Group Depreciation White Paper

Group Depreciation White Paper Ver 1.0 1

ORACLE APPLICATIONS

WHITE PAPER

Group Depreciation

Prepared by Author: Anshu Malhotra –Fixed Asset Support Creation Date: 01-Mar-2006 Last Updated: 07-July-2006 Control Number: 1 Version: 1 Copyright (C) 1995 Oracle Corporation All Rights Reserved Product Design and Architecture


Table of Content 1 SCOPE........................................................................................................................................... 4

2 INTRODUCTION......................................................................................................................... 5

3 A GLOBAL PERSPECTIVE........................................................................................................ 6

3.1 CANADA.............................................................................................................................. 6 3.2 INDIA ................................................................................................................................... 8 3.3 JAPAN .................................................................................................................................. 9 3.4 UNITED KINGDOM........................................................................................................... 11 3.5 UNITED STATES ............................................................................................................... 12

4 OVERVIEW ................................................................................................................................ 14

5 SETUP......................................................................................................................................... 16

5.1 GROUP ASSET SET UP AT BOOK CONTROLS LEVEL FOR CORPORATE BOOK.............................. 16 5.2 GROUP ASSET SET UP AT BOOK CONTROLS LEVEL FOR TAX BOOK. ........................................ 18 5.3 GROUP ASSET SET UP ON ASSET CATEGORIES........................................................................ 20

6 CREATION OF A GROUP ASSET ........................................................................................... 21

6.1 A. GROUP ASSET ADDITION VIA DETAIL ADDITION ON ASSET WORKBENCH .............................. 21 6.1.1 Depreciation Tab: Method. .............................................................................................. 23 6.1.2 Depreciation Tab: Depreciation limit............................................................................... 23

6.1.2.1 Over depreciate.....................................................................................................................23 6.1.2.2 Super Group .........................................................................................................................24

6.1.3 Advanced rules tab: Retirement options. .......................................................................... 26 6.1.3.1 Retirement options: Recognize gain and loss..........................................................................27 6.1.3.2 Retirement options: Terminal gain and loss............................................................................33

6.1.4 Advanced rules tab: Tracking options .............................................................................. 34 6.1.4.1 Allocate Group Amount ........................................................................................................34 6.1.4.2 Calculate Member Asset Amount ..........................................................................................37

6.1.5 Advanced rules: Reduction rules...................................................................................... 39 6.2 GROUP ASSET ADDITION VIA QUICK ADDITIONS ON ASSET WORKBENCH............................... 41 6.3 GROUP ASSET ADDITION VIA PREPARE MASS ADDITIONS ...................................................... 43 6.4 GROUP ASSET ADDITION VIA APPLICATION DESKTOP INTEGRATOR (ADI) .............................. 43 6.5 GROUP ASSET ADDITION VIA WEB ADI................................................................................. 43

7 MEMBER ASSET ADDITION .................................................................................................. 44

7.1 MEMBER ASSET ADDITION VIA DETAIL ADDITION ON ASSET WORKBENCH ............................... 44 7.2 MEMBER ASSET ADDITION VIA QUICK ADDITIONS ON ASSET WORKBENCH............................ 46 7.3 MEMBER ASSET ADDITION: CATEGORY................................................................................. 46 7.4 MEMBER ASSET ADDITION VIA PREPARE MASS ADDITIONS.................................................... 47 7.5 MEMBER ASSET ADDITION VIA APPLICATION DESKTOP INTEGRATOR (ADI) ........................... 47 7.6 MEMBER ASSET ADDITION VIA WEB ADI.............................................................................. 48

8 DISABLING GROUP ASSETS .................................................................................................. 49

9 QUERYING A GROUP ASSET ON THE ASSET WORKBENCH OR INQUIRY FORMS... 50

10 ONE TIME ENTRY AND UPDATABLE PARAMETERS............ ........................................... 53

10.1 GROUP ASSET....................................................................................................................... 53 10.2 MEMBER ASSET.................................................................................................................... 56

11 ASSIGNING MEMBER ASSET COST TO THE GROUP ....................................................... 57

11.1 CURRENT PERIOD MEMBER ADDITION.................................................................................... 58 11.2 PRIOR PERIOD MEMBER ADDITION.......................................................................................... 61 11.3 FUTURE PERIOD MEMBER ASSET ADDITION ........................................................................... 64


11.4 CIP MEMBER ASSET ADDITION ............................................................................................. 64

12 ADDING A GROUP OR A MEMBER ASSET WITH RESERVE ....... .................................... 65

12.1 ADDING A GROUP ASSET WITH RESERVE................................................................................. 65 12.2 MEMBER ASSET ADDITION WITH RESERVE............................................................................. 65

13 DEPRECIATION........................................................................................................................ 68

13.1 GROUP DEPRECIATION WITHOUT MEMBER TRACKING OPTION. ................................................ 68 13.2 GROUP DEPRECIATION WITH MEMBER TRACKING OPTION........................................................ 71

13.2.1 Allocate group amount ................................................................................................ 71 13.2.1.1 Allocate Group Amount with Distribute Excess .....................................................................71 13.2.1.2 Allocate group amount with reduce excess.............................................................................76 13.2.1.3 Allocate Group amount with Allocate to fully retired and reserved Assets...............................79

13.2.2 Calculate member amount........................................................................................... 79 13.2.2.1 Calculate Member amount with sum Member Asset Depreciation to Group disabled...............79 13.2.2.2 Calculate Member amount with sum Member Asset Depreciation to Group enabled................81

13.3 DEPRECIATION LIMIT ............................................................................................................ 84 13.4 OVER DEPRECIATE................................................................................................................ 87 13.5 DEPRECIATION OVERRIDE..................................................................................................... 88

13.5.1 Allocate group amount ................................................................................................ 90 13.5.1.1 Group amount override .........................................................................................................90 13.5.1.2 Member amount override ......................................................................................................91

13.5.2 Calculate member Asset amount.................................................................................. 93 13.6 UNPLANNED DEPRECIATION.................................................................................................. 93

13.6.1 Allocate group amounts............................................................................................... 93 13.6.1.1 Unplanned depreciation performed at group level...................................................................93 13.6.1.2 Unplanned depreciation performed at Member level...............................................................95

13.6.2 Calculate member amount..........................................................................................100

14 JOURNAL ENTRIES FOR GROUP ASSETS..........................................................................102

14.1 DEPRECIATION OVERRIDE....................................................................................................105 14.2 UNPLANNED DEPRECIATION.................................................................................................107

15 SUMMARY................................................................................................................................111

15.1 GROUP ASSET RULES...........................................................................................................111 15.2 MEMBER ASSET RULES........................................................................................................112

16 APPENDICES............................................................................................................................114

16.1 APPENDIX 1: HOW TO READ THE GROUP AND MEMBER ASSET TRACES? .................................114 16.2 APPENDIX 2: NEW TABLES CREATED FOR GROUP ASSET........................................................118


1 SCOPE 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.


2 INTRODUCTION 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. More so due to globalization most of multinational companies need to satisfy Multiple tax regulations across geographical boundaries. In many countries it is required to depreciate the asset in Groups rather than individual assets. For example the Indian ‘Block’ of asset where similar assets as defined in the tax regulations, are grouped and then depreciated. Group depreciation caters to many of these regulatory requirements, thus facilitating companies to meet global regulatory requirements.


3 A GLOBAL PERSPECTIVE In many countries, Accounting Principles and Tax regulations require depreciation to be calculated and reported by Group of Assets. Group Asset allows the companies to meet the global regulatory requirement needs. Business requirements for some countries are provided in the following section. 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 grouping prescribed by law

Add a group asset and add member assets to it. 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 the Group.

Depreciation is calculated and tracked at the group asset level. Do not enable member tracking at book level.

Group depreciation is required only for the Tax book.

The group asset must exist in the corporate 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.

Add individual asset with reserve to the group.

Enter a standalone asset with reserve and then reclass it to the Group asset. Direct addition of a member asset with reserve is not allowed. Refer to Member asset addition with Reserve


It is not required to claim the entire calculated depreciation amount in any given year. Any amount between Zero and calculated depreciation could be claimed in a given year.

This is done via entering Override depreciation at the group level. Refer to Depreciation override for more details.

User to control treatment of transferred/retired member asset from the Group. Remove the NBV of these member assets from the group.

Select the transfer type ‘ENTER’ to enter the amount of reserve/expense to be removed from the Group while transferring member asset. Enter the retired reserve while retiring the member asset.

Add CIP asset to the group and depreciate it as part of the group. Able to control the depreciation start date for each cost addition to CIP assets.

Enable CIP asset Addition to the Group at Book level. Able to depreciate selected Source lines as part of Group at asset level. Inclusion of any source line in the depreciation calculation is taken as a current period adjustment.

Depreciation is calculated as a percentage of NBV balance at the end of fiscal year. Special treatment of asset added and retired in the fiscal year. 50% rule on inclusion of incremental cost in the depreciation basis.

