GENERAL INFORMATION

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DEPRECIATION CALENDAR
The depreciation calendar determines the number of accounting periods in your fiscal year.
PRORATE CALENDAR
The prorate calendar determines what rate Oracle Assets uses to calculate annual depreciation by
mapping each date to a prorate period, which corresponds to a set of rates in the rate table.
PERIOD CLOSE
Oracle Assets automatically closes the book's current period and opens the next when you run
the depreciation program. You cannot have more than one open period for a given depreciation
book.
YEAR-END PROCESSING
You can close the year independently in each depreciation book. The depreciation program
automatically resets year-to-date amounts on a book the first time the depreciation program is
run on that book in a fiscal year. For assets added in the first period of the year with YTD
depreciation, the YTD is NOT reset to zero on the first depreciation run. Oracle Assets
automatically creates the depreciation and prorate periods for your new year when you run
depreciation for the last period of the previous fiscal year.
SUSPEND DEPRECIATION
You can suspend depreciation by un-checking Depreciate flag in the Books form. If you suspend
depreciation of an asset when you add the asset, Oracle Assets expenses the missed depreciation
in the period you start depreciating the asset.
For table and calculated methods, Oracle Assets calculates depreciation expense for the asset
based on an asset life that includes the periods you did not depreciate it. If you suspend
depreciation after an asset has started depreciating, Oracle Assets catches up the missed
depreciation expense in the last period of life.
For flat-rate methods, Oracle Assets continues calculating depreciation expense for the asset
based on the flat-rate. For flat-rate methods that use net book value, Oracle Assets uses the asset
net book value at the beginning of the fiscal year in which you resume depreciation. The asset
continues depreciating until it becomes fully reserved.
RECOVERABLE COST
For depreciation methods with a calculation basis of cost, Oracle Assets calculates depreciation
using the recoverable cost. The recoverable cost is calculated as the lesser of either the cost less
the salvage value less the investment tax credit basis reduction amount, or the cost ceiling.
Oracle Assets depreciates the asset until the accumulated depreciation equals the recoverable
cost.

DEPRECIATION
Depreciation is the periodic charge of the cost over the useful life of an asset. The amount of
depreciation calculated is stored in two tables.
A decrease or loss in value, as because of age, wear, or market conditions.
Accounting. An allowance made for a loss in value of property.
Reduction in the purchasing value of money.
CATCH UP DEPRECIATION
This is an important term used in explaining depreciation calculation of an asset. Catch up means
prior period depreciation expense calculated in the current period.
Eg: If you add an asset with a date placed in service in a prior period and without accumulated
depreciation, Oracle Assets automatically calculates catch up depreciation when you run
depreciation, and expenses the catch up depreciation in the current period. You may add an asset
in Mar-09 with date in service 01-Jan-09.So catch up depreciation is calculated for Jan-09 and
Feb-09.
To give another example, if you do a cost adjustment on an asset, system will recalculate
depreciation from date in service and accumulated depreciation is recalculated. It will result in a
negative or positive catch up. There will not be any catch up if you amortize the adjustment.
Year to date depreciation
Year to date depreciation is the total of depreciation of periods beginning from the first period of
the current fiscal year to the latest period for which depreciation is run
Eg: If your fiscal year is Jan to Dec and last closed period is Sep, year to date depreciation is the
total of depreciation from Jan to Sep.
Accumulated depreciation
Accumulated depreciation or depreciation reserve is the total of depreciation from the period
when asset is added to the latest period for which depreciation is run.
Oracle Assets takes the following steps to calculate depreciation:
1. Use the date placed in service (DPIS) and the prorate convention to determine the prorate date.
2. Use the prorate date and the prorate calendar to determine the prorate period.
3. Determine the depreciation rate.
- For flat-rate depreciation methods, use the adjusted rate.
- For table-based depreciation methods, use the prorate period and the rate table.
- For calculated depreciation methods, use the life.
- For units of production assets, use the capacity and the periodic production.

4. Determine the depreciable basis.

- For cost-based depreciation methods, this is usually the cost minus salvage value.
- For net book value based depreciation methods, this is usually the cost minus accumulated
depreciation.
- In TAX books, the depreciable basis may be limited by a cost ceiling.
5. Calculate the current year depreciation.
- Use the depreciation rate, the depreciable basis, and the prorate calendar to calculate the current
year depreciation.
- In TAX books, the annual depreciation may be limited by an expense
ceiling.
6. Determine the current period depreciation.
- For the first period of the asset life, use the depreciation calendar; prorate calendar,
depreciation start date, and current year depreciation.
- For the last period of the asset's life, use the recoverable cost minus accumulated depreciation.
- For the last period of the fiscal year, use the current year Depreciation minus year-to-date
depreciation.
- For other periods, use the depreciation calendar and the current year depreciation.

