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WHITE PAPER
Group Depreciation
Prepared by
This paper is intended for an audience familiar with Oracle Fixed Assets and seeking an
insight into how the new functionality of Group Depreciation introduced from Patchset
11i.FA.M is built to cover the statutory requirement in many countries of maintaining
assets in a Group.
This paper is functional in nature keeping in sight Oracle’s existing literature that has
adequate details on the technical aspect of the Oracle Fixed Assets, though adequate
insight is given to the table level details relevant to the topic. This is more so, in the light
of the Asset trace being available as a concurrent program, thus making table level details
easily accessible to the user. Thus we have tried to handle the topic from the available
functionality as well as the data perspective level.
To prevent this document from becoming too bulky, and also to maintain focus
throughout the paper, the scope of this paper is limited to the basic set up need for adding
group assets, factors to be kept in mind while adding a group asset as well as its member
assets and the various factors that affect the depreciation calculation for a Group asset as
well as its member asset. However, this paper does not handle how various transactions
performed on the group assets (like cost adjustment, group reclassification, retirements
and group adjustments) are treated and how they affect depreciation calculations for the
group as well as its member assets. It is assumed that the audiences are aware of the
basics of fixed assets, as only the behavior peculiar to group assets is handled in the
paper.
This document is intended to be supplementary in nature and does not in any way,
purport to be a substitute for any official literature being drafted or currently published.
Group Depreciation was first developed by Oracle Capital Resource Logistics (‘CRL’) to
provide an Asset Management Solution to meet the financial accounting needs of the
communications Industry in the United States. Communications companies typically own
and maintain a large network infrastructure enabling them to offer communication
services to their many customers. These networks consist of many individual pieces of
equipment, such as routers, switches, cables, transmitters, etc.
The large volume of assets require pooling of similar assets into groups to ease reporting.
This logical pooling of asset is referred to as GROUP ASSETS.
Group asset reduce data entry substantially as the member asset default the depreciation
rules from the group assets. The group asset cost is equal to the sum of member asset
cost. A Group may contain a number of assets with different date placed in service but
depreciation expense goes to only one account maintained at the Group asset level. A
member asset can be moved in and out of a group and between groups. This is called
Group Reclassification. Retirement may only be performed on a member asset. It is
optional to recognize gain or loss on retirement of an asset. You can postpone the
recognition till the time the last member of the group asset is retired. Depreciation can
also be tracked at the member asset level for Reporting and auditing purpose.
3.1 CANADA
Under the Canadian Income Tax System, expenditure of a capital nature is generally not
deductible from the income in the year they are incurred. Instead capital expenditures are
deducted over several years. These annual charges to income are known as the ‘Capital
Cost Allowance’ commonly referred to as ‘CCA’.
CCA requires that similar assets as defined in the tax regulations be grouped in ‘CCA
Classes’. CCA requires depreciation to be calculated and tracked at the group asset level
only.
An asset becomes available for use at the earlier of, the year it begins being used by the
taxpayer and the first taxation year that begins more than 357 days after the year in which
asset is acquired (available for in use). When the asset becomes available for use, it
should belong to the regular grouping and should start being depreciated. This implies
that in Canada, assets at CIP status can be depreciated as a part of the Group. Each cost
Addition to the CIP asset automatically becomes available for depreciation. It starts
depreciating in the second year of after the year of acquisition or in the year it begins
being used which ever is earlier. Thus controlling the depreciation start date for each cost
adjustment. Refer to Group Asset Set up at Book Controls level for Corporate Book.
The table below lists some of the requirements of CCA and how they are met by Group
asset.
Table 1: Requirement for CANADA
Regulatory Requirement How Group Asset meets these requirements?
Assets classified under respective Add a group asset and add member assets to it. The
grouping prescribed by law group asset cost is the sum of its member asset cost.
The member asset inherits the depreciation rules
entered at the Group asset level.
Depreciation to be tracked only Depreciation is calculated and tracked at the group
for the Group. asset level. Do not enable member tracking at book
level.
Group depreciation is required The group asset must exist in the corporate Book to
only for the Tax book. get copied onto the tax book. Thus Corporate book
must allow group assets also. Refer Group Asset
Set up at Book Controls level for Tax Book.
Add individual asset with reserve Enter a standalone asset with reserve and then
to the group. reclass it to the Group asset. Direct addition of a
member asset with reserve is not allowed. Refer to
Member asset addition with Reserve
3.2 INDIA
Group Asset Rules for India are defined in India Tax regulations only. India requires that
similar Assets (as defined in the tax regulations) be grouped together in ‘Block’.
Depreciation is calculated and tracked at member level and summed up to the group total.
Reporting is done at group asset only.
The table2 below lists some of the requirements of India and how they are met by Group
asset.
3.3 JAPAN
Group depreciation rules for Japan are defined for Financial as well as Tax Regulations.
The assets are grouped together by usage or location. Depreciation is calculated and
reported at the group asset level. However, the group depreciation needs to be allocated
to its member asset for auditing purpose.
The table3 below lists some of the requirements of Japan and how they are met by Group
asset.
Table 3: Requirement for JAPAN
Regulatory Requirement How Group Asset meets these requirements?
Assets classified under respective Add a group asset and add member assets to it.
grouping prescribed by law The group asset cost is the sum of its member
asset cost. The member asset inherits the
depreciation rules entered at the Group asset
level.
Add individual asset with reserve to Enter a standalone asset with reserve and than
the group. reclass it to the Group asset. Direct addition of a
member asset with reserve is not allowed. Refer
to Member asset addition with Reserve
Add individual asset with a prior Enter an asset with any DPIS between the Group
period DPIS. DPIS and the current period date.
Group depreciation is required only Enable group asset for the tax as well as the
for the Tax as well as fiscal reporting corporate book. Refer Group Asset Set up at
purpose. Book Controls level for Tax Book.
Depreciation is calculated and (a) Select ‘Allocate Group Depreciation’ in the
reported at the Group level. Though Tracking option for the Group Asset. Do not
Written Down Allowance (WDA) is defined in UK Inland Revenue for corporation tax
purposes. WDA requires that similar assets (as defined in the tax regulation) be grouped
together in “Block”. Depreciation is calculated and tracked at group asset level only. No
depreciation is calculated or tracked for the Member asset in the group.