Select depreciation basis rule “Year end balance with positive reduction” while entering the depreciation method. For the group asset, Enter reduction rules as follows: Reduction Rate as 50%. ‘Addition’ check box :ON ‘Adjustment’ check box :ON ‘Retirement’ check box :ON If (Addition plus/minus Adjustments less proceeds of sale > 0), Then half of such excess amount must be deducted from the depreciation basis of the Group. In case this condition is not satisfied than the rule is ignored. Refer Advanced rules: Reduction rules and depreciation basis rule white paper note number 276453.1.

Postponing recognition of Gain/loss on retirement of asset till the retirement of the last asset in the Group. Limit net proceeds of sale to the cost of the retiring member and/or to the group NBV.

Retirement option defaults as’ Do not recognize’ gain or loss. Set Terminal gain and loss to be ‘Recognize Immediately’. Check the ‘Limit Net Proceeds to Cost’ and ‘Recapture Excess Reserve’ checkboxes. Excess amount of (Net proceeds-less Cost of the retired Member assets) is booked as gain/loss. And (Net proceeds less NBV of Group) recaptured for the group to bring NBV to 0. Refer Advanced rules tab: Retirement options.

Group, selected Group assets into higher-level grouping.

Maintain Super group to facilitate high-level grouping. Only flat rate methods can be set for a


Super Group. Refer Super Group for more details on this.

Note: Net proceeds here refer to sales proceeds less cost of removal. 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. Table 2: Requirement for INDIA Regulatory Requirement How Group Asset meets these requirements? Assets classified under respective grouping prescribed by law

Add a group asset and add member assets to it. The group asset cost is the sum of its member asset cost. Refer to Advanced rules tab: Tracking options


Enter a standalone asset with reserve and than reclass it to the Group asset. Direct addition of a member asset with reserve is not allowed. Refer to Member asset addition with Reserve



Depreciation calculated and tracked at Member asset level and summed up to the group.

Enable member asset tracking at Book level. Choose calculate member asset amount and check sum member asset to group check box in the tracking option for the group asset.

User to control treatment of transferring the member asset out of the Group. Remove the NBV of transferred member assets from the group.

Select the transfer type ‘ENTER’ To enter the amount of reserve/expense to be removed from the Group.

Depreciation is calculated as a percentage of NBV balance at the end of fiscal year. If Date in service of the newly acquired asset falls in the first half of the fiscal year, 100% cost included in the depreciation basis. While if it fall in the second half of the fiscal year, 50% cost included in the depreciation

Select depreciation basis rule ‘Year end balance with Half year Rule’ while entering the depreciation method. For the group asset, Enter reduction rules as follows: Reduction Rate as 50%. ‘Addition’ check box :ON ‘Adjustment’ check box :OFF ‘Retirement’ check box :OFF


basis of the Group. This rules applies only to positive cost addition.

Refer Advanced rules: Reduction rules and depreciation basis rule white paper note number 276453.1.

Postponing recognition of Gain/loss on retirement of asset till the retirement of the last asset in the Group. Group NBV cannot be negative.

Retirement option default to ‘Do not recognize’ gain or loss. Set terminal gain and loss to ‘Recognize Immediately’. Check ‘Recapture Excess Reserve’ checkbox. (Net proceeds less NBV of Group) recaptured for the group to bring NBV to 0. Refer Advanced rules tab: Retirement options.

Perform unplanned depreciation at member asset level.

Unplanned depreciation is allowed at member asset level since member asset tracking is enabled. Refer Unplanned depreciation.

Allow backdated transaction for the group and/or member asset at the book level

Not possible to enter backdated transactions for group assets.

Note: Net proceeds here refer to sales proceeds less cost of removal. 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




Enter a standalone asset with reserve and than 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 period DPIS.

Enter an asset with any DPIS between the Group DPIS and the current period date.

Group depreciation is required only for the Tax as well as fiscal reporting purpose.

Enable group asset for the tax as well as the corporate book. Refer Group Asset Set up at Book Controls level for Tax Book.

Depreciation is calculated and reported at the Group level. Though

(a) Select ‘Allocate Group Depreciation’ in the Tracking option for the Group Asset. Do not


depreciation needs to be calculated and tracked at member asset level as well, but depreciation methods at member asset level can be different than that of the group.

enable ‘Allocate to fully retired or reserved assets’ and check ‘Reduce excess’ check box. (b) Select ‘Calculate Member asset amount’ and pick member or group depreciation method.

Annual depreciation is calculated as Aggregate of the period to date depreciation amount. The period to date depreciation amounts is calculated as percentage of aggregate balance of depreciation basis of member asset at the end of each period. Thus depreciation can be cost or NBV based.

Select depreciation basis rule “Flat rate extension” while entering the depreciation method. Refer Advanced rules: Reduction rules and depreciation basis rule white paper note number 276453.1.

Treatment of the fully reserved asset in depreciation calculation. When member tracking is enabled: Cost based Method: fully reserved member asset to be excluded from the depreciation calculation. NBV based Method: fully reserved member asset should remain included in the depreciation Calculation.

For the tracking method Calculate Member Amount. Depreciation basis of fully reserved or fully retired member assets is excluded from the depreciation calculation. Refer Advanced rules tab: Tracking options

Enable the ability to restrict member reserve amount to depreciation limit

Depreciation limit can be set at member level and summed up to the group. Refer Depreciation Tab: Depreciation limit

Deduction of salvage value from depreciation basis.

Depreciation basis = Cost less salvage value if depreciation method is Flat rate Cost based.

User to control treatment of transferred/ retired member asset from the Group. Remove the NBV of the transferred assets from the group.

Select the transfer type ‘ENTER’ To enter the amount of reserve/expense to be removed from the Group. Enter the retired reserve while retiring the member asset.

Perform unplanned depreciation at member asset level.

Unplanned depreciation is allowed at member asset level since member asset tracking is enabled.

Override depreciation at the group level

Override allowed on at group asset as well as Member level. But override cannot be specified for the group as well as the member in the same period for allocate group amount. Refer to Depreciation override for more details.

Gain and loss need to be recognized on retirement.

Retirement option is grayed out with default as ’Recognize immediately when retired’ gain/ loss. Refer Advanced rules tab: Retirement options.

Add CIP asset to the group. Enable CIP asset Addition to the Group at Book level. Refer to Group Asset Set up at Book


Controls level for Corporate Book. 3.4 UNITED KINGDOM 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







Group, selected Group assets in to higher-level grouping.

Maintain Super group to facilitate high-level 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 on retirement of asset till the retirement of the last asset in the Group. Limit net proceeds to the cost of the retiring member. The group can have a negative NBV.

In the retirement Option, select ‘Do not recognize’ gain or loss. Set terminal gain and loss to’ Recognize Immediately’. Check the ‘Limit Net Proceeds To Cost’ Excess amount of (Net proceeds less Cost of the retired Member assets) booked as gain/loss. Refer Advanced rules tab: Retirement options.

Depreciation basis calculated as a percentage of NBV balance at the end of fiscal year.

Select depreciation basis rule “Year end balance” while entering the depreciation method. Refer Advanced rules: Reduction rules and depreciation basis rule white paper note number 276453.1.

User to control treatment of transferred member asset out of the Group. Remove only the COST of the transferred assets.

Select the transfer type ‘ENTER’ and enter the amount of reserve/expense as zero since the reserve is not to be moved out.


Note: Net proceeds here refer to sales proceeds only. No cost of removal is adjusted against reserve. 3.5 UNITED STATES The group depreciation feature was created to cater to the needs of the telecommunication industry in US. Federal Communications Commission (FCC) for the telecommunication industry requires similar asset to be grouped together by category. US Federal Energy Regulatory Committee (FERC) for the Utilities industry requires similar asset to be grouped together by “FERC code”. Asset groupings may be further subdivided by vintage year and location. Asset depreciation Range (ADR) for Income Tax regulations require similar assets to be grouped (as defined in the tax code) first in ‘Vintage Accounts” by year of acquisition. Depreciation is calculated and tracked at group level only. No depreciation is to be calculated or tracked at member level. The table5 below lists some of the requirements of United States and how they are met by Group asset. Table 5: Requirement for UNITED STATES Regulatory Requirement How Group Asset meets these requirements? Assets classified under respective grouping prescribed by law


Add individual asset with a prior period DPIS.

Enter an asset with any DPIS between the Group DPIS and the current period date.

Group, selected Group assets into higher-level grouping based on rate category.

Maintain Super group to facilitate high-level grouping. Only flat rate methods to be set for a Super Group. Refer Super Group for more details on this.



Postponing recognition of Gain/loss on retirement of asset till the retirement of the last asset in the Group. And limit the proceeds to the cost of the retiring member asset cost. Though the NBV of the group can be negative.

In the Retirement option select ‘Do not recognize’ gain or loss. Set terminal gain and loss to ‘Recognize Immediately’. Check ‘Limit Net Proceeds to Cost’ check box. Excess amount of (net proceeds less Cost of the retired member asset) booked as gain/loss. Refer Advanced rules tab: Retirement options.

