 Accumulated Depreciation - Asset 1 Accumulated Depreciation + FY2002 Depreciation = 10,800 - 3,600 + 2,560 = 9,760
The system creates journal entries for retiring Asset 1 as follows:
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | 6,000 | |
| Group A Accumulated Depreciation | 3,600 | |
| NBV Retired Loss | 1,400 | |
| Asset 1 Cost | 10,000 | |
| Cost of Removal | 1,000 |
If the balancing segment value of the retired member asset is different than the balancing segment value of the group asset, the system creates journal entry balancing segment values to balance the journal entry batch posted to General Ledger. The journal entries created include the following:
| Account Description | Debit | Credit |
|---|---|---|
| Company 01 Proceeds of Sale | 6,000 | |
| Company 01 Group A Accumulated Depreciation | 3,600 | |
| Company 01 NBV Retired Loss | 1,400 | |
| Company 02 Asset 1 Cost | 10,000 | |
| Company 01 Cost of Removal | 1,000 | |
| Company 02 Intercompany AR | 10,000 | |
| Company 01 Intercompany AP | 10,000 |
You can optionally enter a retiring accumulated depreciation amount for the retiring member asset. This option is always treated as a current period retirement. The Retiring Reserve Amount field is available only if the Recognize Gain and Loss Immediately option is selected.
The accumulated depreciation amount you enter will be used to calculate the gain and loss for the retiring member asset. The entered retiring reserve amount is restricted to values ranging from zero to the adjusted cost of the retiring member asset.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 (Cost = 10,000; DPIS = FY2000) Asset 2 (Cost = 20,000; DPIS = FY2000) |
| Depreciation Method: | Flat Rate with NBV Basis Depreciable Basis Rule: Use Transaction Period Basis |
| Depreciation Rate: | 20% |
| Depreciation Calendar: | Yearly |
| Retirement Setup: | Recognize Gain and Loss = Immediately When Retired Recapture Excess Reserve = No Limit Proceeds to Cost = No Terminal Gain and Loss = Recognize Immediately |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Retire Date: | Retiring Asset 1 in FY2002 |
| Cost Retired: | 10,000 |
| Proceeds of Sale: | 6,000 |
| Cost of Removal: | 1,000 |
| Retiring Reserve Amount: | 8,000 |
The table below contains cost and calculated amounts for the group and member assets:
| FY-2000 | FY-2001 | FY-2002 | FY-2003 | |
|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | - | - |
| Asset 2 | 20,000 | 20,000 | 20,000 | 20,000 |
| Group A Cost | 30,000 | 30,000 | 20,000 | 20,000 |
| Group A Depreciation | 6,000 | 4,800 | 3,440 | 3,072 |
| Group A Accumulated Depreciation | 6,000 | 10,800 | 6,240 | 7,712 |
| Group A NBV | 24,000 | 19,200 | 13,760 | 12,288 |
Group A Depreciable Basis in FY 2002 = 20,000 - (10,800 - 8,000) = 17,200
Depreciation = 17,200 * 20% = 3,440
Accumulated Depreciation = FY2001 Accumulated Depreciation - Enter Accumulated Depreciation for Asset 1 + FY2002 Depreciation = 10,800 - 8,000 + 3,440 = 6,240
The system creates journal entries for the retiring Asset 1:
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | 6,000 | |
| Group A Accumulated Depreciation | 8,000 | |
| Asset Cost 1 | 10,000 | |
| Cost of Removal | 1,000 | |
| NBV Retired Gain | 3,000 |
When the member asset being retired or transferred out is the last member asset in the group asset, and no additional asset will be added to the group asset, the remaining accumulated depreciation balance in the group asset is treated as a terminal gain or loss. Terminal gain and loss can be recognized only when the group asset cost becomes zero, after the last member asset in the group asset has been retired. The Recognition of Terminal Gain and Loss option is set up in the group asset Retirement tabbed region.
The three methods available to recognize terminal gain and loss include the following:
Recognize Immediately
Defer Recognition to End of Fiscal Year
Do Not Recognize
When the Recognize Immediately method is used, the terminal gain and loss is recognized immediately in the period it occurs. The net book value of the group asset becomes zero upon recognition of terminal gain and loss.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 |
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 10% |
| Depreciation Calendar: | Quarterly |
| Retirement Setup: | Recognize Gain and Loss = Do Not Recognize Recapture Excess Reserve = No Limit Proceeds to Cost = No Terminal Gain and Loss = Recognize Immediately |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Retire Date: | Retiring Asset 2 in Q2-01 |
| Cost Retired: | 10,000 |
| Gain and Loss Recognition: | Do Not Recognize |
| Terminal Gain and Loss: | Recognize Immediately |
| Proceeds of Sale: | 8,000 |
| Cost of Removal: | 5,000 |
The table below contains cost and calculated amounts for the group and member assets.
