Dual GAAP R12 Fixed Asset

8/20/2019 Dual GAAP R12 Fixed Asset

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Fixed As set Solu t io n fo r Dual GAAPLedg ers Usin g Oracl e Release 12

Standard Funct ional i tyBy: Jeanne Cooper

Sr. Oracle Financials Consultant

AST Corporation

September 19, 2014

Specialized. Recognized. Preferred.

The right partner makes allthe difference.

1755 Park Street, Suite 100 | Naperville, Illinois 60563 | 1.888.278.0002 | www.astcorporation.com

Ap p l i ca t ions So f tware Tec hno logy C orpora t i on


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Fixed Asset Solution for Dual GAAP Ledgers Using Oracle Release 12 Standard FunctionalityPage i

Contents

ABSTRACT .............................................................................. 1

INTRODUCTION ..................................................................... 2

FIXED ASSETS BUSINESS SCENARIO ......................................... 2

SETUP REQUIREMENTS ......................................................... 2

HIGH LEVEL SOLUTION .......................................................... 3

ACCOUNTING PROCESS FLOW ................................................ 4

ACCOUNTING MANAGER SETUPS FOR SECONDARY LEDGER .... 7

FIXED ASSET BOOKS SETUP..................................................... 9

ASSET CATEGORIES .............................................................. 11

HOW TO CAUSE 100% DEPRECIATION IN THE SAME MONTH AN ASSET

IS ADDED TO ORACLE ASSETS ............................................... 16

CONCLUSION ....................................................................... 27


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Fixed Asset Solution for Dual GAAP Ledgers Using Oracle Release 12 Standard FunctionalityPage 1

Abstract

Oracle Accounting Setup Manager is the new configuration tool foraccounting setups in General Ledger for Oracle E-Business Suite R12.

The Accounting Setup Manager can also be used to control the flow ofJournal Entries from the Primary Ledger journal entries to secondaryledger for Fixed Assets Subledger, only using the Subledger accountingoptions for secondary ledger.


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Introduction

This paper provides information to help familiarize users with some

implementation options to control the flow of Fixed Asset Journal entriesas a solution for dual GAAP ledgers. It will also describe the journalentry flow from Fixed Assets to the appropriate Ledger. The necessarysetups within the Accounting Setup Manager, Fixed Asset setups forFixed Asset Book, and Asset Categories will also be provided in detail.

Fixed Assets Business Scenario

Company XYZ has a business requirement where Assets should bedepreciated based upon local and corporate depreciation schedules and

journal entries created from both schedules should be uploaded intoappropriate ledgers.

For example: for fixed assets in China there are different depreciationschedules based upon China GAAP and US GAAP. Assets costed between $250 and $2499 are recognized in China GAAP while in USGAAP, these items are expensed.

To allow the business to perform the Asset Accounting per GAAP rule,Oracle R12 Account Setup Manager allows setups where flow of Asset journal entries can be controlled to a specific ledger.

The solution stated below meets the US GAAP and China GAAPrequirements by using the standard Oracle R12 functionality, and meetsdual GAAP scenarios including CHINA, KOREA and INDIA.

This paper describes the solution based on the CHINA scenario using thestandard R12 functionality.

SETUP REQUIREMENTS

Primary Ledger US GAAP with PRC COA

Secondary Ledger PRC GAAP with PRC COA

Fixed Asset Corporate Book pointed to Primary Ledger

Fixed Asset Tax Book based upon Corporate Book pointed toSecondary Ledger

Use Accounting Setup Manager to switch off the flow ofPrimary Ledger journal entries to secondary ledger for FixedAssets Subledger only using the Subledger accounting optionsfor secondary ledger


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H IGH LEVEL SOLUTION


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Accounting Process Flow

The following journal entries depict the accounting flow from Purchase

Order/Requisition until the item reaches the appropriate ledger. Twoaccounting flows are displayed: the first for items from 250 to 2,500USD; the second for items greater than 2,500 USD.