The table4 below lists some of the requirements of United Kingdom and how they are
met by Group assets.
Table 4: Requirement for UNITED KINGDOM
Regulatory Requirement How Group Asset meets these requirements?
Assets classified under respective Add a group asset and add member assets to it.
grouping prescribed by law The group asset cost is the sum of its member asset
cost. The member asset inherits the depreciation
rules entered at the Group asset level.
Depreciation to be tracked only for Depreciation is calculated and tracked at the group
the Group. asset level. Do not enable member tracking at book
level.
Group depreciation is required only The group asset must exist in the corporate Book
for the Tax book. to get copied onto the tax book. Thus Corporate
book must allow group assets also. Refer Group
Asset Set up at Book Controls level for Tax Book.
Group, selected Group assets in to Maintain Super group to facilitate high-level
higher-level grouping. grouping. Only flat rate methods can be set for a
Super Group. Refer Super Group for more details
on this.
Postponing recognition of Gain/loss In the retirement Option, select ‘Do not recognize’
on retirement of asset till the gain or loss. Set terminal gain and loss to’
retirement of the last asset in the Recognize Immediately’.
Group. Check the ‘Limit Net Proceeds To Cost’
Limit net proceeds to the cost of the Excess amount of (Net proceeds less Cost of the
retiring member. The group can retired Member assets) booked as gain/loss. Refer
have a negative NBV. Advanced rules tab: Retirement options.
Depreciation basis calculated as a Select depreciation basis rule “Year end balance”
percentage of NBV balance at the while entering the depreciation method. Refer
end of fiscal year. Advanced rules: Reduction rules and depreciation
basis rule white paper note number 276453.1.
User to control treatment of Select the transfer type ‘ENTER’ and enter the
transferred member asset out of the amount of reserve/expense as zero since the
Group. Remove only the COST of reserve is not to be moved out.
the transferred assets.
The table5 below lists some of the requirements of United States and how they are met
by Group asset.
Group Asset’s cost is the aggregate of its Member Asset’s cost. Depreciation rules are
defined at the Group asset level supersedes the rules defined at member asset level.
This has only one exception, when member tracking option is enabled, and set to
‘Calculate Member Asset Amount’ with ‘Sum Member Asset Depreciation To Group’ is
enabled. Depreciation start date is the group Assets date placed in service. A member
asset can be added with any date placed in service between the group asset date placed in
service and current period date.
A group asset has to be of the asset type ‘GROUP’ while member assets can either of the
assets type Capitalize or CIP. All adjustments to the group or its member asset are
amortized adjustment only.
Member asset can be moved in and out of the Group and between Groups. This is Group
Reclassification. There are two transfer types of group reclassification.
1. Calculate: System will calculate the group reclassification based on the Group
amortization start date entered.
Member asset only can be retired, as the Group Asset does not have a cost of its own. But
the Retirement options are set at the Group asset level only and apply to all its members.
There are two types of rules for group assets retirement.
1. Do Not Recognize Gain and Loss at the time of retirement. The proceeds of sale
cost of removal and retired cost is adjusted with the Group reserve. And no gain
and loss is booked for asset.
After retiring the last asset in the group, the remaining reserve will be booked as the
Terminal Gain and Loss.
2. Calculate member asset amount: Member asset amount is calculated based on the
group or member depreciation method. And the depreciation can be summed up
to the group level also. The Group as well as member asset depreciation are
calculated.
5.1 Group Asset Set up at Book Controls level for Corporate Book.
To be able to add a group asset in a book, the ‘Allow Group Depreciation’ Flag must be
checked for the book. This flag can be updated at any point of time after the creation of
the Book.
‘Allow Amortized Change’ checkbox must also be checked to Add member asset to the
group. As every addition or adjustment to the group or the member asset is an Amortized
adjustment. Thus the book should have ‘Allow Amortized Changes’ to have group asset
added to this book.
The rest of the boxes are on need basis. Revaluation cannot be performed on a group or
its member asset. Add a standalone asset on which revaluation has been performed
cannot become a member of a group asset.
In fact when a CIP asset is ready for depreciation, user can select the applicable source
line(s) and check the “Depreciate in Group Asset” flag on the source lines form.
The selected Source line cost will be included in the Group asset cost and the group
assets depreciable basis. System will default this transaction as a current period amortize
adjustment, however user may optionally enter any amortization start date from the
current period to the CIP member asset’s Date placed in service. Change of any attributes
in the source line is not allowed when “Depreciate in Group asset” flag is updated.
5.2 Group Asset Set up at Book Controls level for Tax Book.
To be able to create group asset in the Tax book, the Allow Group Depreciation Flag
must be checked. The four flags explained in the previous section, function the same as
for the corporate book.
Mass copy allows copy of assets and transaction from the Corporate book to the Tax
book. Group asset and its member assignments can also be copied from the Corporate
book to the tax book. A Group Asset must exist in the corporate book before it can be
added to the tax book. Thus if the requirement is to have group asset only in the tax book,
group asset will need to be added in the Corporate book first.
Mass Copy does not copy group reclassification transactions that are performed when
changing member asset’s group assignment. Mass Copy does not copy an type of group
adjustment, including group reserve transfer, group retirement adjustments, and group
unplanned depreciation.
Scenario Group asset Member asset Group asset MEMBER asset in the
addition assignment in Tax book tax book
A Copy Copy GROUP A MEMA and MEMB added
to GROUP A
B Do Not Copy Copy None None
In the scenarios B and D the MEMA and MEMB will be copied as a standalone asset in
the tax book.
A group asset can be added in many ways. Following are the various methods of adding a
Group Asset:
A. Detail Addition on Asset Workbench,
B. Quick addition on Asset workbench.
C. Mass Additions
D. Application desktop integrator.
E. Web ADI
The additions button on the asset workbench can be used for detail addition of a Group
Asset. All the fields on the asset workbench are available for a group asset also. Detailed
descriptions of the exception for a group asset addition are listed below.
Asset type
Asset type of ‘Group’ must be selected when creating a group asset.
In physical Inventory
Physical inventory is not allowed for a group asset. Thus after group is selected as the
asset type the ‘In physical inventory’ check box is unchecked and is non-updatable.