There are specific cases that FADEPR checks when running depreciation:
AMORTIZED ADJUSTMENTS (COST OR LIFE CHANGES)
Oracle Assets uses the (ADJUSTED_COST)/(RATE_ADJUSTMENT_FACTOR) to calculate
current period depreciation. In normal cases this is equal to Asset Cost, but when there is an
amortized change, the ADJUSTED_COST is the new asset cost and the
RATE_ADJUSTMENT_FACTOR is used to spread depreciation over the remaining life of an
asset after amortization or revaluation.
FIRST YEAR OF ASSET'S LIFE
For the first year of asset's life, DPIS, prorate convention, and Depreciate When Placed in
Service are taken into account for calculating the depreciation for the period. For this fiscal year,
current period depreciation will be calculated based on the following formula:
= Annual Depreciation Amount x Fraction of Year Held /(number of periods the
asset will depreciate during this fiscal year)
LAST YEAR OF THE ASSET'S LIFE
For the last year of asset's life, retirement date and retirement convention are taken into account
for calculating the depreciation for the period. For this fiscal year, current period depreciation
will be calculated based on the following formula:

= Annual Depreciation Amount x Fraction of Year Held /(number of periods the

asset will depreciate during this fiscal year)
DEPRECIATION CEILINGS
If the asset has a depreciation ceiling and the calculated depreciation amount is greater than the
ceiling amount, then Oracle Assets uses the ceiling amount.
DEPRECIATION PROGRAM
The Depreciation Program (FADEPR) calculates depreciation expense and adjustments, and
updates the accumulated depreciation and year-to-date depreciation. When you run depreciation,
the Depreciation Program submits three or four separate requests, depending on release version:
- Generate Accounts (FAGDA - Release 11 and 11i)
- Calculate Gain/Loss (FARET)
- Depreciation (FADEPR)
- Journal Entry Reserve Ledger Report (FAS400) for a Corporate book
or Tax Reserve Ledger Report (FAS480) for a TAX book.
- Process Pending Transactions (11i only)
The Generate Accounts process will generate all necessary GL code combinations
and populate the FA_DISTRIBUTION_ACCOUNTS table. FAGDA is independent of the
depreciation program and is intended as a performance enhancer. If you are running depreciation
for the first time, you should consider running Generate Accounts first (Other-Requests-Run)
because it can take an extended length of time to run, depending on the number of assets and
distributions.
The Calculate Gain/Loss process will calculate gains and losses for retired assets and catch up
depreciation for retired and reinstated assets in the current period. FARET should be run
standalone whenever you retire or reinstate assets throughout the period.
The depreciation process will calculate depreciation expense and adjustments and close the
current period for the book. You should be sure you have entered all transactions for the period
before running depreciation because you cannot reopen the period once it is closed.
The Process Pending Transactions program has added an additional Mass Addition Post job in
the Depreciation request set. When Depreciation runs and opens the next period, a Mass
Additions Post job will automatically be submitted to process any mass additions for that period.

Depreciation Variables in Calculation

Following five values needs to be determined to verify the depreciation amount of an asset.
1) Current Cost
2) Depreciation method
3) Date in Service
4) Prorate Convention
5) Prorate date
Current Cost
Current cost is active cost of an asset. During the lifecycle of an asset, it may go through cost
adjustments or partial retirement, thus updating it.
Depreciation method
The depreciation method you choose determines the way in which Oracle Assets spreads the cost
of the asset over the time it is in use. You specify default depreciation rules for a category and
book in the Asset Categories window. You can use predefined Calculated, Table, Units of
Production, FlatRate, or Formula type methods, or define your own in the Methods window.
Depending on the type of depreciation method you enter in the Books window, Oracle Assets
provides additional fields so you can enter related depreciation information. For example, if you
enter a Calculated or Table depreciation method, you must also enter a life for the asset. In
contrast, for units of production depreciation method, you must enter a unit of measure and
capacity.
The table below illustrates information related to the depreciation types:
Calculated or Table: Life in Years and Months
Calculated or Table: Bonus Rule
Flat: Basic Rate
Flat: Adjusted Rate
Flat: Bonus Rule
Production: Unit of Measure
Production: Capacity
Production: YeartoDate Production display only
Production: LifetoDate Production display only
Formula: FormulaBased Life in Years and Months
Formula: Bonus Rule
Calculated and table methods must be set up with the same number of prorate periods per year as
the prorate calendar for the book. The depreciation method must already be defined for the life
you enter. You cannot choose units of production depreciation method in a tax book if the asset
does not use units of production method in the associated corporate book.