For retirements with gain and loss to be recognized immediately on retirement, remove the cost and reserve of the retiring asset from the

While performing a retirement on a member asset, do not enter the reserve retired; the cost and reserve of the retiring asset will be removed from the Group.


group. User to control treatment of transferred member asset out of the Group.

Select the transfer type ‘ENTER’ and enter the amount of reserve/expense to be transferred out.

Transfer of group reserve between groups without transferring any member asset.

Use the ‘Reserve transfer’ button on the asset workbench to transfer the reserve between groups.

Depreciation projections What-IF analysis can be used for group depreciation projections.

Future period asset transaction Future transaction like depreciation rate change or salvage value change is not possible.

Adjustments resulting from Changes to the assets are amortized over the remaining periods.

All adjustment are amortized, expensed adjustments are not possible for Group asset.

Use Half year prorate convention Prorate conventions are not relevant for group assets.

Change the depreciation rate for a group and backdate the change To a prior period.

Depreciation rate change is treated as a current period adjustment only.

Note: Net proceeds here refer to sales proceeds less cost of removal.


4 OVERVIEW Group asset is a collection of Individual Assets or Member assets.

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.

2. Enter: The user is required to enter reserve and/or expense amount to be

transferred. System will process group reclassification using manually entered amounts.

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.

2. Recognize Gain and Loss at the time of retiring a Member asset.

After retiring the last asset in the group, the remaining reserve will be booked as the Terminal Gain and Loss.

Cost = 300

Cost = 100Cost = 100 Cost = 100

Member Asset Member Asset Member Asset

Group Asset


Depreciation is calculated and tracked at Group asset level, but for reporting and auditing purposes Member Asset tracking may also be enabled. There are two options for member asset tracking:

1. Allocate Group amount: The group depreciation amount is allocated based on depreciation basis of member asset. Reduce or distribute excess can be checked to facilitate treatment of Excess depreciation allocated to a fully reserved asset. Though depreciation can also be allocated to fully retired and fully reserved member assets. The two options are mutually exclusive.

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 SETUP 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.

Allow CIP Member in Group Assets To Allow CIP member asset in a Group check the “Allow CIP Member in Group Assets” checkbox. This will allow CIP member asset to the group though the cost of the CIP asset will not be included in the depreciation calculation for the Group asset until the CIP asset is capitalized.


Allow CIP Depreciation in Group Assets In Canada tax regulations, CIP asset may be added to a Group asset and depreciated as part of the Group asset cost. To Allow depreciation of CIP asset as a part of the group asset cost check the “Allow CIP Depreciation in Group Asset”. This just enables the functionality. This would not make all CIP assets to be depreciated. 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.


Allow Member Asset Tracking The depreciation is calculated and tracked at Group asset level but for reporting and auditing purpose depreciation may need to be tracked at member asset level also. To allow Member asset tracking for the Book check “Allow Member Asset Tracking”. Allow Intercompany Member asset Assignments Check “Allow Intercompany Member asset Assignments” if member assets are required to have different balancing segments than the balancing segment value of the Group Asset. Intercompany journal entries will be create to balance the balancing segment within a single journal entry batch posted to GL. If the flag is not set, the member asset must have the same balancing segment as the group asset. 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. Allow mass copy Allow mass copy enables mass copy for the tax book. Copy addition, Copy adjustment, Copy retirements, Salvage value, last period dictate mass copy of individual and member assets from the Corporate book to the Tax book. These setup options do not apply to a Group asset. Member Asset will be copied as stand alone asset to the Tax book. Member’s Group asset assignments to the group will only be copied based on the setup in the group rules.


Group Rules-Group Addition Group asset addition dictates mass copying of a group asset Addition from the Corporate to tax book. There are two values: Copy and Do Not Copy. The default value is Do Not Copy Copy: Addition of a group asset is copied from the corporate book to tax book. The category must exist in the corporate and tax books for copying the group asset onto the Tax book. Do Not Copy: Group asset is not copied from the corporate to the tax book. The member asset will be added as a standalone asset in the tax book. The group asset will not exist in the tax book unless manually adding the group asset in the Tax book via Asset workbench.

Group Rules- Member Asset Assignments Group Asset Assignments dictates mass copying member’s Group Asset assignments from the Corporate to Tax book. Otherwise, Member assets are copied as a standalone asset from the corporate book to tax book. The group asset must exist in both the corporate and tax book when copying member asset’s group membership. There are two values: Copy and Do Not Copy. The default value is Do Not Copy. Copy: The same Group membership will be copied to the tax book. This option supersedes the default Group assignments on the tax book category default. Do Not Copy: Assets will be added to the default group asset in the tax book category defaults. If there is no default group in the tax book category default, the member asset will be added as a standalone asset in the tax book. This standalone asset can be reclassified to a group asset later.


For example let us take a Group asset GROUP A that has two members MEMA and MEMB. Let us see what will be copied in the following table: Scenario Group asset

addition Member asset assignment

Group asset in Tax book

MEMBER asset in the tax book

A Copy Copy GROUP A MEMA and MEMB added to GROUP A

B Do Not Copy Copy None None

C Copy Do Not Copy Group A MEMA and MEMB will be added to the group based on group asset in the tax book category defaults

D Do Not Copy Do Not Copy None None In the scenarios B and D the MEMA and MEMB will be copied as a standalone asset in the tax book. 5.3 Group Asset Set up on Asset Categories A group asset default can be set at the category level. This group asset will default for the Member assets added in this category.


The group asset default set in the tax book’s category default, dictates member’s Group Asset assignments for the tax book when Group Rules- Member Asset Assignments is set to do not copy. This is set in a scenario where the tax book needs to have a different member’s Group Asset assignments than the corporate book. 6 CREATION OF A GROUP ASSET 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

6.1 A. Group asset addition via detail addition on asset workbench 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.


Parent Asset A group or its member cannot be assigned a parent or child asset. Thus after selecting group as the asset type Parent asset field is grayed out. 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. In the books window enter information for the Group Asset. 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.


6.1.1 Depreciation Tab: Method. 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. Prorate convention and prorate date Prorate convention is not used for group or member assets. The depreciation start date is determined using the group asset’s Date in service. Prorate convention is for display only. Amortizations start date and Amortize adjustment checkbox. Amortization start date defaults to the date in service. All additions or adjustments to the group are amortized so the amortize adjustment checkbox is always checked and is non-updatable. 6.1.2 Depreciation Tab: Depreciation limit Type There are three depreciation limit options for the group asset: Null : No depreciation limit is set up for the group asset. Percentage: Depreciation limit will be calculated as percentage of the group asset cost. Group asset depreciation limit=Group asset cost* depreciation limit percentage Sum of member Assets: Group asset depreciation limit is the sum of the member asset’s depreciation limit 6.1.2.1 Over depreciate Over depreciation field allows the group asset to depreciate beyond its cost that is the group asset reserve may exceed group asset cost. There are three options available: 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.


Allow depreciation cannot be set to ‘Allow’ or ‘Allow and Depreciate’ if anyone of the following condition are true: � Depreciation method is calculate, table, formula or Flat-NBV. Though formula

and Flat-NBV are allowed if over depreciate is set to Allow. � ‘Recapture Excess Reserve’ flag in the retirement option is set to Yes. � ‘Allocate to Fully Retired or Reserved Flag’ in the tracking option is set toYes. Depreciation limit is allowed to be set when ‘Over Depreciate’ is set to ‘Allow’ or ‘Allow and Depreciate’ from the rollup patch 2942785 or later on FA.M. There was a restriction on this in FA.M (Patch 2719046) but was later lifted in the rollup. 6.1.2.2 Super Group Super Group is a grouping of group assets.

Group A Group B Group C

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.


Enter the super group name and description. The enabled check box needs to be checked for active super group. This can be used to deactivate the super group as well. The table FA_SUPER_GROUPS stores data entered here. 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.


A super group can be attached to a group asset in the depreciation limit block on the books window on the asset workbench. Super group rules: � To add a super group to a group asset, over depreciate should be Allow or Allow

and Depreciate for the group asset. � One super group can be attached to a number of group assets. This can be done as a backdated group adjustment as well. � Group assets depreciation will be calculated collectively using the method defined by the super group, and allocate to each group asset based on the weighted group cost (each group asset cost/aggregate group asset cost belonging to the same group asset). � Super group depreciation will be validated against the super group depreciation limit. � Any change in the depreciation method and depreciation limit for the super group is processed for the group asset via a concurrent program: Process Super group change. This change can be identified by the calling interface being FAPSGC and transaction key as SG in the fa_transaction_headers table for the group asset. � Any change to the depreciation method or depreciation limit for the super group is treated as a current period transaction for the group asset.

6.1.3 Advanced rules tab: Retirement options. The retirement rules at the group asset level will apply to all member assets belonging to such group. Retirement transaction is performed at the member asset only. The retired member asset will inherit their group asset’s retirement rules. Member asset retirement can only be a current period transaction. And retirement prorate convention is just a display field.