Certain financial information such as Current cost, Original cost, recoverable cost and
net book value cannot be updated for a group asset. YTD depreciation and
accumulated depreciation can be updated for a group asset in the period of addition
after a member asset is assigned to the group.
Revaluation ceiling and revaluation reserve cannot be updated for a group.
Revaluation is not available for group assets.
Salvage value
There are two options to calculate salvage value for the group asset:
Percentage: Salvage value will be calculated as percentage of group asset cost.
Group salvage value= Group Asset Cost* salvage value percentage.
Sum of member asset: The salvage value will be the total of the salvage value of its
member asset.
Depreciation methods
All depreciation methods can be entered for group assets except unit of production
method. Unit of production method is not available for group or member assets.
Date in service
Date placed in service is used for determining the group depreciation start date. It can be
current period as well as prior period date.
Do Not Allow: This is the default option. The group asset will stop depreciating once the
group reserve reaches the group assets recoverable cost. After every transaction on the
group asset a validation will happen to check if the reserve is greater than the cost. And
the transaction that fails this validation will error.
Allow: The group asset 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.
Super Group
Super group facilitate high level grouping requirement for the telecom industry. The
group asset inherits the depreciation rule from the super group.
Super group is defined at the super group form. From Fixed Asset Manager navigator:
Setup> Depreciation>Super group.
Books and depreciation rule facilitates the attachment of a single super group to many
books. The table FA_SUPER_GROUP_RULES stored the data entered here.
Book
Many corporate and tax books can be attached to the same super group. Thus the super
group can be active in many books together.
Periods from
The range of periods for which the depreciation rules are effective.
Method
Depreciation with flat rate method can be entered for the super group. The methods need
to be picked form the List of values which shows only flat-cost depreciation methods.
Depreciation limit
The depreciation limit percentage needs to be entered for the super group. The
depreciation limit has to be a positive limit and is validated to be anything from zero to
any positive value. The value of the depreciation limit can be greater than 100% percent
for a group asset.
Member asset retirement can only be a current period transaction. And retirement prorate
convention is just a display field.
The retiring reserve entered is restricted to values between Zero and the lesser of
the following: -
The recoverable cost of the retiring member asset
The reserve of the group Asset.
Though if member asset tracking is enabled, the retiring reserve entered is
restricted to values between zero and retiring member asset reserve amount.
The gain or loss on retirement is the difference between NBV retired and net
proceeds (proceeds of sale less cost of removal)
For Example:
Group A Cost: 100000
Member 1 Cost: 50000
Member 2 Cost: 30000
Member 3 Cost: 20000
The group reserve as on date is 23142.85
Member 1 is retired with:
Proceeds of sale 6000
Cost of removal 1000
For Do Not Recognize gain and loss option we have two more options:
For Example:
Group A Cost: 80000
Member 1 Cost: 50000
Member 2 Cost: 30000
For Example:
Group A Cost: 35000
Member 1 Cost: 15000
Member 2 Cost: 20000
This option will only be available on the asset workbench if Member Asset Tracking is
enabled at the book level. Once enabled, group depreciation amounts will be calculated
and allocated to the member asset according to the rules specified. Thus depreciation
gets calculated as well as tracked at group as well as member asset level. Member
tracking also applies to other financial amount like Initial reserve adjustment, retirement
Adjustments and unplanned depreciation entered at the Group asset level.
The main advantage of member tracking is that it facilitates member asset depreciation
amounts like member asset reserve which is needed for transaction performed at member
asset level like retirement, reclassification etc.
With this tracking method the following options are also used:
Allocate to Fully Retired and Reserved Assets
If the “Allocate to Fully Retired or Fully Reserved Assets” flag is check the
depreciation will be allocated to the fully retired and fully reserves member
asset also. Thus bypassing all validation done for fully reserved and retired
asset while calculating depreciation. Once this flag is checked the reduce
excess and distribute excess check box are disabled, and cannot be updated.
Reduce Excess.
This option is picked as default for ‘Allocate Group Amounts’ tracking
method. When the depreciation is being allocated to a member asset,
validation happens as to whether the current period depreciation will make the
member asset to become fully reserved. The excess amount is reduced from
the depreciation expense charged to the group asset for the period.
For example:
Asset Cost Current reserve Depreciation basis
Group Asset 31500 21510 14200
Member 1 18000 17910 2200
Member 2 9000 2400 8000
Member 3 4500 1200 4000
For Member Asset 1, if 110 are allocated to the asset, it ends up being fully
reserved, in fact it will have a negative NBV of 20. Thus Depreciation will be
allocated only till the Member asset becomes fully reserved. The balance
amount of 20 will be reduced from the depreciation expense for the group.
Thus, the depreciation charged for the group would be 690 (710-20).
Member Asset 1 = 90
Member Asset 2 = 400
Member Asset 3 = 200
Distribute Excess
When the depreciation is being allocated to a member asset, validation
happens as to whether the current period depreciation will make the member
asset to become fully reserved. The excess amount is redistributed between
the other member assets of the group that are not fully reserved, based on their
depreciation basis of the remaining member assets.
The reduce excess and distribute excess are mutually exclusive options.
Group Method: The depreciation method used to calculate the Member asset
depreciation is the group assets depreciation method. With this option the total
of member and group depreciation expense will always be the same as the
depreciation method used for both is the same.
For example:
Asset cost Depreciation method with Four periods
in a Year
Group Asset 45000 Flat cost 20%
Member Asset 1 20000 Flat cost 10%
Member Asset 2 15000 Flat cost 20%
Member Asset 3 10000 Flat cost 30%
Group Asset depreciation = 45000*0.2/4 = 2250 which the same as the Total of the
Member asset depreciation amounts.
Group Asset Depreciation = 45000*0.2/4 = 2250 which is not equal to the Total of the
Member asset depreciation amounts.
For example in Canada (CCA) if Addition plus/minus adjustments less Proceeds of sale
is a positive amount in a given period for a group asset, that half of such amount must be
deducted from the depreciable basis when calculating the group depreciation amount. The
depreciation basis must be ‘Year End balances with positive reduction amount’ for the
depreciation method attached at the group asset level. Reduction rate is set to 50% and all
three checkboxes (Addition, Adjustment, and Retirement) are checked.