Date in Service
Date in service of an asset can be date of purchase of asset or date when it is started using. You
cannot enter a date placed in service before the oldest date placed in service you specified in the
System Controls window.
You can change the date placed in service at any time. If you change the date placed in service
after depreciation has been processed for an asset, Oracle Assets treats it as a financial
adjustment, and the accumulated depreciation is recalculated accordingly.
If you add an asset with a date placed in service in a prior period and without accumulated
depreciation, Oracle Assets automatically calculates catch up depreciation when you run
depreciation, and expenses the catch up depreciation in the current period.
Prorate convention and prorate date
Oracle Assets uses the prorate convention to determine how much depreciation to take in the first
year of asset life and the year in which asset is retired. Oracle Assets determines the prorate date
from the date placed in service and the prorate convention. Depreciation for an asset is calculated
from the prorate date.

Calculation setup
After determining the basic variables values as discussed in Chapter 2, following five values
needs to verified in that order.
1) Method type
2) Calculation Basis
3) Depreciate when placed in service
4) Depreciation Allocation
5) Prorate Calendar

1. Method type
Navigation: Setup>Depreciation> Methods
There are five method types available while defining a depreciation method. They are given
below;
Calculated
Flat
Formula
Production
Table

2. Calculation Basis
Navigation: Setup>Depreciation> Methods
There are two calculation basis available while defining a depreciation method. They are given
below;
Cost
NBV

All method types can have these two calculation basis except method type Calculated.
Method type Calculated can have only Cost Calculation basis. Application will not allow
choosing NBV calculation basis. NBV is not valid for calculated methods.

3. Depreciate when placed in service

Navigation: Setup>Asset System>Prorate Conventions

Checkbox Depreciate when placed in service can be checked or unchecked at any point of time.
Default is checked.
This check box is relevant only when method types are other than Calculated. In other words if
method type is calculated this check box has no relevance while calculating depreciation amount.
Designates whether to start taking depreciation in the accounting period that corresponds to the
date placed in service or to start taking depreciation in the accounting period that corresponds to
the prorate date.

4. Depreciation Allocation
Navigation: Setup>Asset System>Book Controls
Divide depreciation have two values
Evenly
Daily
Evenly: Annual depreciation will be divided evenly over the number of periods in the fiscal
year.
Daily: Annual depreciation will be divided based on number of days of periods in the fiscal year.
If you want depreciation to be divided based on days, a daily prorate calendar should be attached
to the book.

Prorate Calendar
Navigation: Setup>Asset System>Calendars
The prorate calendar determines the number of prorate periods in your fiscal year. It also
determines, along with prorate or retirement convention, which depreciation rate to select from
the rate table for your tablebased depreciation methods. You must specify a prorate calendar for
each book.

Calculation methods
Calculation Methods:
1.
2.
3.
4.
5.

Calculated
Flat
Formula
Production
Table

1. Calculated: Calculated method is one of the life-based methods available in Oracle Assets.
Calculated methods spread the asset value evenly over the life.

*** Date Placed in Service is not applicable to method type Calculated and Production.
2. Table Method: Table method is another life-based method available in Oracle Assets. Oracle
Assets gets the annual depreciation rate from a rate table. In Table based depreciation method,
rates of depreciation are taken from a table.
Depreciation can be calculated based on Cost or NBV as against calculated method where only
cost basis is available. Also depreciation can be spread over the periods beginning with the
prorate date or the periods beginning with the date placed in service as per check box in prorate
convention window.
3. Production Method: Units of production methods depreciate the asset cost based on actual
use or production each period. First, you enter the units of production depreciation method,
production capacity, and unit of measure. You then enter the production for each period to
depreciate the asset according to actual use that period.
Production capacity and unit of measure for the asset will be entered at the time of addition.
*** Date Placed in Service is not applicable to method type Calculated and Production.