6.1.3.1 Retirement options: Recognize gain and loss There are two types of retirement rules regarding recognition of gain and loss for group asset.

1. Immediately when retired. Gain and loss is recognized at the time of retiring a member asset. Cost and reserve of the retiring member asset would be removed form the group. Therefore, retiring member asset’s reserve must be determined in order to calculate gain and loss. This is usually proportionate to the retiring member asset’s cost in the Group. Retiring member asset reserve = (Member asset cost/ Group asset cost) * Group asset reserve The retiring member asset’s reserve can also be entered manually, if the reserve retired is required to be a different figure that the proportionate reserve amount. And this reserve will be used to calculate the gain and loss on retirement. In the retirement form the ‘Retiring reserve amount’ field can be populated with the reserve retired. Though the default is the proportionate reserve amount for the retiring member asset. 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 journal entry that is passed is as follows: DR Reserve (Retiring member assets Reserve) DR NBV retired CR Cost (Retired member assets Cost) DR Proceeds clearing (Proceeds of sale) CR Proceeds (Proceeds of sale) DR Removal cost (Cost of Removal) CR Removal cost clearing (Cost of Removal)

The gain or loss on retirement is the difference between NBV retired and net proceeds (proceeds of sale less cost of removal)

2. Do not recognize gain and loss. In “ Do Not Recognize gain and loss’ option, gain and loss is not recognized at the time of retirement. At Each member asset retirement proceeds of sale, cost of removal and the retired cost are adjusted with the group reserve. No gain or loss is recognized. Group Reserve before member asset retirement.

Add Proceeds of Sale Less Cost of removal Less retired cost

----------------------------------------------------- Group reserve after member asset retirement ------------------------------------------------------ The following journal entry is create for the above: DR Proceeds Clearing (Sales of Proceeds) CR Group Reserve (Sales of Proceeds) DR Group Reserve (Retired member asset Cost) CR Cost (Retired member asset cost) DR Reserve (Cost of Removal) CR Removal Cost Clearing (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


Group Reserve before member asset retirement. 23142.85

Add Proceeds of Sale 6000.00 Less Cost of removal 1000.00 Less retired cost 50000.00

------------------------------------------------------------------------------ Group reserve after member asset retirement -21857.20 ------------------------------------------------------------------------------- The journal entry passed for the above is as follow:

For Do Not Recognize gain and loss option we have two more options:

a) Limit Net proceeds to Cost Limit net proceeds to cost flag restricts the proceeds amount for the member asset to the retiring member assets cost. This flag is only enabled if recognize gain and loss is set to Do not recognize. If this flag is set, net proceeds from retirement can be added to the group reserve until it is equal to the retiring assets adjusted cost any additional amounts are recognized as gain. The calculation is as follows: NBV retired = Net proceeds (Proceeds of Sale less Cost of Removal)

Less Cost.


The journal entry that is passed is as follows:

DR Proceeds Clearing (Sales of Proceeds) CR Group Reserve (Sales of Proceeds) DR Group Reserve (Retired member asset Cost) CR Cost (Retired member asset cost) CR NBV retired (Net proceeds in excess of Cost) DR Group Reserve (Cost of Removal) CR Removal Cost Clearing (Cost of Removal)

For Example:

Group A Cost: 80000 Member 1 Cost: 50000 Member 2 Cost: 30000 Member 1 is retired in the current open period. Depreciation reserve is 13333.33

Member 1 is retired with: Proceeds of sale 55000 Cost of removal 3000

The NBV gain to be booked is calculated as followed: = Net proceeds (Proceeds of sale less cost of removal) less cost retired. = 52000 (55000-3000) -50000 = 2000

Thus since the net proceeds of sale exceed the cost of the asset retired, the excess amount is booked as a gain or a loss. The Journal entry will be as follows:


b) Recapture Excess Reserve Recapture Excess Reserve dictates whether a group asset can have a negative NBV. This flag is enabled for both the retirement options. (Refer Retirement options: Recognize gain and loss) If this flag is set and do not recognize is set for retirement option, the proceeds from retirement can only be added to the group reserve until it is equal to the group asset cost. Any additional amounts are recognized as gain or loss. The NBV is reduced to zero and the depreciation stops for the group. The Recapture Excess flag is updatable only if the over depreciate field is set to ‘Do Not Allow’. The calculation is as follows for the two retirement options: b.1. Do Not recognize gain or loss

The group reserve is adjusted with the proceeds of sale, cost of removal and cost retired.

Group Reserve before member asset retirement. Add Proceeds of Sale

Less Cost of removal Less retired cost

----------------------------------------------------- Group reserve after member asset retirement ------------------------------------------------------

Recaptured Reserve amount = Group reserve after Retirement

Group cost less Group asset cost The recaptured amount is booked as NBV retired. And the NBV of the Group is set to Zero.


The journal entry passed for the above is as follows: DR Proceeds Clearing (Sales of Proceeds)

CR Group Reserve (Sales of Proceeds) DR Group Reserve (Retired member asset Cost) CR Cost (Retired member asset cost) CR NBV retired (Recaptured reserve) DR Reserve (Cost of Removal) CR Removal Cost Clearing (Cost of Removal) For Example: Group A Cost: 35000 Member 1 Cost: 15000 Member 2 Cost: 20000

Member 1 is retired in the current open period. Depreciation reserve is 5833.33

Member 1 is retired with:

Proceeds of sale 30000 Cost of removal 500 Group Reserve before member asset retirement. 5833.33

Add Proceeds of Sale 30000.00 Less Cost of removal 500.00 Less retired cost 15000.00

------------------------------------------------------------------------- Group reserve after member asset retirement 20333.33 ------------------------------------------------------------------------- But the group asset cost after retirement is only 20000. The NBV of the Group after retirement: = Cost after retirement less group reserve after retirement = 20000-20333.33 = -333.33

Since the NBV of the group cannot be negative thus 333.33 will be recaptured and booked as gain or loss.

The Journal entry will be as follows:


b.2 Immediately when retired. While retiring the member asset the ‘Retiring reserve amount’ is calculated proportionality for the retiring member asset but this can be entered manually as well. In such a case recapture excess reserve flag checks whether the group asset will have a negative NBV after retirement. If yes, that excess amount is recaptured and recognized as the gain or loss in addition to the gain and loss already recognized. Recaptured Reserve amount = Group reserve after retirement less

Group cost after retirement 6.1.3.2 Retirement options: Terminal gain and loss When the last member of the asset is retired from the group the remaining reserve balance is treated as terminal gain and loss. Terminal gain and loss will recognized only when group asset cost becomes zero. There are three methods in recognizing terminal gain and loss.

A. Recognize immediately. The terminal gain and loss is recognized immediately in the period when it occurred. That is the terminal gain and loss is recognized on the retirement of the last member in the group Asset.

B. Defer recognition to end of fiscal year The recognition of terminal gain and loss is postponed to the last period of the current fiscal year. However, if an asset is added to the group before the end of the current fiscal year, terminal gain and loss is no longer valid. Therefore, no terminal gain and loss will be recognized.

C. Do not recognize Terminal gain and loss will not be recognized. The reserve amount will remain in the group. Thus this group will have a negative NBV.


6.1.4 Advanced rules tab: Tracking options Depreciation is usually calculated and tracked at the group asset level. But in some countries statutory requirement mandate that the depreciation is calculated as well as tracked at member asset level also. The Member Asset Tracking feature provides this flexibility.

Cost = 90000Depreciation = 4500

Cost = 10000Depreciation= 500



Member Asset 1 Member Asset 2 Member Asset 3

Group Asset

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. There are two tracking methods:

a) Allocate Group Amounts. b) Calculate Member Asset Amounts

6.1.4.1 Allocate Group Amount

This method allocates the depreciation calculated for the Group to its member asset based on depreciation basis of the member asset. Allocated depreciation amount = (Depreciation basis of a member asset/ Depreciation

Basis of the Group asset)* Group depreciation. 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. If the ‘Allocate to Fully Retired or Fully Reserved Assets’ option is not checked than the Group asset depreciation will not be allocated to the fully


retired or fully reserved member asset. This works with one of the following two options:

� 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

The depreciation method is a NBV based with 20% rate quarterly Group asset depreciation=14200*0.2/4=710


Depreciation basis of the group asset is 14200 Member Asset 1 = 2200 Member Asset 2 = 8000 Member Asset 3 = 4000

Allocated depreciation to Member Asset 1= 710* (2200/14200) = 110 Allocated depreciation to Member Asset 2= 710* (8000/14200) = 400

Allocated depreciation to Member Asset 3= 710-(110+400) = 200

After allocation a validation is done as to whether the member asset is becoming fully reserved after allocation: -

Allocated depreciation to Member Asset 1 = 17910+110 = 18020>18000 (Cost) Allocated depreciation to Member Asset 2 = 2400+400 = 2800<9000 (Cost) Allocated depreciation to Member Asset 3 = 1200+200 =1400<4500 (Cost)

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). Thus the depreciation charged for member asset is as follows:

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. Like in the above Example for Reduce Excess: The balance 20 will be distributed between member 2 and Member 3. Recalculate the group amount as Original Group = Depreciation less allocated amount to Member 1. The recalculate group amount = 710 – 90 = 620.