Refer to Canada and India tax requirement in the Topic: Global Perspective and
depreciation basis rule white paper note number 276453.1.
After this enter the distribution in the assignments form just as it is done for any other
asset.
After the quick addition has been saved, the group asset is queried again to see what is set
as default for other fields.
In the depreciation tab, Salvage value type, salvage value percentage, depreciation limit
default from the category defaults. Though if salvage value type is required as sum of
member assets, it will not be defaulted, as there is no such option in the categories form.
The salvage value type will need to be updated from the asset workbench. Same is the
case with depreciation limit.
Tracking options
These will not be enabled even if member tracking is enabled at the Book level.
Reduction rules
The reduction rate will be grayed out, though if the depreciation basis is set to’ Year End
balances with positive reduction amount’ or ‘Year end balance with half year Rule’ for
the depreciation method attached to the Group asset. Than the reduction rate will default
to 0% and the addition, adjustment, and retirement check boxes will not be checked but
will be updateable fields.
A Member Asset can be assigned to a Group asset in many ways. Following are the
various methods of assigning a member asset to a Group:
A. Detail Addition on Asset Workbench,
B. Quick addition on Asset workbench.
C. Category
D. Mass Additions
E. Application desktop integrator.
F. Web ADI
Group asset fields need to be populated with the Group asset Number. This is the group
to which the member asset will belong.
The expense account for the member asset defaults to the expense account entered for the
group asset. This is more so because the journal entries are to be passed at the group asset
level only.
If the group asset has member tracking enabled with sum up option the expense account
can be different from the group, as the journal entries will be passed at the Member asset
level. The company segment has to be the same as the group asset if ‘Allow
intercompany Member Assets Assignments’ is not enabled for the book. If ‘Allow
intercompany Member Assets Assignments is enabled than any expense account can be
given for the member asset.
A group asset cannot be deleted once a member asset is added to the Group asset. The
group asset cost is a sum total of its member asset cost, it does not have any cost of its
own. Thus, a retirement transaction may not be performed on a group asset.
A group asset can be disabled from the asset workbench by checking the disable
checkbox on the depreciation tab of the books window.
A disabled group asset can also be re-enabled via the assetworkbench. All restrictions are
removed after a group asset has been enabled. Thus the group asset can depreciate and
transaction can be performed on it.
In order to search for group asset, member asset or individual asset, there are additional
search criteria on the asset workbench and the Inquiry forms.
If all assets attached to a book are needed than no criteria except the book needs to be
entered in the find form. All assets will come up whether group, member or stand alone
assets.
If only group asset need to be queried, the asset type needs to be give as ‘Group’ in the
selection criteria.
To search for all the disabled assets in a group, enter the book and enable the ‘Show
Disabled Groups’. All disabled group asset will come. This is more so, when these
disabled assets are not shown in any list of values of group asset, in any of the forms.
Usually, disabled Group assets are excluded from the group asset list of values in the
asset workbench, and other windows. Thus even if the asset type of Group is entered, as
selection criteria the disabled assets will not be queried.
To search for disabled asset the check box ‘Show Disabled Groups’ needs to be checked.
Only disabled group asset will come up in this case.
Cost, original cost, recoverable cost, net book values are not updatable fields.
YTD and depreciation reserve can be updated/entered for the Group asset only in the
period of addition after a member asset is assigned to the Group.
Depreciation tab:
Depreciate
This flag is updatable at any time. It is checked by default. If it is unchecked than
depreciation will not be calculated for that group asset. But a catchup will happen once it
is checked again.
Method
The depreciation method can be changed at any time in the Group asset life. Though this
change will be treated as current period change to the group asset.
Amortized Adjustment
All transactions on the group or its member are amortized thus this field cannot be
updated.
Depreciation limit
Depreciation limit can be changed any time in the group asset life. But the change will be
taken as a current period change only.
Over depreciate
Over depreciation parameter can be changed at any time in the asset life if the Group
asset reserve is less than the total group asset recoverable cost at the time of change. The
change is a current period change only.
Super group
Super group is an updatable field provided the over depreciation parameter is set to
‘Allow’ or ‘Allow and depreciate’ but the change is taken as a current period change only
for the affected assets. The same is the case with the depreciation rate and /or salvage
value percentage change for a super group.
Tracking option
Tracking option can only be changed in the period of addition and before any member
asset is assigned to the group.
Reduction Rule
Reduction rule can be changed for the Group asset in the subsequent period. The change
will be a current period change only.
The distribution information can be change at any time for the group asset and behaves
similarly to a transfer in standalone assets.
Depreciate
This flag is updatable at any time. It is checked by default. If unchecked it has no effect
except if member tracking is enabled and calculate member amount is enabled. But if
depreciate checkbox is unchecked, depreciation is not calculated for those member asset
and their cost is not included in the depreciation basis
Depreciation method
The depreciation method can be changed at any time. This will have no affect of group
depreciation unless member tracking is enabled for the Group and the tracking method is
calculate member amount. This will be treated as a current period adjustment only.
Date in service
Date in service can be changed at any time in the member asset life, provided it is
between the group asset date in service and the current period date. Though it will be
treated as a current period change for the Group asset.
Amortized Adjustment
All transactions on the group or its member are amortized thus this field cannot be
updated.
Group Asset
The group asset can be changed at any time in the member asset life. The transaction will
be taken as a group reclassification. This can be current as well as prior period
transaction. Reclassification is performed in the Group reclassification block in the Group
asset tab on the Asset workbench. The fields in this block are generally grayed out except
when a reclass is performed.
Reduction rate
The Group Assets reduction rate defaults to the member asset, but it can be changed
while performing the transaction on the member asset.
The following are the scenarios for Assigning Member Asset Cost to the Group:
A. Current Period addition
B. Prior period Addition.
C. Future period addition.
D. CIP asset addition
For example
Group Asset: Group A Added in Jan-00 (DPIS: OCT-1999)
Member Assets Member 1 (DPIS: JAN-2000; Cost: 10000)
Member 2 (DPIS: FEB-2000; Cost: 15000)
Depreciation Method Straight line; life in Months: 12
Depreciation calendar Monthly
Group A is added in the period of Jan-2000, thus the addition of member 1 is a member
addition in the period of addition of the Group Asset.
