Understanding Group Asset Processing
PeopleSoft Asset Management is fully equipped to handle group asset processing for organizations such as utility companies or other entities that support a communal infrastructure—such as federal, state, or municipal public utilities, highways, and roads—or other infrastructure that owns, leases, or uses depreciable assets.
Group assets are treated as a single entity for the purpose of depreciation but as multiple entities for all other purposes. These entities may reside in different locations, or they may be in different stages of their service lives. Nevertheless, you consolidate and depreciate their collective cost as if it were that of a single asset.
Some items commonly tracked as group assets include telephone poles, pipelines, and wire. Some of these group assets can be identified by the Federal Energy Regulatory Commission (FERC) code (delivered with the PeopleSoft system) and depreciated according to FERC guidelines. Group assets are added without cost information. The group member assets are added with associated cost information. Asset transactions, except depreciation and accounting entries, are performed on group member assets. After performing transactions against group members and before running depreciation against the group, the Group Asset Consolidation process is run, consolidating group member cost information at the group asset level. Depreciation is then run against the group asset, and the resulting accounting entries are made.
This topic discusses:
Asset transactions.
Depreciated group assets.
Retired group members.
Strategy for asset grouping.
All transactions, except depreciation and accounting entries, are performed on the group asset's member assets. The member assets can be adjusted, transferred, recategorized, retired, reinstated, and so forth—just like any other asset. You can even transfer group member assets from one group asset to another.
The system applies asset transactions at the group member level. The resulting cost is then consolidated, and the total depreciable basis is depreciated at the group asset level.
Each group asset is associated with an average service life that is usually set by the local regulatory agency. The system uses the asset's remaining service life to calculate a group depreciation rate. The group depreciation rate is usually calculated annually and remains fixed for the entire year. The system then applies this rate to the asset's depreciable basis (the sum of the depreciable bases of its group members) to calculate depreciation expense.
Depreciation expense is booked to general ledger by applying the depreciation rate either to an average account balance for the period (using an averaging option) or to actual activity for the period.
Average service life studies provide the basis for calculating average remaining life for a group of assets. Average service life studies are performed every three or four years, depending on the length of the local regulatory agency's rate cases.
Because depreciation rates are calculated by using remaining service life at the group asset level, and depreciation also takes place at the group asset level, it is not possible to over-depreciate group members.
Flat rate depreciation methods calculate depreciation until the calendar ends. Alternatively, if you don't want to calculate depreciation until the end of the associated calendar, you can specify the number of future years for which depreciation should be calculated when you add the asset.
Note: PeopleSoft Asset Management supports only the flat rate depreciation method for group asset processing.
Note: For optimal processing performance and greater table efficiency, you should specify the number of future years for which depreciation will be calculated rather than calculating it to the end of the calendar. Use the Future Depreciation Years option to do this.
Retirements can be processed only against group members.
Because all group members of a group asset are generally depreciated as a single unit, and because the depreciation rate is based on a group average remaining life, all assets that are retired from within a group should be fully depreciated with no gain or loss.
However, not all assets that are managed by an organization are fully depreciated when they are retired. PeopleSoft Asset Management enables you to retire a group member as either fully depreciated or not fully depreciated. If not fully depreciated, gain or loss is calculated for the group member. Any accumulated depreciation is moved to the group asset.
Before you set up group asset processing, consider how you want to group the assets. Asset grouping is not standardized; however, there are key components that apply almost universally. Assets can be grouped by FERC account or subaccount at the highest level. Vintage year and location are also commonly included in a grouping strategy.
Depreciation of group assets identified by the FERC code is usually calculated and booked to the general ledger at the FERC account level by using a group asset depreciation rate. Assets are summed by vintage year within the FERC account to provide statistics to support life studies and, subsequently, to derive the group rate for the FERC account and vintage year. Grouping by vintage year is also required to support reporting of deferred taxes. Regulatory agencies require reporting of assets by location or jurisdiction. Consequently, they require grouping by location.
Other factors that you should consider in determining how to group assets include depreciation policies, tax reporting requirements, jurisdictional reporting requirements, and corporate accounting procedures. Assets grouped together should have these attributes in common.
This diagram shows an asset grouping scheme:
Asset grouping scheme
Note: All group asset processes are available for processing with multiple currency transactions enabled.