| Q4-00 | Q1-01 | Q2-01 | Q3-01 | Q4-01 | |
|---|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 0 | - | - |
| Group A Cost | 10,000 | 10,000 | 0 | 0 | 0 |
| Group Depreciation | 250 | 250 | 0 | 0 | 0 |
| Group Accumulated Depreciation | 6,000 | 6,250 | 0 | 0 | 0 |
Group Accumulated Depreciation before Terminal Gain and Loss = 6,250 + 8,000 - 10,000 - 5,000 = <750>
Terminal Loss = 750
The system creates the following journal entries in Q2-01:
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | 8,000 | |
| Group Accumulated Depreciation | 8,000 | |
| Group Accumulated Depreciation | 10,000 | |
| Asset Cost 1 | 10,000 | |
| Group Accumulated Depreciation | 5,000 | |
| Cost of Removal | 5,000 |
| Account Description | Debit | Credit |
|---|---|---|
| NBV Retired Gain | 750 | |
| Group Accumulated Depreciation | 750 |
When you select the Defer Recognition to End of Fiscal Year option, the terminal gain and loss is recognized in the last period of the current fiscal year. The system will store the terminal gain or loss amount with a pending status until it is recognized. If a member asset is added to the group asset before the end of the current fiscal year, which results in a non-zero group asset cost, the terminal gain or loss is no longer valid, and the terminal gain and loss is not recognized.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 |
| Depreciation Method: | Flat Rate with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 10% |
| Depreciation Calendar: | Quarterly |
| Retirement Setup: | Recognize Gain and Loss = Do Not Recognize Recapture Excess Reserve = No Limit Proceeds to Cost = No Terminal Gain and Loss = Defer Recognition to End of Fiscal Year |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Retire Date: | Retiring Asset 1 in Q2-01 |
| Cost Retired: | 10,000 |
| Gain and Loss Recognition: | Do Not Recognize |
| Terminal Gain and Loss: | Defer Recognition to End of Fiscal Year |
| Proceeds of Sale: | 18,000 |
| Cost of Removal: | 5,000 |
The table below contains cost and calculated amounts for the group and member assets.
| Q4-00 | Q1-01 | Q2-01 | Q3-01 | Q4-01 | |
|---|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 0 | - | - |
| Group A Cost | 10,000 | 10,000 | 0 | 0 | 0 |
| Group Depreciation | 250 | 250 | 0 | 0 | 0 |
| Group Accumulated Depreciation | 6,000 | 6,250 | 9,250 | 9,250 | - |
Group Accumulated Depreciation before Terminal Gain / Loss = 6,250 + 18,000 - 10,000 - 5,000 = 9,250
Terminal Gain = 9,250
The system creates the following journal entries:
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | 18,000 | |
| Group Accumulated Depreciation | 18,000 | |
| Group Accumulated Depreciation | 10,000 | |
| Asset Cost 1 | 10,000 | |
| Group Accumulated Depreciation | 5,000 | |
| Cost of Removal | 5,000 |
| Account Description | Debit | Credit |
|---|---|---|
| NBV Retired Gain | 9,250 | |
| Group Accumulated Depreciation | 9,250 |
Under this method, the terminal gain and loss will not be recognized, and the accumulated depreciation balance will remain in the group asset.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 |
| Depreciation Method: | Flat Rate of with Cost Basis Depreciable Basis Rule: Use Recoverable Cost |
| Depreciation Rate: | 10% |
| Depreciation Calendar: | Quarterly |
| Retirement Setup: | Recognize Gain and Loss = Do Not Recognize Recapture Excess Reserve = No Limit Proceeds to Cost = No Terminal Gain and Loss = Do Not Recognize |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Retire Date: | Retiring Asset 1 in Q2-01 |
| Cost Retired: | 10,000 |
| Gain / Loss recognition: | Do Not Recognize |
| Terminal Gain / Loss: | Do Not Recognize |
| Proceeds of Sale: | 18,000 |
| Cost of Removal: | 5,000 |
The table below contains cost and calculated amounts for the group and member assets.
| Q4-00 | Q1-01 | Q2-01 | Q3-01 | Q4-01 | |
|---|---|---|---|---|---|
| Asset 1 | 10,000 | 10,000 | 0 | - | - |
| Group A Cost | 10,000 | 10,000 | 0 | 0 | 0 |
| Group Depreciation | 250 | 250 | 0 | 0 | 0 |
| Group Accumulated Depreciation | 6,000 | 6,250 | 9,250 | 9,250 | 9,250 |
Group Accumulated Depreciation Before Terminal Gain and Loss = 6,250 + 18,000 - 10,000 - 5,000 = 9,250
Terminal Gain = 9,250
The system creates the following journal entries in Q2-01:
| Account Description | Debit | Credit |
|---|---|---|
| Proceeds of Sale | 18,000 | |
| Group Accumulated Depreciation | 18,000 | |
| Group Accumulated Depreciation | 10,000 | |
| Asset Cost 1 | 10,000 | |
| Group Accumulated Depreciation | 5,000 | |
| Cost of Removal | 5,000 |
The Member Asset Tracking feature allows you to define how depreciation is calculated and allocated for the group and member assets. You can define the options for member asset tracking when you add a group asset to Oracle Assets.
There are two ways to derive member asset depreciation expense, and include the following:
The group asset depreciation calculated is allocated to each member asset based on the ratio of the member asset depreciable basis to the total depreciable basis of all member assets.
Depreciation is calculated for each member asset using either the group asset or the member asset depreciation method.
Member asset tracking enables the tracking and storing of member asset amounts, and makes the member asset amounts available for reporting.
Note: Journal entries are made using the group asset level amounts only.
In addition to allocating depreciation expense, the Member Asset Tracking feature allocates other financial amounts to the member assets. Two examples of these transaction allocations include the following:
The member asset's accumulated depreciation will be transferred when you perform a group reclassification by changing the member asset's group assignment.
When you perform a member asset retirement, and the retirement option is Recognize Gain and Loss Immediately, Oracle Assets will retire the accumulated depreciation stored at the member asset level.
Note: If you have set up the member asset tracking option for a group asset, you cannot enter a retirement adjustment directly to the group asset or transfer accumulated depreciation to or from the group asset.
The member asset accumulated depreciation balance is stored and tracked in addition to the group accumulated depreciation balance.
There are two types of tracking methods available for member assets, Descriptions of both methods are included as follows:
Depreciation is calculated at the group level only, and the amount is allocated among the member assets in proportion to the depreciable basis of each member asset.
Calculate Member Asset Amount: Depreciation is computed for each member asset using either the group asset or member asset depreciation method. Optionally, the total member assets depreciation is summed and used as the depreciation for the group asset. If the member asset depreciation is not totaled and used as the depreciation for the group asset, the group asset depreciation is calculated using the group asset depreciation method only.