The transaction type code of such a transaction would not be group Adjustment it would
be Group addition only. Something on the similar lines of how an asset behaves if any
adjustment is done in the period of addition. The old addition row becomes void and a
new addition transaction row is entered.
If the group Asset is not in the period of addition, the member asset addition will be taken
as a group adjustment (transaction_type_code).
The transaction header id 13434 is for the group A’s Addition while
transaction_header_id 13438 if for the Member 1’s addition in Jan-2000. The member 2
is added through the transaction_header_id 13456 in Feb-2000.
All member asset additions are amortized adjustments to the Group. Thus the transaction
subtype is amortized and the amortization start date is the date placed in service of the
Member asset.
The cost is stored at the Member asset level only. And the journal entries all happen at
the member asset level. There are no journal entries for cost at the group asset level.
Member 1
Member 2
Group asset cost is the sum total of its member cost. This cost forms the basis of the
group’s depreciation calculation.
Our example does not have member tracking enabled thus the depreciation tracked at
stored at the Group asset level only.
The following section explains the group depreciation calculation:
For example
Group Asset: Group A Added in Jan-00 (DPIS: Oct-1999)
Member Assets Member 1 Added in Jan-00 (DPIS: Dec-1999; Cost: 10000)
Member 2 Added in Mar-00 (DPIS: Feb-2000; Cost:15000)
Depreciation Method Straight line; life in Months: 12
Depreciation calendar Monthly
Group A
The transaction header id 13439 is for the group A’s Addition while
transaction_header_id 133443 if for the Member 1’s addition in Jan-2000. The member 2
is added through the transaction_header_id 13461 in Mar-2000.
The cost is stored, tracked and posted from the member asset level.
Member 1
Our example does not have member tracking enabled thus the depreciation tracked at
stored at the Group asset level only.
The following section explains the group depreciation calculation:
Group A
The depreciation charged for Jan-2000 (Member 1 added with DPIS in Dec-99)
= Current period depreciation + Catchup depreciation
= (Cost/remaining life for the group asset)+ Catch up depreciation
= (10000/10)+(10000/10)
= 1000+1000
= 2000
Catch up depreciation = (Cost/remaining life for the group asset)*No of periods for
Catchup
= (10000/10)*1
= 1000
Depreciation charged for the Month of Mar-2000 (Member 2 added with DPIS in Feb-00)
= Current period depreciation + Catchup depreciation
= Depreciation Basis/Remaining life of the Group Asset + Catchup
depreciation
= (23000/10)+1875
= 2875+1875
= 4750
To satisfy Canada tax requirements a CIP asset can also be depreciated. The cost of the
source line will be included in the depreciation basis of the Group asset only if the
following conditions are met:
Book Controls-allow CIP depreciation in Group Asset flag
Source line-Depreciate in Group asset check box.
In such a case the source line addition to the depreciation basis is taken as a current
period member asset addition. And the assets behave exactly the same way like a Current
period member assets addition.
For mote details refer Group Asset Set up on Book Controls for Corporate Book
For example:
Group Asset: Group A Added in Apr-00 (DPIS: Jan-00))
Stand alone asset Member 1 Added in Apr-00 (DPIS: Jan-00; Cost: 10000;
Reserve= 4000)
Depreciation Method Straight line; life in Months: 12
Depreciation calendar Monthly
Reclassification of the Member 1 to the Group A in Apr-00 with the Group amortization
start date as 30-Apr-00 in the group asset tab for the stand-alone asset.
The transaction header is 13612 is the reclassification of the Member 1 to Group A with
the group amortization start date of 30-Apr-00, the reclassification is recognized by the
GC in the transaction_key field.
The same transaction is reflected for the Member 1 via transaction header id 13611.
Member 1
Group A
Member 1
Thus the Group Asset behaves like an asset added with reserve and adjusted cost is the
net book value of the group.
13 DEPRECIATION
Depreciation is calculated at the Group asset level. Thus one depreciation reserve would
be maintained and reported for the group.
The Group asset depreciation rules will be used for calculating group depreciation
expenses.
Depreciation for Group Asset= Group rate *Group depreciation basis/ No. Of periods
There is only one exception to the above that is when member tracking is enabled and the
tracking method is calculate member amount, with sum up option. In such a case there is
one depreciation reserve account for each member asset.
In addition to the depreciation method the depreciation basis rule also determine how
depreciation basis and depreciation amount are derived. There are about eleven
depreciation basis rules available. For more detail on depreciation basis rule refer to
depreciation basis rule white paper note number 276453.1.
Member 1
The basis of the depreciation calculation is the sum of the member assets cost.
Group Assets depreciation basis is
= Member 1 Cost + Member 2 Cost
= 15000 + 10000
= 25000
Depreciation is calculated for the group asset only. The depreciation method is
different for the Group and the member asset but the method used to calculate
depreciation will be the Group asset’s depreciation method.
Thus the depreciation method used to calculate depreciation is 80% Flat rate NBV
Based
Member 1
The group depreciation amount is distributed among its members based on the
depreciation basis of each member in proportion to the Group assets depreciation
basis. The depreciation amount is posted at group level only. There is only one
depreciation reserve account for the Group. The depreciation rules of the Group
asset are used to calculate depreciation for the Group Asset.
For example:
Group A Cost: 35000 (DPIS: Jan-2000)
Member 1 Cost: 20000 (DPIS: Jan-2000)
Member 2 Cost: 15000 (DPIS: Jan-2000)
Depreciation Method 80% Flat rate NBV Based
Depreciation basis rule Use transaction period basis
Depreciation calendar Monthly
No depreciation limit is set.
Member 1
Member 2
Period 5 (May-00)
An override of 1000 is entered for Group A
Allocation of Group depreciation happens as follows:
=Group asset depreciation * (member asset depreciation basis/Group
Assets Depreciation basis)
Member 1 = 1000* (20000/35000) = 571.43
Member 2 = 1000* (15000/35000) = 428.57
Thus the NBV for the group at the end of period 5 is as follows:
=Cost less depreciation charged till the 5th period.