Distribute the recalculated group level amount to the other member assets: Member Asset-2 Recalculated Allocated Amount =

=620 * 8,000/(8,000 +4,000) = 413.33 Member Asset-3 Recalculated Allocated Amount = 620 – 413.33 = 206.67 Check the amounts again… Member Asset-2: Reserve Amount = 2,400 + 413.33 = 2,813.33 < 9,000 Member Asset-3: Reserve Amount = 1,200 + 266.67 = 1,466.67 < 4,500 Member Asset-1: Allocated Depreciation = 90. Member Asset-2: Allocated Depreciation = 413.33

Member Asset-3: Allocated Depreciation = 206.67.

The reduce excess and distribute excess are mutually exclusive options.

6.1.4.2 Calculate Member Asset Amount This method calculates the depreciation amount of member assets individually.

The member asset can be depreciated by: � 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.

� Member Method: The depreciation method used to calculate the Member asset depreciation is the member assets depreciation method. With this option the total depreciation expense amount of the Member may not be equal to the group asset. In such a situation the group depreciation amounts will be booked at the Group asset level, the member asset amount are just for calculation purpose.


To facilitate a way by which this mismatch between the group and the sum of member asset depreciation can be avoided is “Sum Member Asset Depreciation to Group” option. � Sum Member Asset Depreciation to Group: When this checkbox is check

the Member asset depreciation expense amount will be summed up to the Group asset level. The group level depreciation amount will be replaced by this amount. In such a case the Member asset depreciation amount will be booked at the Member asset level only.

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% Depreciate by Group Method:

Member Asset 1 = 20000*0.2/4 = 1000 Member Asset 2 = 15000*0.2/4 = 750 Member Asset 3 = 10000*0.2/4 = 500 ------------- Total of Member asset Depreciation = 2250 ------------ Group Asset depreciation = 45000*0.2/4 = 2250 which the same as the Total of the Member asset depreciation amounts. Depreciation by Member Method:

Member Asset 1 = 20000*0.1/4 = 500 Member Asset 2 = 15000*0.2/4 = 750 Member Asset 3 = 10000*0.3/4 = 750 ------------- Total of Member asset Depreciation = 2000 ------------- Group Asset Depreciation = 45000*0.2/4 = 2250 which is not equal to the Total of the Member asset depreciation amounts. Now if Sum up member option is enabled when depreciate by Member Method is selected:


Member Asset 1 = 20000*0.1/4 = 500 Member Asset 2 = 15000*0.2/4 = 750 Member Asset 3 = 10000*0.3/4 = 750 ------------- Total of Member asset Depreciation = 2000 ------------- After all member asset calculation is done, the group level depreciation will be replaced by the total of the depreciation expense of member asset. Though the depreciation will be posted from the member asset level only. Group Asset Depreciation = 2250

� 2000

6.1.5 Advanced rules: Reduction rules

Reduction Rule- Reduction Rate, Addition, Adjustment, Retirement The reduction rate will be applied when calculating the depreciation basis for the group asset. This is used to satisfy the 50% rule in Canada and India. User will set up the default reduction rate for a group asset. Such reduction rate will be defaulted to its member’s assets. This reduction rate is only a default setup at the group asset level, and may be changed at each of the member transaction (i.e. addition, adjustment, retirement).


The reduction rate is used to reduce a percentage of the transaction amount from the depreciation basis of the group before depreciation is calculated for the group asset. The range of transactions on which this rate is to be applied can be selected by checking the checkbox for addition, adjustment or retirement. 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.

Beginning depreciation basis 100000 Add Addition 40000 Add Adjustment 20000 Less Proceeds of Sales (10000) ------------- Balance before 50% Reduction rule 150000 Less 50% of excess amount (150000-100000) (25000)

------------- Group depreciation basis after Reduction rule 125000

------------- Reduction Rules can only be set up if the depreciation method attached to the group asset has one of the following depreciation basis: � Year End balances with positive reduction amount

To do a set up for Canada (CCA) set the reduction rate to 50% and set the ‘Addition’ check box :ON ‘Adjustment’ check box :ON ‘Retirement’ check box :ON � Year End balance with half year Rule. To do the set up for India 50% rule set the reduction rule to 50% and set the ‘Addition’ check box :ON ‘Adjustment’ check box: Unchecked ‘Retirement’ check box: Unchecked

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.


6.2 Group Asset Addition via Quick Additions on Asset Workbench A group asset can be entered via quick additions as well. The asset type should be ‘Group’. The depreciation rules like depreciation method, depreciate flag, Prorate convention will default from the category. The date placed in service will default to a current period date, which can be changed to a prior period as well. The cost will be Zero, as Group asset cannot have a cost of its Own. Group asset cost is the sum of its member assets cost.

In the assignments block enter the distributions. 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. Over depreciate: It defaults to ‘Do not allow’. Super group: It grayed out as the over depreciation flag is set to ‘Do Not Allow’.


In the advanced rule tab, the retirement options are defaults as follows Retirement options Recognize gain and loss: It defaults to ‘Do Not Recognize’ with both recapture excess reserve and limit net proceeds checkboxes unchecked. Terminal gain and loss: It defaults to ‘Recognize Immediately’. 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.


6.3 Group Asset Addition via Prepare Mass Additions A Group asset can be added via mass addition also. This is similar to mass addition of any other asset except the fact that the Asset type must be ‘Group’. A future addition can be performed for a Group Asset though a future adjustment or a future capitalization cannot be done. When creating the asset via prepare mass addition, depreciation rules default from the category. The Other fields like in retirement or member tracking options will default the same way as for quick additions. Though these fields may be changed if required via the asset workbench.

6.4 Group Asset Addition via Application Desktop Integrator (ADI) A group asset cannot be added via ADI. The asset type ‘Group’ is not a valid input in the ADI layout. 6.5 Group Asset Addition via Web ADI A Group asset can be added via Web ADI. Web ADI is included in the Family Pack G code for 11i Patch 3653484. Also required is Web ADI Patch 11i.BNE.D patch 3218526. Thus for patch sets FA.M, FA.N and FA.O the group asset will need to be manually entered from the asset workbench or via the prepare mass additions form. Though from FA.P onwards Group asset can be added via Webadi. Navigate to Mass Additions>Additions Integrator>Excel 2000>Integrator Fixed Assets-Additions>Book>layout Add Assets-default. The Asset type ‘Group Asset’ should be picked from the Asset type List of values.


The Rest of the mandatory fields need to be added just like any other assets. The depreciation rules will default from the category set up. The rest of the fields are set as default similar to the defaults when the asset is added via quick additions. Most of the retirement or member tracking option can be updated from the asset workbench if a value different than the default is required. Though no validation happens as to the zero cost of the group asset. If a cost is entered it will get picked up while uploading the data to interface but post mass addition will set the cost back to zero. 7 MEMBER ASSET ADDITION 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

7.1 Member Asset addition via detail addition on asset workbench The Member asset addition is just like any other asset except for the Group asset tab on the asset Workbench. Group asset fields need to be populated with the Group asset Number. This is the group to which the member asset will belong.


In the group reclassification tab: Transfer type defaults to calculate and it cannot be updated. Group Amortization start date: Every member asset addition is an amortized adjustment to the group so the amortization start date is the date on which this member asset addition will take affect for the group asset. It defaults to the Date placed in service of the member asset but can be updated to any date from Date placed in service of the group asset to the current date. Reduction Rate: Reduction rate is enabled when the group asset is populated. The rate defaults from the rate entered for the group. But additions check box should also be checked in the Reduction Rules for the Group Asset to get the fields enabled for member asset additions.

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.


7.2 Member Asset Addition via Quick Additions on Asset Workbench A member asset can be assigned to a group asset by populating the group asset field with the group asset number, in the books region of the Quick Addition form. This is the group asset to which this member asset will belong.

7.3 Member Asset Addition: Category A group asset default can be set at the category level. This Group asset will default while adding any asset to the category from the Asset Workbench.


For all asset added in this category via post mass addition this group asset will default. And this is irrespective of the fact that no Group asset id was entered for the asset in the fa_mass_additions table. 7.4 Member Asset Addition via Prepare Mass Additions A member asset can also be added via prepare mass additions. The group asset number needs to be added in the group asset field on the header in the Mass additions form. This asset will be added as a member asset belongs to a group. The group asset number given here will supersede what is entered as a default in the category setup.

7.5 Member Asset Addition via Application Desktop Integrator (ADI) A member asset can be added via Application Desktop Integrator. For any member asset addition the Group asset need to exist beforehand. A group_asset_id field has been added to the template from ADI ROLL UP Patch 3731741 giving the ADI version 7.1.34. This field can be populated with the group asset id to which this assets need to be added as a member. This will supersede the defaults entered at the category level.