By setting up the member asset tracking rules, Oracle Assets can allocate the calculated group depreciation expense to its member assets or calculate the member asset depreciation expense separately. The depreciation calculated may be stored and tracked at both the member asset and the group asset levels. Only the group asset depreciation amount will be posted to General Ledger. However, when the tracking method is Calculate Member Asset Amount and the Sum Member Asset Depreciation to Group option is checked, the depreciation amount is posted from the member assets.
To enable member asset tracking, you must select the tracking method in the Member Asset tabbed region on the Asset Workbench when you add a group asset.
If you need to track member level depreciation amounts, you should select either Allocate Group Amount or Calculate Member Asset Amount as the tracking method option. If you do not select either of these options, member asset tracking is not enabled.
Note: You cannot update the tracking method options of a group asset after the first member asset is assigned.
When the tracking method is Allocate Group Amount, you can select the option Allocate to Fully Retired or Reserved Assets.
Allocate to Fully Retired or Reserved Assets: When you select this option, , the group asset depreciation amount is allocated to all the member assets, including the fully retired and reserved member assets.
If you do not select the Allocate to Fully Retired or Reserved Assets option, the group asset depreciation amount is not allocated to the fully retired and fully reserved member assets. Next, the system determines if the member asset will be fully reserved after the allocated amount is added. If the allocated amount will result in the member asset becoming fully reserved, the excess amount is subtracted from the group asset depreciation amount, or the excess amount is reallocated to the other member assets. The reallocation of excess amount to the other member assets is controlled be the following options:
Distribute Excess: The excess amount is distributed to the other member assets that are not fully reserved.
Reduce Excess: The excess amount is subtracted from the group asset depreciation amount.
Note: Override the Member Level Amount: You can override the allocated member asset depreciation amounts by using the Manual Override feature. However, you cannot override both the group and member asset depreciation amounts. If you override the member asset depreciation amounts, the system will replace the group asset depreciation amount with the sum of all the member asset depreciation amounts.
The following formula is used to allocate the group amount to the member assets.
Allocated Amount = Group Depreciation * Depreciable Basis of all Member Assets / Depreciable Basis of Group Asset
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 Asset 3 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with NBV Basis Depreciable Basis Rule: Use Transaction Period Basis |
| Depreciation Rate: | 20% |
| Group DPIS/Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Tracking Method: | Allocate Group Amounts |
| Allocate to Fully Retired and Reserved Assets: | No |
| Reduce Excess: | Yes |
The table below contains cost and calculated amounts for the group and member assets.
| Asset | Asset Cost | Accumulated Depreciation | NBV Depreciable Basis | Rate |
|---|---|---|---|---|
| Group Asset | 35,000 | 7,000 | 28,000 | 20% |
| Asset 1 | 20,000 | 4,000 | 16,000 | - |
| Asset 2 | 10,000 | 2,000 | 8,000 | - |
| Asset 3 | 5,000 | 1,000 | 4,000 | - |
Group assets are composed of the three member assets listed below. The calendar is Quarterly.
Group Depreciation (This is calculated in the Depreciation Engine.)
Group Depreciation = 28,000 * 20% * 1/4 = 1,400.
Calculate Member Asset Depreciable Basis
Group Depreciable Basis = 28,000
Asset 1 = 16,000
Asset 2 = 8,000
Asset 3 = 4,000
Allocate Amount
Asset 1 Member Asset = 1,400 * 16,000 / 28,000 = 800
Asset 2 Member Asset = 1,400 * 8,000 / 28,000 = 400
Asset 3 Member Asset = 1,400 - (800 + 400) = 200
The table below contains the cost and calculated amounts for the group and member assets after the calculation and allocation of group depreciation to the member assets.
| Asset | Asset Cost | Accumulated Depreciation | NBV Depreciable Basis | Rate |
|---|---|---|---|---|
| Group Asset | 35,000 | 8,400 | 28,000 | 20% |
| Asset 1 | 20,000 | 4,800 | 16,000 | - |
| Asset 2 | 10,000 | 2,400 | 8,000 | - |
| Asset 3 | 5,000 | 1,200 | 4,000 | - |
When you use the Calculate Member Asset Amount tracking method, depreciation is calculated for each member asset using either the group or the member asset's deprecation method. The sum of the member depreciation may not equal to the group asset depreciation. However, you may select to replace the group asset depreciation with the sum of the member depreciation.
You may select to use the group asset or the member asset's depreciation method to calculate the member asset depreciation:
Group Method: The depreciation method used to calculate the member level depreciation amounts are populated from the definition of the group asset.
Member Method: The depreciation method used to calculate the member level depreciation amounts are populated from each definition of the members.
Sum Member Asset Depreciation to Group: The system will replace the group asset depreciation amount with the sum of all the member level depreciation amounts. If you do not select this option, the group asset depreciation amount is calculated using the depreciation method of the group asset, which may result in the total of the member asset depreciation amounts not equalling the group asset depreciation amount.
Note: Override Member Level Amount: You can override the member level amount using Manual Override. When the Sum Up option is selected, you cannot specify the override amount for the group asset.