After the member asset is added to the group, the depreciation basis of the group is
calculated as follows:
= New member asset cost + Group A NBV at the end of 5th period
=10000+2000.01
=12000.01
As usual the validation as to whether any of the member asset becomes fully
reserved after depreciation is calculated for the 9th period.
But since we have distribute excess check box checked. The excess depreciation
on Member 1 and Member 2 will now be charged to remaining members of the
Group. In this example, the excess depreciation will be charged to the Member 3.
Thus the Depreciation charged for Member 3 =
=Excess depreciation for Member 1+ Excess depreciation for Member 2+
Depreciation allocated to Member 3.
= 279.37 + 209.54 + 177.77
= 666.68
Member 1
Member 2
Member 3
For example:
Group A Cost: 25000 (DPIS: Jan-2000)
Member 1 Cost: 15000 (DPIS: Jan-2000)
Member 2 Cost: 10000 (DPIS: Jan-2000)
Depreciation Method 80% Flat rate NBV Based
Depreciation basis rule Use transaction period basis
Depreciation calendar Monthly
No depreciation limit is set.
Group A
Member 1
Member 2
Thus the Depreciation charged to Group A, and since the checkbox Reduce
excess is checked the excess depreciation that could not be charged for the
member 1 is reduced from the Group asset amount.
=550+666.67 = 1216.66
A validation happened as to whether asset would become fully reserved after the
depreciation is allocated.
The depreciation charged for Group A for period 5 will be 450 instead of the
monthly charge of 1666.66. The excess depreciation that couldn’t be charged to
the member asset due to the fact that they were fully reserved is reduced from the
group asset depreciation.
Group A
Member 2
13.2.1.3 Allocate Group amount with Allocate to fully retired and reserved Assets
In this case no validation happens as to whether a member asset is becoming fully
reserved or not. Depreciation is allocated even if the member asset is fully
reserved. The allocation of depreciation happens to fully retired member assets as
well.
If the group depreciation rules are used than group asset depreciation will always
be equal to the sum of its member asset. Since the same depreciation rules are
used to calculate the group as well as member level depreciation.
If the member depreciation rules are used than the Group asset depreciation may
not be equal to the sum of its members as the depreciation rules attached to the
Member and the Group may be different. The group asset rules will be used to
calculate Group depreciation while member asset rules will be used for the
member asset.
Member 1
Member 2
Group A Depreciation:
=(Group Asset Cost/life in months)
= (50000/60)
=833.33
Member 1 Depreciation:
= (Member Asset Cost/life in months)
= (30000/36)
= 833.33
The sum of member asset depreciation is not equal to the Group asset
depreciation
Group A
Member 1
Member 2
Though the depreciation of 833.33 will be posted to GL from the group asset level
only.
13.2.2.2 Calculate Member amount with sum Member Asset Depreciation to Group
enabled.
The Member asset depreciation will be summed up to the Group asset. This
makes sure that the group asset depreciation is always equal to the sum of the
member asset depreciation. This is irrespective of whether the depreciation rules
used are of the member or the Group asset.
The depreciation is posted to GL from the member asset level. There is one
depreciation reserve account for each member asset.
Group A Depreciation:
=(Group Asset Cost/life in months)
= (60000/60)
= 1000
Group A
Member 1
Member 2
Member 1 depreciation:
= (Member Asset Cost/life in months)
= (30000/36)
= 833.33
Member 2 depreciation:
= (Member Asset Cost/Life in months).
The sum of member asset depreciation is set as the Group asset depreciation. The
Depreciation will be posted at the Member asset level
Group Asset Depreciation = 833.33 1333.33
Group A
Member 1
Member 2
There are other factors that affect the calculation of depreciation for the group and its
member asset.
Member 2
At the end of second period, compare the total depreciation charged for the asset and the
adjusted recoverable cost i.e. the cost available for depreciation after reducing
depreciation limit.
The column C represents the depreciation that can be charged to the asset in the next
period.
Thus despite the monthly group depreciation of 1666.66 the depreciation charged at the
group level is only 633.33 for the third period (Period counter 24003). This is the result
of the validation at the Group asset level.
Now when this 633.33 is distributed among the member assets
Member 1 = 633.33* (15000/25000) = 380
Member 2 = 633.33* (10000/25000) = 253.33 but only 53.33 will be charged to
the asset as the adjusted recoverable cost for the asset is 3000 and 2976.66 is
already charged for the asset.
Thus depreciation charged for this month is 433.33.
At the end of third period (period counter 24003), compare the total depreciation charged
for the asset and the adjusted recoverable cost i.e. the cost available for depreciation after
reducing depreciation limit.
The column C represents the depreciation that can be charged to the asset in the next
period. Thus Group A will be charged with the depreciation amount of 200 for the fourth
period (Period counter 24004) and full amount will be allocated to the Member 1.
Thus the validation happens at both levels, first for the Group and than for the member
assets.
Member 1
Member 2
For example:
Group A Cost: 10000 (DPIS: Jan-2000)
Member 1 Cost: 10000 (DPIS: Jan-2000)
Depreciation Method 60% Flat rate NBV Based
Depreciation basis rule Use transaction period basis
Depreciation calendar Monthly
Member tracking is not enabled.
Over depreciate is set to Allow and depreciate.
Group A
As we can see that the group NBV became negative only in the period counter 24007. If
over depreciate was set to ‘Allow’ then only 24007 period depreciation would have been
charged and no further depreciation would be charged on the Group asset. But since the
over depreciate is set to ‘Allow and depreciate’ in this example, it continues to depreciate
every period even when the group asset has negative NBV.
Though if the over depreciate was set to ‘Do not allow’ depreciation for period 24007
would have been charged only to the extent of 300 and than stopped as the group asset
NBV would have become Zero.
Depreciation override can be set at group level since depreciation is stored and tracked at
the Group asset level only. The entered amount overrides the amount calculated by the
depreciation engine.
Member 1
Member 2
For example:
Group A Cost: 50000 (DPIS: Jan-2000)
Member 1 Cost: 10000 (DPIS: Jan-2000)
Member 2 Cost: 15000 (DPIS: Jan-2000)
Member 3 Cost: 25000 (DPIS: Jan-2000)
Depreciation Method 60% Flat rate NBV Based
Depreciation basis rule Use transaction period basis
Depreciation calendar Monthly
Member 1
Thus the monthly depreciation of 500 is overridden by 7500. After the override is
processed the reserve for the member asset is 9500 that is lesser then recoverable
cost 10000. Thus the override is successfully processed.