(N) Production>Enter
You can enter unit of production only for open or future periods of the book. Also Production
units can be entered only starting from prorate date of the asset. Once units are entered, you
need to upload production units before running depreciation.
(N) Production>Upload
Depreciation can be calculated based on cost or NBV as against calculated method where only
cost basis is available.
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.
4. Flat rate method: Flatrate method is used to depreciate the asset over time using a fixed
rate.

Depreciation can be calculated based on Cost or NBV as against calculated method where only
cost basis is available. Also depreciation can be spread over the periods beginning with the
prorate date or the periods beginning with the date placed in service as per check box in prorate
convention window.
5. Formula method: Oracle Assets allows you to define depreciation formulas to calculate
annual depreciation rates. You use the Depreciation Formula window to define depreciation
formulas.
Depreciation can be calculated based on cost or NBV as against calculated method where only
cost basis is available. Also depreciation can be spread over the periods beginning with the
prorate date or the periods beginning with the date placed in service as per check box in prorate
convention window.

AMORTIZED and EXPENSED Adjustments

You can change financial information of any asset after the asset is added in the system.
The financial information of an asset can be changed from Asset workbench>Books.
When you change financial information, you will have two options.
A. Effect of adjustment should have retrospective effect i.e., asset will be treated with new
financial information as though it would have been, when asset is added or
B. Effect of adjustment should have prospective effect i.e., the effect of adjustment will affect
only future depreciation amounts.
If you choose option A, it is called expensed adjustments. For expensed adjustments, Oracle
Assets recalculates depreciation using the new information and expenses the entire adjustment
amount in the current period. Any excess or deficit of depreciation on account of change in
financial information will be charged in the current period.
If you choose option B, it is called amortized adjustments. For amortized adjustments, Oracle
Assets spreads the adjustment amount over the remaining life or remaining capacity of the asset.
For flat-rate methods, Oracle Assets starts depreciating the asset using the new information. You
can set up your amortized adjustments to have a retroactive start date by changing the default
amortization start date (usually the system date) to a date in a previous period. Any adjustment
amount missed since the amortization start date is taken in the current period. If you amortize an
adjustment for an asset, you cannot expense any future adjustments for that asset in that book.

ADJUSTMENTS (Amortize or Expense)

The following are some examples of financial adjustments you can expense or amortize:
- Recoverable Cost Adjustments
- Depreciation Method Adjustments
- Life Adjustments
- Rate Adjustments
- Capacity Adjustments
PRIOR PERIOD TRANSACTIONS
1. Prior Period Additions
If you enter an asset with a date placed in service before the current accounting period, Oracle
Assets automatically calculates the missed depreciation and adjusts the accumulated depreciation
on the next depreciation run. If you provide accumulated depreciation when you add the asset,
Oracle Assets does not recalculate the accumulated depreciation. It accepts the amount you
entered. For table and calculated methods, even if the entered accumulated depreciation differs
from what Oracle Assets would have calculated, Oracle Assets does not depreciate the asset
beyond the recoverable cost. If the accumulated depreciation is too low, Oracle Assets takes
additional depreciation in the last period of the asset's life so that the asset becomes fully
reserved. If the asset's accumulated depreciation is too high, Oracle Assets stops depreciating the
asset when it becomes fully reserved, effectively shortening the asset life.
2. Prior Period Transfers
If you backdate an asset transfer, Oracle Assets automatically reallocates depreciation expense
by reversing some of the depreciation charged to from account, and redistributing it
proportionally to the accounts. Retroactive transfers do not impact the total depreciation. You
cannot backdate a transfer to a prior fiscal year.
3. Prior Period Retirements / Reinstatements
If you backdate a retirement, Oracle Assets automatically adjusts the depreciation for the year by
the appropriate amount, resulting in a one-time adjustment in depreciation expense for the
period. Oracle Assets then computes the gain or loss using the resulting net book value. You
cannot backdate a retirement to a previous fiscal year, nor can you reinstate a retirement
performed in a previous fiscal year.
4. Prior Period Amortized Adjustments
If you backdate an amortized adjustment, Oracle Assets automatically calculates depreciation
from the retroactive amortization start date, and adds the retroactive depreciation to the current
period.
5. Negative Cost (Credit) Assets
You can enter a credit asset as an asset with a negative cost and Oracle Assets credits
depreciation expense and debits accumulated depreciation each period for the life of the asset.