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Group Asset: | Group A |
| Member Assets: | Asset 1 Asset 2 Asset 3 |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Depreciation Method: | Flat Rate with NBV Basis Depreciable Basis Rule: Use Transaction Period Basis |
| Depreciation Rate: | 20% |
| Group DPIS/Prorate Date: | 01-Jan-2000 |
| Depreciation Calendar: | Quarterly |
The following table contains asset setup information used in this example.
| Asset Setup Item | Asset Setup Information |
|---|---|
| Tracking Method: | Calculate Member Asset Amount |
| Depreciation Method all Members: | Flat Rate with NBV Basis Depreciable Basis Rule: Use Transaction Period Basis |
| Depreciation Rate: | Asset 1 20% Asset 2 30% Asset 3 15% |
| Depreciate By: | Member Method |
| Sum Member Asset Depreciation to Group: | No |
The table below contains cost and calculated amounts for the group and member assets.
| Asset | Asset Cost | Depreciable Basis | Accumulated Depreciation | Rate |
|---|---|---|---|---|
| Group Asset | 35,000 | 28,000 | 7,000 | 20% |
| Asset 1 | 20,000 | 18,000 | 2,000 | 10% |
| Asset 2 | 10,000 | 7,000 | 3,000 | 30% |
| Asset 2 | 5,000 | 4,250 | 750 | 15% |
Group Depreciation Amount = 28,000 * 20% * 1/4 = 1,400
When you use this tracking method, the group depreciation amount is calculated using the depreciation method of the group asset. The depreciation expense amount of each member asset is calculated individually using the depreciation method of each member asset.
Calculate the depreciation expense amounts of the member assets
Asset 1: Depreciation = 18,000 * 10% * 1/4 = 450
Asset 2; Depreciation = 7,000 * 30% * 1/4 = 525
Asset 3; Depreciation = 4,250 * 15% * 1/4 = 159
The table below contains the cost, calculated, and allocated amounts for the group and member assets.
| Asset | Asset Cost | Depreciation Expense | Accumulated Depreciation | Rate |
|---|---|---|---|---|
| Group Asset | 35,000 | 1,400 | 8,400 | 20% |
| Asset 1 | 20,000 | 450 | 2,450 | 10% |
| Asset 2 | 10,000 | 525 | 3,525 | 30% |
| Asset 2 | 5,000 | 159 | 909 | 15% |
The following RXi enabled reports support group depreciation reporting. If you are using group depreciation, you must use these reports to address your reporting requirements. Group and member asset amounts are available on most of these reports.
The Group Asset report and other balance reports require the Create Accounting process to be run successfully in draft or final mode.
The other exceptions are noted on the reports included below:
Group Asset Report
Asset Cost Balance Report*
Accumulated Depreciation Balance Report***
Reserve Ledger Report***
Retirements Report**
CIP Cost Balance Report*
Additions by Period Report*
Mass Additions Report
Cost Adjustments Report*
Transfers Report
What-if Depreciation Analysis
Cost Clearing Reconciliation Report*
Mass Reclassification Preview Report
Mass Reclassification Review Report
Mass Change Preview Report
Mass Change Review Report
*The member cost amounts are used in this report. Group asset cost is not displayed to avoid potential user double counting of asset costs.
**This report only displays retired member assets. Group assets do not appear on this report since group asset cannot be retired.
***This report only displays group asset accumulated depreciation amounts. Member asset amounts do not appear on this report since only group asset amounts are maintained and posted to General Ledger. The Reserve Ledger report and Accumulated Depreciation Balance report have a drilldown parameter which, when set, display member asset information.
Revaluation: You cannot perform a revaluation to group or member assets. If a revaluation has been performed to a standalone asset, the asset cannot be assigned to a group asset.
Bonus Depreciation: You cannot use Bonus Depreciation with group or member assets.
Tax Reserve Adjustment: Tax reserve adjustments are not currently supported for group or member assets. You cannot perform a tax reserve adjustment to a group or member asset. Also, if a tax reserve adjustment has been made to a standalone asset, the asset cannot be assigned to a group asset.
Group retirement adjustment and group reserve transfer are not supported when tracking is enabled.
Mass Depreciation Adjustment: Mass depreciation adjustments are not currently supported for group or member assets. You cannot perform a mass depreciation adjustment on a group or member asset. If a mass depreciation adjustment has been made to a standalone asset, the asset cannot be assigned to a group asset.
Standard Units of Production Depreciation Method: The Unit of Production depreciation method is not currently supported for group or member assets. You cannot assign a unit of production type depreciation method to a group or member asset. Note that Energy Units of Production Depreciation Method is supported for Group and member assets.
Expense Adjustment: Expense adjustment transactions are not currently allowed for group or member assets.
Short Fiscal Year: Short fiscal year accounting is not currently supported for group or member assets.
Unplanned Depreciation: The Unplanned Depreciation feature is not currently supported for a member asset unless you enabled the Member Asset Tracking option for the group asset.
Depreciation Ceiling: Depreciation ceiling are not currently supported for group or member assets.
Amortize NBV over Remaining Life: In general, amortizing NBV over the remaining asset life is not currently supported for group or member assets.
Budget Book: Adding group assets to budget books is not supported.
Projection: Depreciation projections are not currently supported for group assets.
Accumulated Current Earnings: The Accumulated Current Earnings feature in Oracle Assets is not currently supported for a group or member assets.
Future Transactions: Future adjustment and capitalization are not currently supported for group assets. However, future additions, adjustments, and capitalizations are supported for member assets. Also, you can create a future group asset, but you cannot change the defaulted group asset options.
Physical Inventory: The Physical Inventory feature is not currently supported for group assets.
Note: Oracle Assets does not support bonus depreciation for any Group setup other than the Calculate Tracking method, with the Sum Member Asset Depreciation to Group option enabled.
The Mass Property feature provides the ability to treat similar assets placed into service with the same category, book, and fiscal year combination as a single asset. This single asset holds the total cost and units and is called a mass property asset.
Using the Mass Property feature can simplify tracking, reporting, analysis, and retirement of assets, since all like assets from a particular category, book, and fiscal year combination are stored as an individual asset. For some asset categories, there is no need to create and maintain an individual asset for every asset addition made. Instead, you can create one mass property asset for an asset category each fiscal year. As each new addition occurs, the costs and units are added to the previously created mass property asset. The total cost and units of the mass property asset are then more easily tracked.