Every member asset addition is an amortized transaction for the group asset. The amortization start date defaults to the member assets Date placed in service. If a different amortization start date than the date placed in service is entered, it will be ignored.

7.6 Member Asset Addition via Web ADI A member asset can be added to the Group via Web ADI also. Navigate to Mass Additions>Additions Integrator>Excel 2000>Integrator Fixed Assets-Additions>Book>layout Add Assets-detail.


The group_asset_id field needs to be entered to assign the member asset to the group. This will supersede the default entered at the category level. The Amortization start date defaults to the member assets date placed in service. A different amortization start date may not be entered. If the data is pre-validated, the upload will error and if not pre-validated the amortization start date entered will be ignored while uploading the lines. 8 DISABLING GROUP ASSETS 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. So how to remove a group asset from the Book? A group asset can be disabled from the asset workbench by checking the disable checkbox on the depreciation tab of the books window.

Prerequisites for disabling a group asset: � Fully retire all the member asset of this group, or � Reclassify the members out of this group, and � The cost of the group asset must be zero.


Disabling a group asset in one book has no affect on its status in other books. A disabled group asset will not depreciate and no transaction can be performed on it. Disabled Group assets are excluded from the group asset list of values in the asset workbench, Mass Additions, mass change, and mass reclassification window. A disabled group asset should not be set as default in category defaults as a member asset cannot be added to a disabled group. 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. 9 QUERYING A GROUP ASSET ON THE ASSET WORKBENCH OR

INQUIRY FORMS. 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 the member asset belonging to a particular group, let the asset type be blank and enter the group asset number in the Group asset Field. All members assigned to that group asset will come up. 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.


The asset type of ‘Capitalized’ as the selection criteria will output all member or standalone asset entered in that book. The group asset will not be output via this selection criterion. The asset type needs to be ‘CIP’ if only CIP asset entered in the book need to be queried.

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.


10 ONE TIME ENTRY AND UPDATABLE PARAMETERS 10.1 Group asset

Cost, original cost, recoverable cost, net book values are not updatable fields. Salvage value type The salvage value type can be changed at any point of time in the group asset life. The change of Salvage value will be treated as a current change only. 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. Date Placed In Service


The date placed in service can be changed before depreciation begins for the Group asset and no member asset has been assigned to the group. After one depreciation run is done this field becomes unupdatable. Prorate convention and prorate date Prorate convention and dates are not updatable after the period of addition. Anyways they are display only field, the depreciation start date is the date placed in service of the group asset. Amortized Adjustment All transactions on the group or its member are amortized thus this field cannot be updated. Amortization start date The Form always shows the current period date as the amortization start date. But this can be updated depending on the amortization start date need to be entered for a transaction being performed on the Group or its member. 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.


Retirement options Retirement option can only be changed in the period of addition and before any member asset is assigned to the 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.


10.2 Member Asset

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. Amortization start date The Form always shows the current period date as the amortization start date. But this can be updated depending on the amortization start date needed to be entered for a transaction being performed on the Member asset.


Depreciation limit Depreciation limit can be changed any time for the member asset. But this will have an effect only if the depreciation limit type for the Group asset is ‘Sum of member assets’. The change will be taken as a current period change only.

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. 11 ASSIGNING MEMBER ASSET COST TO THE GROUP 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


Some rules to keep in mind while assigning Member asset to a Group: � Addition of a member asset will be treated as a Cost Adjustment to the Group asset level. � The cost is Stored and tracked at member asset level and summarized to the group asset. Group asset cost = Sum of Member assets cost � The member asset Date placed in service cannot be older than the group asset date placed in service. � Group asset may contain member asset with date placed in service in different periods. (i.e. Assets placed in service is disparate accounting periods) � The asset cost is tracked and posted to GL from member asset level. � The depreciation expense and accumulated depreciation tracked and stored from the Group asset level, unless member tracking is enabled for the Group. With member tracking the depreciation is also tracked and stored at the member asset level. The journal entries will be posted to GL from the Group asset level only except if member tracking option of ‘Calculate Member Asset Amount’ with ‘Sum up member asset depreciation to group’ checked.

11.1 Current period member addition Addition of member asset is treated as a cost adjustment to the group. The group asset cost is the sum of its member assets. 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).


Group A

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:


Group A

Calendar period Jan-2000 Feb-2000 Member 1 10000 10000 Member 2 15000 Group Asset Cost 10000 25000 Depreciation basis 10000 24166.67 Group depreciation 833.33 3020.83 Group depreciation For JAN-2000 = Cost/life in months = 1000/12 = 833.33 Depreciation basis for the Month of Feb-2000 = New Cost-Reserve = 25000-833.33 =24166.67 Group depreciation for the Feb-2000 = Depreciation Basis/Remaining life of the Group Asset = 24166.67/8 = 3020.83 Remaining life as on Feb-2000

Date placed in service for the group asset is Oct-1999. So 4 periods have already passed leaving only 8 months in the Group Assets life. This can also be calculated as follows: =Rate adjustment factor*life in months = 0.6666672*12 = 8 Months


Group A

11.2 Prior period member addition Prior period member asset addition is treated as an amortized adjustment to its group in prior period. Process group adjustment (FAPGADJ) concurrent program is spawned to process the prior period member asset addition to the Group. The transactions work quite similarly to current period addition except for the catchup calculated due to the prior period addition. 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


Member 2

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

Calendar period Jan-2000 Feb-2000 Mar-2000 Member 1 10000 10000 10000 Member 2 15000 Group Asset Cost 10000 10000 25000 Depreciation basis 10000 10000 23000 Total Depreciation Charged for the period 2000 1000 4750 Catchup 1000 1875 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


Remaining life For the Group Asset:

DPIS for the group asset is Oct-1999 and the Member 1 is added with DPIS of Dec-99, So 2 periods have already passed leaving only 10 months in the group assets life. This can also be calculated as follows: =Rate adjustment factor*life in months = 0. 833334*12 = 10 Months

Depreciation charged for the Month of Feb-00 = Cost/remaining life for the group asset = 10000/10 = 1000 Depreciation basis for the Month of Mar-2000

= New Cost-Reserve charged till Jan-00 (Since the DPIS of Member 2 is Feb-00)

= 25000-2000 = 23000 Catch up depreciation = (Depreciation Basis/remaining life for the group asset) * No. of

periods for catchup- depreciation already charged for Feb’00 = (23000/8)*1-1000 = 2875-1000 = 1875 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 Remaining life for the Group asset:

DPIS for the group asset is Oct-1999 and the Member 2 is added with DPIS of Feb-00, So 4 periods have already passed leaving only 8 months in the group assets life. This can also be calculated as follows: =Rate adjustment factor*life in months = 0.6666672*12 = 8 Months


Group A

The catch up depreciation is booked as an expensed depreciation adjustment for the group asset. 11.3 Future period Member Asset Addition A member asset may be added as a future period addition. Future period addition is enabled only via mass additions form. If an asset is added with future period transaction date, the system will the asset when the future transaction date becomes current. This addition will behave just like a current period member asset addition. 11.4 CIP Member Asset Addition CIP asset can be added to a group if CIP assets are allowed in the for Group asset at the book level. The cost of the CIP member asset will not be included in the group asset cost. It would be included in the Group depreciation basis when CIP asset are capitalized. Capitalization of a CIP asset behaves just like a current period member asset addition. Though a prior period capitalization date can also be given provided it falls between the group asset date placed in service and the current period date. 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.


In the source line form after checking the ‘Depreciate in Group asset’ check box a prior period amortization start date can be entered, though it has to be between the date placed in service of the CIP member asset and the current date. For mote details refer Group Asset Set up on Book Controls for Corporate Book 12 ADDING A GROUP OR A MEMBER ASSET WITH RESERVE 12.1 Adding a group asset with reserve A group asset cannot be added with a reserve. The YTD and Accumulated depreciation fields are grayed out. But reserve and YTD can be entered for a group asset in the period of addition after one Member has been added to the Group asset. 12.2 Member asset addition with Reserve A member asset cannot be added to the group with an Accumulated depreciation or YTD figure. In fact YTD and Accumulated depreciation fields are grayed out the moment a group number is attached to the member asset. And the group asset field is grayed out for the asset that had YTD and Accumulated depreciation figures entered for them. The only way to add a member asset with reserve is to add the asset as a standalone asset with YTD and Accumulated depreciation. Than reclassify the standalone asset to the Group. The reserve of the standalone asset is added to the group asset reserve. The concurrent program process group adjustment is spawned to process the reclassification.

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.