A. Solution for an Asset between the Value of USD 250 and 2500

(250 < 2500 USD)

PO / Requisition will enter the Asset with an Asset Clearing Account inthe Charge Account Field for all the USD values between 250 and2499.99:

AP will match the Invoice to POo FA Clearing A/C DRo AP Liability A/C CR

(The above journal entry will post to the Primary Ledger)

Mass Additions Create will run and the Asset will be sent to theFA Mass Additions Table of the FA Corporate Book.

FA Accountant will process the Asset in Mass Additions;selecting a location and a “special” asset category

FA Accountant will post the Mass Additions to Fixed Assets.o Asset Cost A/C DRo FA Clearing A/C CR

(Mass Additions journal entries will be created in the PrimaryLedger)

Transfer the Asset to the FA Tax Book by running Periodic MassCopy. Update the depreciation life in FA Tax book for the Asset based upon Local GAAP depreciation schedules, if necessary.

** The above step is a process change as Periodic Mass Copy

normally is run after Depreciation.

FA Accountant verifies the life of the Asset, in the CorporateBook is 1 month.

Run Depreciation for the FA Corporate Book. The asset will be100% depreciated based upon the life of the Asset of 1 Month.

o

Expense Account Dr. (cheat the system as DepreciationExpense Account)

o Asset Cost A/C CR (cheat the system as AccumulatedDepreciation Account)

(**The above journal entry will only go to the Primary Ledgersince the Corporate Book is pointed to the Primary Ledger andthe transfer to secondary journal entries for Assets is switchedoff.)


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Run Depreciation for the FA Tax Book. The asset will bedepreciated per Local GAAP Depreciation schedules.

o

Depreciation Expense A/C DR

o Accumulated Depreciation A/C CR

(The above journal entry will be created in the Secondary

Ledger; depreciation journal entries will be created every monthuntil the asset is fully depreciated. The Tax book is pointed tothe Secondary Ledger.)

The above Journal entries in Blue text will post to the Primary Ledger.The journal entries in Green italicized text will post to the SecondaryLedger.

B. Solution for an asset equal to or greater than USD 2500 (>=2500

USD)

PO / Requisition will enter the Asset with an Asset Clearing

Account in the Charge Account Field.

AP will match the Invoice to PO

o FA Clearing A/C DRo AP Liability A/C CR

Mass Additions Create will run and the Asset will be sent to theFA Mass Additions Table of the FA Corporate Book.

FA Accountant will process the Asset in Mass Additions;selecting location and a “normal” asset category.

Post Mass Additions to Fixed Assets

o

Asset Cost A/C DRo FA Clearing A/C CR

(Mass Additions journal entries will be created in the PrimaryLedger)

Transfer the Asset to the FA Tax Book by running Periodic MassCopy. The Tax book will be maintained per Local GAAPDepreciation schedules.

** The above step is a process change as Periodic Mass Copynormally is run after Depreciation.

o Run Depreciation for the FA Corporate Book. The asset will

depreciate per US depreciation methods.

o

Depreciation Expense A/C DR.o Accumulated Depreciation A/C CR

(The above journal entry will go the Primary Ledger.Depreciation journal entries will be created every month until theAsset is fully depreciated.)

o Run Depreciation for the FA Tax Book. The Asset will bedepreciated per Local GAAP Depreciation schedules.


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o Depreciation Expense A/C DR. o Accumulated Depreciation A/C CR

(The above journal entry will be created in the SecondaryLedger. Depreciation journal entries will be created every monthuntil the asset is fully depreciated. The Tax book is pointed to

the Secondary Ledger.)The above journal entries in Blue text will post to the Primary Ledger.The journal entries in Green Italicize text will post to the SecondaryLedger


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Accounting Manager Setups for

Secondary Ledger

The Secondary Ledger provides additional accounting representation ofthe information present in the Primary Ledger. For Secondary ledger,select Subledger Accounting Options then click on the update icon(Pencil).