Some of the benefits provided by the Mass Property feature include the following:
Ease of analysis, reporting, and downstream processing of annual additions. One asset per fiscal year is easier to identify and process than a myriad of individual assets.
Enables downstream average costing of partial unit-based retirements. Each retirement will be a fraction of the asset cost for the fiscal year in direct proportion to the number of units retired.
Mass property assets are usually created automatically via Mass Additions, but they can also be created manually by using the Asset Workbench or QuickAdditions. If you choose to create mass property assets manually, be sure follow the naming convention described below, and set the date placed in service to the first day of the fiscal year. If you do not create mass property assets manually, then the first Mass Addition for a mass property eligible category in a given fiscal year will automatically result in a mass property asset.
Prerequisites
To create a mass property asset, you must first check the Mass Property Eligible check box in the Default Depreciation Rules window for the asset category and book combination that should use the mass property feature. See: Setting Up Asset Categories
The first asset added via Mass Additions to the mass property enabled category, book, and fiscal year combination becomes the mass property asset for the combination. This mass property asset is the first asset added with a date placed in service falling within the fiscal year of the combination. Oracle Assets processes the mass property asset as follows:
The date placed in service is reset to the first day of the fiscal year. The original date placed in service (prior to resetting) is defaulted to the Amortization Start Date field, and is used to calculate the depreciation contribution of the initial mass property asset.
The Asset Description is defaulted with a standard name composed of the following:
MP + YYYY(fiscal year) + Asset Category Description
The new asset number of the mass property asset is reflected in any external systems, such as Projects, that may have pre-specified a different asset number.
When subsequent mass additions are made to the category, book, and fiscal year combination, they are treated as cost and unit adjustments to the previously created mass property asset. Since subsequent asset additions are treated as cost adjustments, the date placed in service is not tracked, but it is used as the amortization start date of the addition.
Navigate to the Asset Categories window.
Query the required category.
Query the required book.
Select the Default Rules button.
Check the Mass Property Eligible check box.
Save your work.
Using the Asset Workbench or QuickAdditons, you can create additional mass property assets for a category, book, and fiscal year combination, in spite of the fact it already contains the first mass property asset.
Manually creating additional mass property assets may be needed to accommodate reclassification of specific asset additions, or to segregate certain additions made during the fiscal year in a separate mass property asset. For example, you may need to segregate additions related to an acquisition in the middle of the fiscal year, requiring two initially distinct pools, or mass property assets, to exist in the same category and fiscal year.
Depreciation for the mass property asset is calculated by summing the depreciation of all the asset additions. The amortization start date is used to calculate depreciation of each individual asset addition. The amortization start date of each asset addition is defaulted from the original date placed in service of the individual asset addition.
Copying from a corporate book to a tax book is not impacted by the Mass Property feature. If the source book has enabled Mass Property, the target book will receive the previously aggregated assets. Alternatively, if the source book did not have Mass Property enabled for a category, copying to a target book with Mass Property enabled will not cause aggregation to occur. The only purpose of having Mass Property enabled for a category and book combination is to allow different treatment of these categories in distinct corporate books.
Oracle Assets addresses the financial and reporting requirements of the oil and gas industry through use of Energy Assets functionality. The oil and gas industry accounts and reports their asset information based on a hierarchy structure. Generally, a two level hierarchy structure is used where a field is a parent and the wells are child assets. All the asset information is captured at the lower level, which is then summarized to a higher level at which operations, queries and reporting are done. Operations include following:
Depreciation calculation
Overriding Oracle Assets-calculated depreciation
Calculating gain and loss on retirement
Transfer of costs and reserve
Impairment
Oil and gas companies use unit-of-production and life-based methods with a Net Book Value depreciable basis. The assets in a hierarchy are transferred along with its reserve to another hierarchy. When an asset is transferred, the source asset hierarchy is decreased by the transferred amount(s), and the target asset hierarchy is increased by the transferred amount(s).
Energy Assets uses the following two methods to calculate energy depreciation:
Energy Units of Production
Energy Straight-Line
Energy depreciation calculation is based on a depreciation basis defined as Net Book Value (NBV) over the net remaining reserves for the Energy Units of Production method, or the net remaining life for the Energy Straight-Line method.
Apart from the regular depreciation expenses these companies also recognize impairment expense at the parent level.
Oil and gas companies group assets together by properties, reservoirs, or fields for accumulating and depreciating capitalized costs. Oracle Energy Assets meets these requirements through an Asset Hierarchy structure.
The asset hierarchy structure is supported using the global group depreciation feature of Energy Assets, which allows you to group, depreciate, and report assets at group level. The global group depreciation supports two levels of asset hierarchies, the group asset level and the member asset level.
In the global group depreciation structure of Oracle Assets, a group is a collection of member assets. The depreciation is calculated and reported at the group level. In addition, you can choose to allocate group depreciation to member assets. There is also an option available to calculate depreciation at the member asset level and then sum up the member depreciations to the group level.
Depreciation expense and accumulated depreciation balances can be tracked for both group and member assets. Essentially, there is a parent-child implied relationship between group and its members. Based on this relationship, you can model a field-to-well type of parent-child relationship using global group depreciation.
For more information on Global Group Depreciation, see Group Depreciation.
Asset information is sent to a Mass Additions interface table from Oracle Payables, Joint Venture Accounting (JVA) and other external systems. Energy Assets automates the creation of assets from these lines based on predefined rules. The business process for auto creation of assets is as follows:
Define Hierarchy
Setup Quickcodes
Interface Mass Addition Lines
Mass Addition Process
In order to automate the asset creation process through the Prepare Mass Additions concurrent program, you need to establish a valid hierarchy relationship based on the asset ownership. The hierarchy is established through the following steps.