Group A

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


Member 1 was added with a reserve of 4000 that is added to the Group asset reserve. The reserve transfer entry happens for group A and the balancing entry happens in the Member 1. This reserve amount will be knocked off with the cost of the asset to calculate the adjusted cost which is the depreciation basis for Group A. Group A

Adjusted cost for Group A

=10000-4000 = 6000

Remaining life for the Group asset: DPIS for the group asset is Jan-2000 and the Member 1 is reclassed to Group A with Group Amortization start date of Apr-00, So 3 periods have already passed leaving only 9 months in the group assets life. This can also be calculated as follows: =Rate adjustment factor*life in months = 0.750001*12 = 9 Months

Depreciation for the month of Apr-00 = Depreciation basis/Remaining life of the Group Asset = 6000/9 = 666.66 Member 1 shows a YTD of 4000 still while the reserve shows Zero as it has been moved to Group A. A reclass transaction will not move YTD amounts just the reserve amounts are moved. Thus YTD will not be in sync for the group A and Member 1. The YTD of Member 1 is 4000 while the YTD of Group A is 666.66 only, that is, the depreciation expense for Apr-00. 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. Depreciation for group asset = Sum of the depreciation of Member Assets. Depreciation methods available for group assets include: � Flat rate � Life based method � Formula based. Unit of production method is not available for group assets. For an asset of the type “Group” the unit of production depreciation methods will not be there in the List of values for depreciation methods. 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. 13.1 Group depreciation without member tracking option.

The depreciation is calculated, tracked and posted at the group asset level. 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: 25000 (DPIS: Oct-2000) Member 1 Cost: 15000 (DPIS: Oct-2000) Member 2 Cost: 10000 (DPIS: Oct-2000) Depreciation Method for Group A 80% Flat rate NBV Based Depreciation Method for Member 1 and Member 2 is 60% Flat rate

Depreciation basis rule Use transaction period basis Depreciation calendar Monthly Group A

Member 1


Member 2

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

The Monthly depreciation is

=(Group Asset Cost* Rate)/No of periods in a year = (25000*0.80)/12

=1666.66 Group A

Member 1


Member 2

No depreciation is calculated for the member assets. Since depreciation is calculated only at the group asset level, it is posted to GL from Group asset level itself.

13.2 Group depreciation with member tracking option.

With member asset tracking option enabled the depreciation is tracked at the group asset as well as member asset level. But the way depreciation is calculated for a member asset differs for different tracking options. The following section will explain how member asset tracking behaves with different tracking options.

13.2.1 Allocate group amount

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.

13.2.1.1 Allocate Group Amount with Distribute Excess After every depreciation run a validation happens as to whether the member asset is becoming fully reserved after the current period depreciation amount is allocated. In case one of the member becomes fully reserved than the excess depreciation that could not be charged to the member asset due to it becoming fully reserved, is distributed among the remaining members. This validation happens after every depreciation calculation.

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.


Period 1 (Jan-00 period counter 24001) The Monthly depreciation is

=(Group Asset Depreciation basis* Rate)/No of periods in a year = (35000*0.80)/12

= 2333.33 Group A

Member 1

Member 2

Allocation of Group depreciation happens as follows: =Group asset depreciation * (member asset depreciation basis/Group Assets

Depreciation basis) Member 1 = 2333.33* (20000/35000) = 1333.33 Member 2 = 2333.33* (15000/35000) = 1000.00

Period 2 (Feb-00 period counter 24002) An override of 25000 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 = 25000* (20000/35000) = 14285.71 Member 2 = 25000* (15000/35000) = 10714.29


Depreciation is run for 3rd (Mar-00 period counter 24003) and 4th (Apr-00 period counter 24004) period, with calculations similar to period 1 (Jan-00 period counter 24001).

Period 5 (May-00) An override of 1000 is entered for Group A Allocation of Group depreciation happens as follows:


Member 1 = 1000* (20000/35000) = 571.43 Member 2 = 1000* (15000/35000) = 428.57

Period Group A’s

Depreciation basis Override entered

Group A Member 1 Member 2

1 35000 2333.33 1333.33 1000.00 2 35000 25000 25000.00 14285.71 10714.29 3 35000 2333.33 1333.33 1000.00 4 35000 2333.33 1333.33 1000.00 5 35000 1000 1000.00 571.43 428.57 Total 32999.99 18857.13 14142.86

Thus the NBV for the group at the end of period 5 is as follows: =Cost less depreciation charged till the 5th period.

Group A NBV = 35000 - 32999.99 = 2000.01

Period 6 (Jun-06 period counter 24006) a new Member 3 is added. Member 3 Cost: 10000 (DPIS: Jun-2000)

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


The Monthly depreciation is =(Group Asset Depreciation Basis* Rate)/No of periods in a year

= (12000.01*0.80)/12 = 800

Allocation of Group depreciation happens as follows: =Group asset depreciation * (member asset depreciation basis/Group Assets Depreciation basis)

Member 1 = 800* (20000/45000) = 355.56 Member 2 = 800* (15000/45000) = 266.67 Member 3 = 800* (10000/45000) = 177.77 Depreciation is run for the 7th (Jul-06 period counter 24007), 8th (Aug-00 period counter 24008) and 9th (Sep-00 period counter 24009) periods with the same calculations.

Period Group A’s

Depreciation basis

Group A Member 1 Member 2 Member 3

6 12000.01 800 355.56 266.67 177.77 7 12000.01 800 355.56 266.67 177.77 8 12000.01 800 355.56 266.67 177.77 9 12000.01 800 355.56 266.67 177.77 Total 20279.37 15209.54 711.08

As usual the validation as to whether any of the member asset becomes fully reserved after depreciation is calculated for the 9th period.

Check the allocated amount: Member 1 = Total Reserve Amount = 20279.37 > 20000

The depreciation that can be charged for the Member 1 = 76.19 Excess Depreciation Allocated = 279.37

Member 2 = Total Reserve Amount =15209.54 > 15000 The depreciation that can be charged for the Member 2 = 57.13

Excess Depreciation Allocated = 209.54

Member 3 = Reserve Amount= 533.31+ 177.77 = 711.08 < 10000

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


Here the group depreciation amount remains the same irrespective of some of its member asset becoming fully reserved, the remaining member take the burden of extra depreciation.

Group A

Member 1

Member 2

Member 3


13.2.1.2 Allocate group amount with reduce excess After every depreciation run a validation happens as to whether the member asset is becoming fully reserved after the current period depreciation amount is allocated. In case one of the member assets becomes fully reserved than the excess depreciation that could not be charged to the member asset due to it becoming fully reserved, is reduced from the Group asset depreciation amount. This validation happens after every Depreciation calculation.


Group A

Member 1

Member 2

Period 1 (Jan-00 Period counter 24001) The Monthly depreciation is

=(Group Asset Depreciation Basis* Rate)/No of periods in a year = (25000*0.80)/12

= 1666.67


Allocation of Group depreciation happens as follows: =Group asset depreciation * (member asset depreciation basis/Group Assets Depreciation basis)

Member 1 = 1666.67* (15000/25000) = 1000 Member 2 = 1666.67* (10000/25000) = 666.67

Period 2 (Feb-00 Period counter 24002) A depreciation override of 20000 for Group A

Allocation of Group depreciation happens as follows:


Member 1 = 20000* (15000/25000) = 12000 Member 2 = 20000* (10000/25000) = 8000 Period 3 (Mar-00 Period counter 24003) Allocation of Group depreciation happens as follows:


Member 1 = 1666.67* (15000/25000) = 1000 Member 2 = 1666.67* (10000/25000) = 666.67

Period Group A’s

Depreciation basis Override entered

Group A Member 1 Member 2

1 25000 1666.67 1000.00 666.67 2 25000 20000 20000.00 12000.00 8000.00 3 25000 1666.67 1000.00 666.67 4 25000 550 1216.66 550.00 666.67 Total 24550.00 14550.00 10000.00

Period 4 (Apr-00 Period counter 24004) A depreciation override of 550 is entered for the Member 1


Thus, Member 1 = 550 (due to override) Member 2 = 1666.67* (10000/25000) = 666.67 (Allocated depreciation amount)

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

Period 5 (May-00 Period counter 24005) Allocation of Group depreciation happens as follows:


Member 1 = 1666.67* (15000/25000) = 1000 Member 2 = 1666.67* (10000/25000) = 666.67

A validation happened as to whether asset would become fully reserved after the depreciation is allocated.

Member 1 = Cost - Reserve till period 4 = 15000- 14550 = 450 Thus depreciation to the extent of 450 out of 1000 can be allocated to the asset.

Member 2 = Cost - Reserve till period 4 = 10000-10000 = 0.00 Thus no depreciation can be allocated to Member 2.

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 1

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.

13.2.2 Calculate member amount

The member asset depreciation amount is calculated based on the depreciation rule entered at the group or member asset level.

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.

13.2.2.1 Calculate Member amount with sum Member Asset Depreciation to

Group disabled. The member asset amounts are calculated based on the group or the member asset depreciation rules. If the member asset depreciation rules are different than the group asset rules, the group asset depreciation and the total of the member asset depreciation may not be equal. There is only one depreciation reserve account for the Group and depreciation is posted to GL at group asset level only.


