Fixed assets, constitute the durable capital base of an enterprise (traditionally the “Property, Plant and Equipment”), necessary to deliver products and services expanded to include investments in non-tangible
assets like software.
Asset management encompasses three primary activities:
Physical Upkeep: Comprises asset location, asset condition and assignment
Asset Tracking: Covers the whole gamut from controlling, leased, loaned and consigned items from acquisition to asset maintenance.
Financial Administration: Involves asset value, depreciation and taxation.
Two Types of Asset Books:
Corporate Books: Where are all assets are created or captured, accounted, Depreciated and retired as per the GAAP rules.
Tax Books: Tax books use the asset data of the corporate book but account, Depreciate and retire as per the tax rules.
Capital Assets such as building and machinery typically lose their value over time.
The loss of value during any given period is called depreciation and it is charged as anexpense in that period. The value of asset at any point in time –usually cost minusaccumulated depreciation–is called net book value.
When an asset is acquired / built, asset is assigned an initial book value, an economic life and a calculation to determine value of asset at each period during that economic life. An asset may have a residual value beyond which it will not depreciate.
At the end of its economic life, the initial cost of asset (less residual value if any), will have been expensed. The depreciated book value appears on balance sheet as an asset. The asset is taken off books when it is sold. The diff between sale price and book value at the time of the sale is gain/loss on sale.
Fixed Asset Process flow
R12 New Features – Fixed Assets
Payables to Assets Integration
Payables now has a new level of detail between Invoice Header and Invoice Distribution. The new level is Invoice Lines. At this new level, new field are available to enter details that will integrate to Assets, these fields are:
• Serial Number
• Warranty Number
• Asset Book
• Asset Category
Assets now has event accounting, meaning that every transaction is treated as a new event to the assets. The impact on assets are as follows:
• Audit trail will no longer show voided transaction types if changes occur in the month an asset was added.
• No longer forced to delete assets in the period it was added, due to the event accounting – Oracle treats the addition and retirement as two separate events, so now Oracle allows assets to be retired in the period added.
• Event accounting also allows for transferring accounting to GL multiple times in a period.
Auto Prepare Mass Additions
New APIs and Quick Codes are available to automate the Prepare Mass Additions process. There are default rules available, you can accept the defaults or choose to create custom rules. These APIs and Quick Codes will automatically process data and assign the required data attributes, such as:
Depreciation Expense Account
Asset Category – this is derived from the asset cost clearing account, as long as there is one to one relationship between the account and asset category. This process will only impact items in the ‘New’ and ‘On Hold’ queue names.
Expense Account – this is derived from the clearing account combination and overlaying the natural account segment with the value of the natural account segment of the depreciation expense defined in the asset category. If the program cannot derive an expense combination, the queue name is set to ‘On Hold’.
This should minimize the amount of manual efforts involved in the Prepare Mass Additions process. Manual updating is still required – some required fields may not be populated.
Asset Category – a one to one relationship between cost clearing account and asset category – this will expand the Chart of Accounts of many companies.
Expense Account – the expense combination is going to be derived from a Balance Sheet account. Oracle will simply overlay the natural account segment, replacing the cost clearing account leaving all other segment values alone. If there are certain requirements for P&L accounts versus Balance Sheet accounts, i.e. cost center required for P&L, this may present issues.
Manual efforts are required to perform Merging, Splitting, Add to Assets and Merge then Split functionality.
Auto Depreciation Rollback
In Release 12, you will no longer be required to run the Rollback Depreciation process in order to make corrections to assets. After running depreciation when a correction or change is required, simply choose the asset to modify. Oracle will automatically rollback depreciation for this single asset. Make your modifications and when you re-run depreciation, Oracle will re-calculate depreciation based on the modifications made to the asset.
The features to rollback depreciation and rollback journal entries that are in R11i are no longer available in R12.
Month End Close
Create Accounting process is now used in Assets – journals are created not by a period, but by events and a date. This means that one can create accounting on the 15th of a month for all transactions performed at the end of the month. This allows for clients to view accounting prior to month end for events that will greatly impact the books(i.e. mass retirements, transfers, etc.)