Define Hierarchy Segment
Define Hierarchy Structure
In Energy Assets, the Asset Key Flexfield should contain a minimum of two segments that have to be designated as the Hierarchy and Project segments. The Hierarchy Segment contains values that are used to define group and member relationships. Generally, in the oil and gas industry, the hierarchy segment value will be the report center segment value of the accounting flexfield. To map the asset key segments for hierarchy and project segments, you should define the following two QuickCodes:
ASSETKEY HIERARCHY MAPPING
ASSETKEY PROJECT MAPPING
The hierarchy segment can be entered in the asset key flexfield either manually by you, or you can define the mapping segment of the hierarchy segment using the Energy Base application through a quick code called ASSETKEY HIERARCHY SOURCE. The Prepare Mass Addition concurrent program will populate the value based on the predefined mapping.
You must define a value set to create a hierarchy structure based on which group and member will be created through the mass addition process.
To create a value set, navigate to Setup > Financials > Flexfields > Validation > Sets
Enter the group and member hierarchy segment value and description as the values of the value set. Select Enabled to enable hierarchy values, and select the Parent check box for all group hierarchy values. To define the range of child values to the group value, click Define Child Ranges.
Once all hierarchy relationships have been defined, click View Hierarchies in the Value Set window to view the defined relationships.
To enter hierarchy values, navigate to Setup > Financials > Flexfields > Validation > Values
In addition to the Quickcodes setup in prior steps, the following Quickcodes must be added to enable the Prepare Mass Addition concurrent program to auto create the assets from the mass addition table.
QuickCode: RULES TO PREPARE MASS ADDITIONS
Meaning: Rules to Prepare Mass Additions
Description: Rules to Prepare Mass Additions
Lookup Codes: CUSTOM ENERGY
QuickCode: VALUE FOR GROUP ASSET IN ASSET KEY PROJECT SEGMENT
Meaning: Value for Group Asset in Asset Key Project Segment
QuickCode: GROUP ASSET DEFINITION SEGMENT IN ASSET CATEGORY
Meaning: Group Asset Definition Segment in Asset Category
QuickCode: VALUE FOR GROUP ASSET IN ASSET CATEGORY
Meaning: Value for Group Asset in Asset Category
QuickCode: LOCATION MAPPING IN CLEARING ACCOUNT
Meaning: Location segments mapping in Asset Clearing Account
Description: You will define which segments of Asset Clearing Account (Payables CCID) will be used for location derivation.
QuickCode: LOCATION SEGMENTx MAPPING TO CLEARING ACCOUNT
Meaning: Mapping the segment x to segment x in the clearing account.
QuickCode: CATEGORY MAPPING FOR CHART OF ACCOUNTS
Meaning: Category Mapping for Chart of Accounts
To setup Quickcodes, navigate to Setup > Asset System > Quickcodes
You can interface mass addition lines from Oracle Payables or an external system. For information of interfacing mass addition lines, see Overview of the Mass Additions Process.
Energy Assets automates the preparation of mass addition lines and asset creation, through the Prepare Mass Additions concurrent program, to avoid manual intervention in the mass additions process. Upon the preparation of lines, Energy Assets either creates new assets or makes adjustments to existing assets by uniquely identifying the mass addition lines with asset key and category, and relating it to the hierarchy relationship.
The Prepare Mass Additions concurrent program performs the following tasks:
Prepare Mass Addition Lines
Create Assets
The Prepare Mass Additions concurrent program uses lookup values and the basic information provided for specific mass addition lines to create the other asset information. The process supports specific energy business rules where an asset must be uniquely identified using the Asset Key and Category combination.
The Prepare Mass Additions program processes the lines in fa_mass_additions that have a queue status of NEW or ON HOLD. The process derives the asset key and clearing account combination from the feeder system.
The category is derived by matching the cost clearing account of the line with the cost clearing account defined for different categories. There must be a one-to-one mapping for the cost clearing account and the asset category. Upon deriving the Asset Key and Category, the Prepare Mass Additions process merges the cost of all mass addition lines having same Asset Key ID and Category ID, and derives the depreciation expense account from the asset category. The location is derived from the mapped segment of the Asset Clearing Account (Payables CCID).
If the Prepare Mass Additions program cannot derive the required information, it sets the queue status to ON HOLD, and you can review and make the necessary changes to the line.
After the creation of mass addition lines, Prepare Mass Additions refers to the asset key and category of the lines, along with searching for the group asset ID.
If a group asset ID exists, Energy Assets validates the ID and determines whether any assets exist with the same asset key and category combination. When a matching asset is available, the mass addition line is marked as Cost Adjustment to that asset. If no matching asset is available, the mass addition line is marked as a new addition.
If a group asset ID does not exist, Energy Assets derives the group asset ID by first deriving the group asset key and category using QuickCode values and the hierarchy structure. Then Energy Assets checks whether any group asset exists for the derived asset key and category combination. If a valid group asset exists, the group asset ID is populated in the mass additions line.
When no group asset exists for the derived asset key and category combination, Energy Assets creates a group asset, using the information in the mass addition line.
After deriving the group asset ID, Energy Assets determines whether any asset exists with the same asset key and category combination. If a matching asset is available, the mass addition line is marked as Cost Adjustment to that asset. If no matching asset is available, the mass addition line is marked as a new addition.
Energy Assets uses the following two methods to calculate energy depreciation:
Energy Units of Production
Energy Straight-Line
This section consists of the following topics:
Energy Units Of Production Method Overview
Energy Units Of Production Method Process
Energy Units Of Production Method Conditions
The Energy Assets Units of Production depreciation method applies when oil and gas companies have producing properties, such as fields, leases, and wells. Assets are generally structured into two hierarchy levels, where a field is a group asset and the wells are member assets. As the depreciation is calculated at the group asset level, the production or estimated production for these assets is also entered at the group level.