Group A
Thus total group depreciation for the period is 9500. Including the override
entered for Member 1 and the other assets will have monthly allocated
depreciation
For example:
Group A Cost: 15000 (DPIS: Oct-2000)
Member 1 Cost: 10000 (DPIS: Oct-2000)
Member 2 Cost: 5000 (DPIS: Oct-2000)
Depreciation Method 80% Flat rate NBV Based
Depreciation basis rule Use transaction period basis
Depreciation calendar Monthly
This depreciation charged for the group will be allocated to the member asset
based on their depreciation basis.
Member 1
Unplanned depreciation is charged as an expense for the group asset and the
allocated amount is also charged as an expense doe the member asset as well.
Though this just facilitates drill down of depreciation expense, the depreciation
will be posted to GL from the group asset level only.
For example:
Group A Cost: 15000 (DPIS: Oct-2000)
Member 1 Cost: 10000 (DPIS: Oct-2000)
Member 2 Cost: 5000 (DPIS: Oct-2000)
Depreciation Method 80% Flat rate NBV Based
Depreciation basis rule Use transaction period basis
Depreciation calendar Monthly
Thus total depreciation charged for the member assets are as follows:
= Unplanned depreciation entered for Member Asset +monthly depreciation
Member 1 =8333.33+666.67 = 9000
Member 2 = 0+333.33= 333.33
Though unplanned depreciation is entered for Member 1, it has no entry for the
unplanned depreciation in FA_adjustments.
Member 2
Member 2 is not affected by the unplanned depreciation entered for the member 1.
The validation that happens for member asset while allocating depreciation
from the Group Asset
In Continuation of the above test case, an unplanned depreciation of 900 is done
for Group A.
Let us see what validations happen when the depreciation is allocated. Even if the
reduce excess is enabled for the Group asset, it will behave just like distribute
excess.
Group A
Member 1
Thus total depreciation charged for the member assets are as follows:
= Allocated unplanned depreciation+ monthly depreciation
Member 1
Member 2
Since the unplanned depreciation was 900 and out of which 333.33 was allocated
to member 1, remaining 900 less 333.33 that is 566.67 is allocated to member 2.
Thus despite the asset having ‘reduce excess’ due to the unplanned depreciation
the validation happens similar to distribute excess. This means distributing the
excess depreciation to the remaining member of the group.
Member asset 2 is will be charged the full monthly depreciation calculated for the
group that is 1000 as well as the remaining unplanned depreciation (After
allocation of 333.33 to member 1) 566.67. Thus a total depreciation amount of
1566.67 is charged for member 2 for the current period (period counter 24012).
For example:
Group A Cost: 35000 (DPIS: Jan-2000)
Member 1 Cost: 10000 (DPIS: Jan-2000)
Member 2 Cost: 15000 (DPIS: Jan-2000)
Depreciation Method 60% Flat rate NBV Based
Depreciation basis rule Use transaction period basis
Depreciation calendar Monthly
Tracking Method: calculate member amount
Depreciation method: Group Methods
Sum Member Asset Depreciation to Group checkbox is checked.
In this case the group A will not store any depreciation and depreciation will be
calculated at member level and stored thereof. The group asset will show only the
sum of member asset depreciation on the asset workbench.
Group A
Group A
In the group asset set up various attributes of an asset are divided among the group and its
member. Like cost is always booked at the member asset level while depreciation is
booked at the group asset level. Thus in a group asset set up the journal entries handled a
bit differently, to avoid double booking of the same amounts. The following section
explains how journal entries for group asset are created.
Cost is posted to GL from the member asset. The member asset stores the cost, as the
group asset cost is the total of the member asset cost. The cost adjustments also happen at
the member asset level.
For Example, in the retirement entry the cost side is posted from the member asset while
the rest of the lines in the journal entry go from the group asset. This is due to the fact
that reserve is posted from the group asset, thus reserve and NBV retired is calculated at a
group asset level.
Group A
Member 1
FA_adjustments table in the member asset has the Cost line for retirement while the rest
of the entry is seen in the Group asset.
In the case where member tracking is set and sum up option is enabled, override is not
possible at the Group asset level thus it will be posted to GL from the member asset level
only.
For example: Take five group assets.
The above drill down report shows the depreciation charged for May-00 in the book.
DEPRN1 and DEPRN2 have a depreciation override posted to GL of 7000 and 2000
respectively.
For the group asset DEPRN3 the override is entered for a member asset MEMDERPN31
for an amount of 7500.
The depreciation amount of 9500 posted to GL from the group asset DEPRN3 is
calculated as follows:
In the case Member tracking is enabled the unplanned depreciation is booked at the group
level only, irrespective of the fact that the unplanned has been entered for the group or
the member asset. There is only one exception to the above that is the case where
member tracking is set and sum up option is enabled. Here unplanned depreciation is not
possible at the Group asset level. Thus unplanned depreciation will be posted to GL from
the member asset level only.
The behavior of unplanned depreciation is a bit different only in the situation where the
member tracking is enabled and sum up option is not enabled.
There could be two cases here
1. Unplanned depreciation at group asset level (Refer Group All6 in example below)
2. Unplanned depreciation at member asset level. (Refer Group All7 in example
below)
For example: Take three group assets.
In the Month of Nov-00, unplanned depreciation of 12000 is entered for Group All6.
Allocation of Unplanned depreciation for Group ALL6 is as follows:
=Unplanned depreciation * (member asset depreciation basis/Group Assets
Depreciation basis)
MEMALL61 = 12000* (10000/15000) = 8000
MEMALL62 = 12000* (5000/15000) = 4000
MEMALL61
MEMALL62
The unplanned depreciation entry comes as a debit to Expense account. But the same
debit is allocated to the member asset assets.
This was a case where the unplanned depreciation is entered at the Group asset level but
the same can also be entered at the member Asset level. An unplanned depreciation for
8333.33 is entered for the member asset MEMALL7. This Asset belongs to the Group
ALL7. The unplanned depreciation will be charged only to MEMALL7 but the
depreciation will be posted to GL from the Group asset only.