Beneath Application, select Assets then click on the Pencil icon in theUpdate Accounting Options column.


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Every time a journal is posted in the Primary ledger, it gets created in theSecondary Ledger.

Set “Use Primary Ledger Amounts” to “No” to switch off the flow of all journal entry transactions for assets generated in the Fixed AssetSubledger, from the Primary ledger into the Secondary ledger.


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Fixed Asset Books Setup

Corporate Book

The Corporate FA book for China will be based upon US GAAP and will be pointed to the Primary Ledger (CHN HUTS PRC PRIMARY).

Assets costed below 2,500 USD will be expensed. The life of the Assetscosted below 2,500 USD will be set to 1 month.

Assets costed above 2,500 USD will be depreciated based upon USGAAP depreciation schedule.


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Tax Book

The Tax FA book for China will be based upon China GAAP and will bepointed to the Secondary Ledger (FA-TEST).

Assets costed above 250 USD will be depreciated based upon ChinaPRC GAAP depreciation Schedule.


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Asset Categories

*Note: Two different Asset Categories were created for the same type ofasset (i.e. Building).

First asset category “TEST.TEST” was created for assets costing < 2,500USD. HUTS Corp Book and HUTS TAX2 Book were added toTEST.TEST Asset Category.


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The difference between the HUTS Corp Book and HUTS Tax2 Book isthe account numbers used for Depreciation Expense and AccumulatedDepreciation.

For an asset costing < 2,500 USD, for the corporate book the:

- Common Expense account number was inserted in the Depreciation

Expense Account field- Asset Cost account number was inserted in the Accumulated

Depreciation Expense Account field


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For an asset costing < 2,500 USD, the “normal” Depreciation Expenseand Accumulated Depreciation accounts were still used for the TaxBook.

The second Asset Category TEST2.TEST2 was created for assets costing> or = 2,500 USD:

HUTS Corp Book and HUTS TAX2 Book were added to theTEST2.TEST2 Asset Category.


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Because the asset cost is > or = 2,500 USD in both books, “normal”Asset Cost and Accumulated Depreciation account numbers wereinserted for HUTS Corp and HUTS TAX2 for the TEST2.TEST2 assetcategory.


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How to Cause 100% Depreciation in

the Same Month an Asset is Added to

Oracle Assets

As part of the Fixed Asset Solution for Dual GAAP Ledgers, an assetcosting < 2,500 USD and posting to the FA Corporate Book must be100% depreciated in the same month the asset was added. The following procedures describe the setup up steps needed to fully depreciate an assetthe same month it is added to the Fixed Asset system.

Background: An asset was manually created for less than 2,500 USD inthe FA Corporate Book. The appropriate Asset Category was alsoselected to cause:

o the “Common Expense” account to be used in place of

Depreciation Expense

o the “Asset Cost” account to be used in place of AccumulatedDepreciation within the Corporate Book for HUTS

From the Navigator, select: Assets > Workbench

The Find Assets window will be displayed. [Enter] the asset number inthe Asset Number field, then [click] on the Find button.


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The Assets window will be displayed. [Click] on the Books button.

The Books window will be displayed. [Tab] to the yellow highlightedBook field and use the LOV to select the appropriate book (in this

scenario it is the HUTS Corp book). Then, [press] the Tab key to viewthe financial information.


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After the financial data appears, [tab] to the Salvage Value field:change the amount to 0 USD.

After the change is made, the Recoverable Cost field should display thesame amount as the Current Cost field.


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In the Depreciation tab, [click] on the Life Years field. Use the LOV tochange the Years to 0 and the Months to 1 as highlighted in the Lifes window below.

Make sure to save the changes when finished.

Return to the Navigator and select: Depreciation > Run Depreciation.