The group asset is marked to depreciate and the depreciation is booked from the group asset level only. Though the member assets are marked not to depreciate, the group asset depreciation can be rolled down to the associated member assets based on their depreciable basis. Depreciation expenses and accumulated depreciation can be tracked for both group and member assets.
The production capacity is entered at the group asset level and can be updated in the future. Production capacity information is processed by Energy Assets for the group asset each period prior to the depreciation run.
Oil and gas companies use the units of production depreciation method based on a depreciation rate defined as Current Period Production over Net Remaining Production Capacity with a NBV depreciable basis, as shown in the following formula:
Net Book Value x (Production for the Period / Net Remaining Production Capacity) = Current Period Depreciation Expense
Net Remaining Production Capacity = Total Capacity – Production used to date
Additional Information: The NBV is equal to the asset's Cost minus Salvage Value minus Depreciation Reserve.
The Energy Units of Production business process consists of the following steps:
Define Depreciation Method
Enable the Method for Group Asset
Enter and Update Production
To define the Energy Units of Production method, navigate to Setup > Depreciation > Methods.
The following table describes defining depreciation Method details.
| Field or Check box | Description |
|---|---|
| Method | Enter a name for the method |
| Description | Enter the description of the method |
| Method Type | Production |
| Calculation Basis | NBV |
| Depreciable Basis Rule | Energy Period End Balance |
| Depreciate in Year Retired | Select this check box |
| Exclude Salvage Value | Do not select this check box |
| Straight Line Method | Do not select this check box |
To enable the units of production method for the group asset, check all the options in the Allow Group Depreciation region in the Accounting Rule tab of Book Controls window.
Before running depreciation for the period, the production for the period has to be entered at the group asset level. To enter the monthly production details of a group asset navigate to Production > Enter.
The following conditions apply to the Energy Units of Production Depreciation Method.
All transactions are current period amortizations for assets that are using the Units of Production method with NBV calculation basis; no backdating amortization date is allowed.
No depreciation will be calculated when the net remaining production capacity (the production capacity minus life-to-date production) is zero.
When depreciation is calculated at the group level, changing the Depreciation check box at the member level will not impact the group depreciation.
Member asset addition is treated as a current period amortized cost
CIP member assets can be assigned to the group asset. However, the CIP cost is not added to the group cost and will not be included in the depreciable basis.
Group retirement adjustment and group reserve transfer is not supported for the Energy Units of Production and Energy Straight-Line depreciation methods.
Reinstatement does not calculate missed depreciation expenses for the Energy Period End Balance depreciable basis rule.
This section consists of the following topics:
Energy Straight-Line Depreciation Overview
Define Energy Straight-Line Depreciation Method
Energy Straight-Line Depreciation Conditions
Oil and gas companies depreciate other assets such as pumps, office equipment, and other equipment using the Energy Straight-Line method. Oracle Assets calculates Energy Straight-Line depreciation at both the member and group levels. The formula for calculating depreciation using the Energy Straight-Line method is as follows:
Net Book Value of the Asset/ Remaining Life of the Asset = Depreciation
Additional Information: The Net Book Value is equal to the asset's Cost minus Salvage Value minus Accumulated Depreciation.
To define the Energy Straight-Line method, navigate to Setup > Depreciation > Methods.
The following table describes Energy Straight-Line Depreciation Details
| Field or Check box | Description |
|---|---|
| Method | Enter a Name for the method |
| Description | Enter the description of the method |
| Method Type | Calculated |
| Calculation Basis | Cost |
| Depreciable Basis Rule | Energy Period End Balance |
| Depreciate in Year Retired | Select this check box |
| Exclude Salvage Value | Do not select this check box |
| Straight Line Method | Select this check box |
The following conditions apply to the Energy Straight-Line Depreciation Method.
If you select Calculate Member Asset Amount and Sum Member Asset Depreciation to Group for the tracking method, you cannot perform any adjustments to the group assets.
Energy Assets enables you to enter an impairment expense on the group asset to write off asset cost as impairment incurred. You can enter an impairment expense as an unplanned depreciation for a group asset. When performing the unplanned depreciation you need to enter Type, Amount, and Expense Account. The unplanned depreciation amount is booked as a current period expense in addition to the calculated depreciation expense.
The unplanned depreciation type enables you to indicate the nature of the unplanned depreciation performed. You can use the QuickCode to pre-seed an unplanned depreciation type for Impairment.
For more information on unplanned depreciation, see Unplanned Depreciation.
Oil and gas companies use the Authority for Expenditures (AFE) application to support budgeting, approval, and tracking expenditures for their capital projects. An AFE is created for each drilling project to track and monitor the project activities, including cost estimates, project authorization, actual charges, and project status. Upon creation of an AFE, a unique number is assigned and all subsequent tracking happens based on this number.
The cost incurred during the course of a capital project is accounted and reported as Construction In Progress (CIP). At the completion of the project, these costs may either be capitalized or expensed based on the outcome of the project and in accordance with accounting policies.
Energy Assets provides an AFE Reclass process through the Post Transaction Interface concurrent program to capitalize or expense the CIP assets based on the status of the AFE.
The Energy Assets AFE Reclass process consists of the following tasks:
AFE Setup
Interface Reclass Information
AFE Reclass
You need to setup the hierarchy structure, hierarchy, and Project segment of the asset key flexfield and quick codes. For information on these setups, see Auto Create Assets.
The following accounts must be set up in the Asset Category window when defining your asset categories.
Alternate Asset Cost: When an AFE is closed as a Dry Hole or capital abandonment, the AFE reclass process will transfer all CIP assets costs to this account.
Write-off Expense: When an AFE is closed as an Expense, it is updated in the interface table as retirement. The AFE reclass process will retire the CIP assets in the book by charging the NBV retired to this account.