MEMALL7
MEMALL72
The unplanned depreciation entered for the MEMALL7 is a positive figure of 9000 and
than a negative unplanned depreciation was performed for 666.66 thus the net unplanned
depreciation will be 8333.33.
Thus we see two rows with amounts 8333.33 and 666.67 for the group asset. Besides that
there is a monthly depreciation of 1000 charged for the group asset. A total of 9333.33 is
charged for the group ALL7. And No drilldown is done at the member asset level, and
the unplanned depreciation amount is posted to GL at the group asset level.
15 SUMMARY
1. Group Asset and its member assets must belong to the same book (either within
the same corporate book or same tax book).
2. Cost is stored and tracked at the member asset level and summarized to the group
asset.
Group asset cost = sum of member assets’s cost.
7. Reserve is generally stored and tracked for the group asset only. There is usually
one reserve account for the group asset. Though there is only one exception here,
if Member Asset Tracking is set to calculate member asset amount and sum
member asset depreciation to the group is enabled. In this case there is going to be
one reserve account for every member asset in the group.
9. Both capitalized and CIP member assets may be added to a group asset.
However, cost of a CIP member asset will not be included in the group asset cost
until it has been capitalized. Only capitalized member assets’ costs are included
in the group asset’s cost. CIP member asset cost may be added to its group
asset’s depreciable basis if the Allow CIP Depreciation in Group Asset flag on the
Book Controls form and the Depreciate flag on the Source Line form are both
checked.
10. Unplanned depreciation can only be entered for the group Asset if Member
tracking is not enabled for the group asset.
11. Group asset may contain member assets with DPIS in different periods / years
(i.e. assets placed in service in disparate accounting periods).
12. A group asset cannot be deleted after a member asset is added to the group.
Though a group asset can be disabled if all the member asset are either retired or
reclassified out of the group and cost of the group asset is zero.
1. Group Asset and its member assets must belong to the same book (either within
the same corporate book or same tax book).
4. A member asset date placed in service cannot be earlier than the group’s date
places in service.
5. Member asset belonging to the same group asset may have different depreciation
methods and attributes.
7. Member asset will inherit the retirement rules defined at the group asset.
Retirement rules include Recognize Gain and Loss, Recapture Excess Reserve,
Limit Net proceeds to Cost, and Terminal Gain and Loss.
8. Once an asset is assigned to a group asset, it cannot be deleted from the system
even though it is in the period of addition.
9. Unplanned depreciation is allowed for the member asset only if Member Asset
Tracking is enabled for the group.
10. A CIP member asset can be added to a group asset only if ‘Allow CIP Member in
Group Assets’ is enabled for the book.
11. Depreciation rules defined for the group asset generally supersede its member
asset’s depreciation rules. However, if Member Asset Tracking is enabled and
calculate member Amount is set as the tracking method, the depreciation rules of
the member asset’s will be used to calculate depreciation for the member assets.
12. Depreciation expense is generally posted to GL from the Group asset only.
Though there is only one exception here, if Member Asset Tracking is set to
calculate member asset amount and sum member asset depreciation to the group
is enabled. In this case the depreciation expense will be posted to GL from the
Member asset itself.
13. Reserve is generally stored and tracked for the group asset only. There is usually
one reserve account for the group asset. Though there is only one exception here,
if Member Asset Tracking is set to calculate member asset amount and sum
member asset depreciation to the group is enabled. In this case there is going to be
one reserve account for every member asset in the group.
The FA_BOOKS table has a GROUP_ASSET_ID field that stores the Group
asset to which this Member asset belongs.
C. At times a group may have many member assets attached to it. How to find which
transaction on the group asset is related to which member asset?
D. How to find the retirment and tracking options setup for the Group asset?
In the FA_BOOKS table stores advance rules set up the group asset.
Retirement options arestored in the following fields:
RECOGNIZE_GAIN_LOSS: YES/NO
RECAPTURE_RESERVE_FLAG: Y/N
LIMIT_PROCEEDS_FLAG: Y/N
TERMINAL_GAIN_LOSS: YES/NO
Tracking options are stored in the following fields:
TRACKING_METHOD: ALLOCATE/CALCULATE
EXCESS_ALLOCATION_OPTION: REDUCE/DISTRIBUTE
ALLOCATE_TO_FULLY_RET_FLAG: Y/N
ALLOCATE_TO_FULLY_RSV_FLAG: Y/N
MEMBER_ROLLUP_FLAG: Y/N
Reduction rules are stored in the following fields:
REDUCTION_RATE
REDUCE_ADDITION_FLAG: Y/N
REDUCE_ADJUSTMENT_FLAG: Y/N
REDUCE_RETIREMENT_FLAG: Y/N
The rest of the tables are same as for standalone assets. In case there is a data corruption
in the group asset, fixes are needed for the group as well as the member asset. Generic fix
does not work for group asset or its member Assets.
FA_BOOKS_SUMMARY
This table stores group assets' periodical financial information. All group financial
information changes, such as group additions, adjustments, member asset addition,
member asset adjustments, member asset retirements, group reclassifications, and
unplanned depreciations, will result in maintaining this table. This table stores the latest
group asset information for each period. This means that any retroactive adjustment will
result in updating multiple records for that group asset to reflect the latest changes to old
periods.
FA_BOOKS_GROUPS
Contains financial (cost) information for a group asset within a particular book.
FA_GROUP_ASSETS
Contains group asset definitions - flexfield and general descriptive information.
FA_GROUP_ASSET_DEFAULT
Defines accounts to be used for a group asset within a particular book. e.g. Expense
account, reserve account etc.
FA_GROUP_ASSET_RULES
Defines the depreciation rules to be followed when depreciating a group asset within a
particular book. This is also a history table.
FA_GROUP_DEPRN_RATES
Contains the depreciation rates to be used when calculating the reserve amount to be
transferred with an asset, which is being moved out of a group.
FA_GROUP_DEPRN_SUMMARY
Stores information about depreciation taken on a group asset, in a particular book in a
particular period. This is a history table.
FA_SUPER_GROUPS
Contains super group definitions - flexfield and general descriptive information.
FA_SUPER_GROUP_RULES
Defines the depreciation rules to be followed when depreciating asset groups that are
members of the super group.