[Enter] the Book and Period for which to run Depreciation, then [click] on the Run button.

Note: Only click on the “Close Period” check box if you want to close

the period.


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The Journal Entry Reserve Ledger Report is automatically generatedafter depreciation is completed running. From the Menu Bar, select:View > Requests to review the report. The report displays the currentmonth depreciation amount for Asset # 181056. For this scenario, thetotal amount of the asset is fully depreciated in the Corporate Book

because the asset is less than 2,500 USD.

From the Navigator, select: Create Accounting Entries. This program

creates the Fixed Asset Journal Entries which can be transferred toGeneral Ledger.


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The Create Accounting Entries program will create the GL import for theJournal Entries.

Review the Journal Import Execution Report, for Status of “Success” andto ensure there are no errors.


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Change to the appropriate GL Responsibility to review the Fixed AssetJournal Entries, in GL. Select: Journal > Enter. Use the Find Journals window to locate the journal entry.

The Journals window will appear. Because the Asset #181056 amountis < 2,500 USD in the Primary Ledger, the following journal entry wascreated:

- Debit: The Common Expense account (instead of DepreciationExpense) 2,100.00 USD

- Credit: The Asset Cost account (instead of Accumulated Depreciation)2,100.00 USD


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The Financial Inquiry window in Fixed Assets displays the asset for both books.

In HUTS Corporate (Corporate Book), the asset, for < 2,500 USD has

been fully depreciated.


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In the HUTS TAX2 (Tax Book), the asset, for < 2,500 USD hasremaining life.


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Subledger Accounting – Fixed Assets Solution

F A C o r p o r a t e B o o k

(

L i n k e d t o P r i m a r y L e d g e r )

N o

Is Asset < 2,500

USD (M)

FA Accountant processes

new assets, selecting

“usual” Asset Category &Location for Assets > or =

to 2,500 USD (M)

During Month End

close, FA

Accountant

processes any

remaining assetsin Mass Additions

(M)

Asset added toMass Additions

table in Fixed

Assets (A)

FA Accountant

processes new assets,selecting a “special”

Asset Category &

Location for Assets <

2,500 USD (M)

Yes

FA Accountant willpost Mass

Additions to Fixed

Assets (A)

FA Accountant will

run Periodic Mass

Copy to transfer

assets from the FA

Corporate Book to

the FA Tax Book (A)

B

B

In the FA Corporate

Book, FA Accountant

verifies the life of the

asset (


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Subledger Accounting – Fixed Assets Solution

S e c o n d a r y

L e d g e r

F A T a x B o o k

( L i n k e d t o S e c o n d a r y L e d g e r )

P r i m a

r y L e d g e r

For the FA CorporateBook, FA Accountant

will run Accounting

Entries and journalentries will be received

in the Primary Ledger(A)

Page 1

Page 1

FA Accountant willupdate the depreciation

life in FA Tax Book for

the new assets basedupon Local GAAP

Depreciation Schedule, if

necessary (M)

For the FA Tax Book,

FA Accountant will runDepreciation (A)

FA Accountant will Create

Journal Entries and send journal entries to

Secondary Ledger (A)

For the FA Tax Book, FA

Accountant will run Accounting Entries and

journal entries will be

received in the Secondary

Ledger (A)


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Conclusion

This document provided an overview of the Fixed Asset solution for

Dual GAAP Ledgers. It highlighted the accounting journal entry flow,covered the necessary setups for Accounting Setup Manager and FixedAssets (Asset Books and Asset Categories) and provided detail steps onhow to fully depreciate an asset the same month it was added.


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Fixed Asset Solution for Dual G AAP Ledgers UsingOracle Release 12 Standard Functionality

September, 2014

AST Corporation1755 Park Street, Suite 100Naperville, Illinois 60563

Phone: 888-278-0002Fax: 630-778-1179www.astcorporation.com

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Dual GAAP R12 Fixed Asset