SLA Setups: You can setup the Account Derivation Rules (ADR) to derive the account code combinations based on the transaction types. You can setup ADRs to derive the dry hole cost and write-off expense accounts. In order to derive the Alternate Cost Account, all cost ADRs (not just the one for Capitalization) must have the following conditions:
If dryhole_flag = Y, then use alternate cost account
Else = Use standard cost account
For write-off expense accounts, you must modify the NBV Retired row to look at the retirement type code value, and conditionally use the write-off expense account instead of the standard NBV RETIRED, based on a lookup code.
The AFE application sends the reclass information to Energy Assets when an AFE is closed and is ready for capitalization. Energy Assets integrates with the AFE application through the interface table FA_TRANSACTION_INTERFACE to receive and store the reclass information.
The following table describes the FA_TRANSACTION_INTERFACE table.
| Column Name | Data Type | Size | Null | FK To Table Column |
|---|---|---|---|---|
| TRANSACTION_INTERFACE_ID | NUMBER | 15 | X | |
| TRANSACTION_DATE | DATE | |||
| TRANSACTION_TYPE_CODE | VARCHAR2 | 30 | X | |
| POSTING_STATUS | VARCHAR2 | 30 | X | |
| BOOK_TYPE_CODE | VARCHAR2 | 15 | X | FA_BOOK_CONTROLS.BOOK_TYPE_CODE |
| ASSET_KEY_PROJECT_VALUE | VARCHAR2 | 30 | X | |
| ASSET_KEY_HIERARCHY_VALUE | VARCHAR2 | 30 | X | |
| ASSET_KEY_NEW_HIERARCHY_VALUE | NUMBER | 30 | X | |
| REFERENCE_NUMBER | NUMBER | N/A | ||
| COMMENTS | VARCHAAR2 | 80 | ||
| CONCURRENT_REQUEST_ID | NUMBER | 15 | FND_CONCURRENT_REQUESTS.REQUEST_ID | |
| CREATED_BY | NUMBER | 15 | X | |
| CREATION_DATE | DATE | X | ||
| LAST_UPDATED_BY | NUMBER | 15 | X | |
| LAST_UPDATE_DATE | DATE | X | ||
| LAST_UPDATE_LOGIN | NUMBER | 15 |
The Post Transaction Interface Program performs the following two tasks:
Reclass CIP Asset
Report Center Changes
The AFE Reclass process is run at an asset book level. The process first selects the CIP assets that need to be capitalized or written off, then picks up the AFE Number from the interface table and matches it with the CIP assets in that asset book. The AFE Number is matched against the project segment value in the asset key flexfield of the asset. If a match is found, then the process will select these CIP assets for AFE reclassification.
Since the data in the interface table is not purged, the Post Transaction Interface Program runs a check on all records in the interface table every time the process is initiated.
The selected assets will be capitalized, written off, or charged to a Dry Hole account based on the status in which the AFE is closed. An AFE can be closed with one of the following statuses:
Capitalize
Dry Hole or Capital Abandonment
Expense
When the project cost is proven to be a producing property, the action status is Capitalize and the CIP asset will be capitalized. The cost is moved from CIP cost account to capitalized cost account. The asset category remains the same even after the capitalization. The CIP asset is capitalized with a date place in service in the current period. The accounting entry will be:
DR--Asset Cost Account--xxx
CR--CIP Cost Account--xxx
The Asset Cost account is set up in the Asset Cost field of the Asset Categories window.
When the project is proven to be a dry hole, it is treated as a capital abandonment and the action status will be Dry Hole. The CIP cost will still be capitalized, however the capitalized cost is booked to a different cost account, labeled as Alternate Asset Cost.
On capitalization the asset category remains the same and with the current period date placed in service. The accounting entry will be:
DR-- Alternate Asset Cost Account-- xxx
CR--CIP Cost Account--xxx
When the project cost is proven to be nonproducing, the cost has to be written off as a current period expense and the action status will be Expense. The process will retire the CIP asset in the current period. The CIP cost will be expensed to a write off expense instead of the retired gain or loss account.
When the report center populated in the interface table is different from the report center of the CIP asset, the AFE Reclass process will first capitalize the asset and then make the report center changes. The report center changes will be performed only on the selected CIP assets to be capitalized. No report center changes will occur for retiring CIP assets.
Since the report center is used in the cost center segment of the accounting flexfield as well as the hierarchy segment of the Asset Key flexfield, the AFE process will first update the assets hierarchy segment with the new report center value. After updating the asset key, the AFE process performs an asset transfer to change the cost center segment of the capitalized assets.
As the assets are grouped under a hierarchy structure, the change of the report center will require an asset reclass if the new report center belongs to a different hierarchy. The AFE process checks for the hierarchy structure of the new report center on the Hierarchy structure. If a match is found, it assigns the capitalized assets to that group asset. If the group asset does not exist, it automatically creates the group asset, and then assigns the capitalized asset to that group asset.
The following are the accounting entries which are created by this process:
| Debit or Credit | Description | Amount |
|---|---|---|
| DR | Asset Cost Account (Old Report Center) | xxx |
| CR | CIP Cost Amount | xxx |
| Debit or Credit | Description | Amount |
|---|---|---|
| DR | Asset Cost Account (New Report Center) | xxx |
| CR | Asset Cost Account (Old Report Center) | xxx |
or
| Debit or Credit | Description | Amount |
|---|---|---|
| DR | Alternate Asset Cost Account (Old Report Center) | xxx |
| CR | CIP Cost Account | xxx |
| Debit or Credit | Description | Amount |
|---|---|---|
| DR | Alternate Asset Cost Account (New Report Center) | xxx |
| CR | Alternate Asset Cost Account (Old Report Center) | xxx |