For example: Group A Cost: 50000 (DPIS: Jan-2004). Depreciation method: STL 60 months Member 1 Cost: 30000 (DPIS: Jan-2004). Depreciation method: STL 36 months Member 2 Cost: 20000 (DPIS: Jan-2004). Depreciation method: Flat 33% Depreciation basis rule Use transaction period basis Depreciation calendar Monthly Tracking Method: Calculate member amount Depreciation by: Member Method

Group A

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


Member 2 Depreciation:

= (Member Asset Cost*rate)/No. Of periods in a Year. = (20000*.33)/12 = 550

Sum of Member asset depreciation: = Member 1 depreciation + Member 2 Depreciation = 833.33+550 = 1383.33

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.


For example Group A Cost: 60000 (DPIS: Feb-2004). Depreciation method: STL 60 months Member 1: 30000 (DPIS: Feb-2004). Depreciation method: STL 36 Months Member 2: 30000 (DPIS: Feb-2004). Depreciation method: STL 60 months Depreciation calendar Monthly Tracking Method: Calculate member amount Depreciation by: Member Method And Sum Member Asset Depreciation to Group is checked.

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).


= (30000/60) = 550

Sum of Member asset depreciation = Member 1 depreciation + Member 2 Depreciation

= 833.33+500 = 1333.33

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

There is no depreciation booked for the group asset as the depreciation is calculated, booked and posted from the member asset level. A depreciation amount of 833.33 will be booked to GL from Member 1 and 500 will be booked to GL from Member 2.

Member 1

Member 2

There are other factors that affect the calculation of depreciation for the group and its member asset. They are as follows:

• Depreciation Limit • Over Depreciate. • Depreciation Override. • Unplanned depreciation.


The following section handles how these factors affect depreciation calculation for the group asset and its member asset. 13.3 Depreciation limit Depreciation limit can be set for the Group asset. It can either be a set as a percentage of group asset cost or sum of member assets depreciation limit. The group depreciation charged is validated against the depreciation limit set for the Group similar to stand alone assets. This validation is also done at the member level if member tracking is enabled. The following explains how depreciation limit affects group depreciation calculation with member asset tracking enabled.

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 Member tracking is enabled with allocate group amounts enabled and reduce excess checked.

Depreciation limit : Sum of Member assets. Group A Depreciation limit: 17000 Member 1 Depreciation limit: 10000 Member 2 Depreciation limit: 7000

Group A


Member1

Member 2

The Monthly depreciation is =(Group Asset Depreciation basis* Rate)/No of periods in a year

= (25000*0.80)/12 =1666.66 Allocation of Group depreciation happens as follows: =Group asset depreciation * (member asset depreciation basis/Group Assets

Depreciation basis) Member 1 = 1666.66* (15000/25000) = 1000 Member 2 = 1666.66* (10000/25000) = 666.66


In the second period (Period counter 24002) depreciation override of 5700 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 = 5700* (15000/25000) = 3420 Member 2 = 5700* (10000/25000) = 2280

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. Asset Depreciation (A) Adjusted recoverable cost (B) C= B-A Group A 7366.66 8000 633.33 Member 1 4420 5000 580 Member 2 2946.66 3000 53.33 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. Asset Depreciation (A) Adjusted recoverable cost (B) C= B-A Group A 7800 8000 200 Member 1 4800 5000 200 Member 2 3000 3000 0 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.


Group A

Member 1

Member 2

13.4 Over depreciate Over depreciation field allows the group asset to depreciate beyond its cost that is the group asset reserve may exceed group asset cost. There are three option here ‘Do not allow’, ‘Allow’ and ‘Allow and depreciate’. Do not allow means the group NBV cannot be negative at any time.


If over depreciate is set to ‘Allow’ or ‘Allow and depreciate’ then the validation as to NBV being equal to zero or negative does not happen here. For 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. But for Allow and depreciate the depreciation will continue for the group assets until the group asset cost becomes zero.

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. 13.5 Depreciation override Depreciation override allows the user to enter a group depreciation amount instead of the calculated depreciation amount. The overriding amounts are to be inputted via an open interface table FA_DEPRN_OVERRIDE. From FA.M the table can be populated from the override form. Navigation>Depreciation>Override


This feature is intended to satisfy Canada CCA requirement. In Canada, companies are not required to claim the system calculated group depreciation in any given year. Instead they may choose to claim depreciation amount from zero to the system calculated amount as group asset depreciation in the current fiscal year. 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.

The periodic depreciation for the asset is: = (Cost*0.60)/12 = (10000*0.60)/12 = 6000/12 = 500 A depreciation override amount of 7000 is entered for May-00 (Period counter 24005) for the Group asset. Thus after depreciation run for May’00 a periodic depreciation of 500 is overridden by 7000 entered in the fa_deprn_override table. Though validation is done as whether the group asset is becoming fully reserved after the depreciation override. If the group asset becomes fully reserved then the depreciation run will error, provided over depreciate is set to ‘Do not allow’.


Depreciation override can be entered for a member asset as well, if Member tracking is enabled. Though the behavior is different for the two tracking methods: 13.5.1 Allocate group amount

For allocate group amount override cannot be entered for both Group and its members in the same period.

13.5.1.1 Group amount override When the manual override for the group will be allocated, even if ‘Reduce Excess’ is selected. The calculation will be treated as ‘Distribute Excess’. The accumulated depreciation amount after calculation will be validated against the recoverable cost or depreciation limit of the member as well as the group. If after allocation a member asset becomes fully reserved, the excess amount will be allocate proportionately to the other member assets in the group.


Period 1 (Jan-00 period counter 24001) The Monthly depreciation is

=(Group Asset Depreciation basis* Rate)/No of periods in a year = (35000*0.80)/12

= 2333.33 Allocation of Group depreciation happens as follows: =Group asset depreciation * (member asset depreciation basis/Group Assets

Depreciation basis) Member 1 = 2333.33* (20000/35000) = 1333.33 Member 2 = 2333.33* (15000/35000) = 1000.00 Period 2 (Feb-00 period counter 24002) An override of 25000 is entered for Group A Allocation of Group depreciation happens as follows:


Member 1 = 25000* (20000/35000) = 14285.71 Member 2 = 25000* (15000/35000) = 10714.29


Group A

Member 1

Member 2

13.5.1.2 Member amount override

While processing the override for a member asset, a validation will happen as to whether the member or the group asset becomes fully reserved after depreciation override. In case the asset becomes fully reserved the depreciation run will error. 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 The Monthly depreciation is =(Cost* Rate)/No of periods in a year

= (50000*0.60)/12 =2500 Allocation of Group depreciation happens as follows: =Group asset depreciation * (member asset depreciation basis/Group Assets

Depreciation basis)


Member 1 = 2500* (10000/50000) = 500 Member 2 = 2500* (15000/50000) = 750 Member 3 = 2500* (25000/50000) = 1250 For Member 1 a depreciation override amount of 7500 is entered in May-2000 (period Counter 24005)

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

For the Group asset the depreciation is calculated at as follows: Member 1 = 7500 Member 2 = 2500* (15000/50000) = 750 Member 3 = 2500* (25000/50000) = 1250 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


13.5.2 Calculate member Asset amount

The override amounts for the member asset or the group are applied instead of the calculated amount. Though if sum-up option is enabled, system will replace the Group level amounts with sum of member amounts. Thus depreciation override cannot be set at the Group asset level under sum up option.

13.6 Unplanned depreciation An unplanned depreciation amount can be entered for a group asset via Asset Workbench-book form. Unplanned depreciation is available if the depreciation method is Flat for the Group asset. Unplanned depreciation cannot be entered for an asset that has no member assigned to it. A zero cost asset cannot have an unplanned transaction performed except for the case where the cost is Zero but the over depreciate is ‘Allow’ or ‘Allow and depreciate’. The behavior of unplanned depreciation for group asset is quite similar to standalone asset if member tracking is not enabled. Though here also a validation is done as to the fully reserved status of the group as well as the member asset. With member Asset tracking enabled unplanned depreciation with behave as follows with different tracking methods:

13.6.1 Allocate group amounts Unplanned depreciation can be entered for the group as well as its member:

13.6.1.1 Unplanned depreciation performed at group level When the unplanned depreciation is entered for the group asset, it will be allocated among its member asset. Even if ‘Reduce Excess’ is selected, the calculation will be treated as ‘Distribute Excess’. The accumulated depreciation amount after depreciation calculation will be validated against the recoverable cost or depreciation limit of the group as well as the member asset. If after the depreciation calculation, any member asset becomes fully reserved, excess amount that cannot be charged due to asset becoming fully reserved, will be allocate proportionately to the other member assets in the group. 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 The Monthly depreciation is =(Group asset depreciation basis* Rate)/No of periods in a year

= (15000*0.80)/12 = 1000


In the second period (Period counter 24011) an unplanned depreciation of 12000 is entered for group A. Thus the depreciation for the period is 13000 i.e. 12000 unplanned depreciation plus 1000 Monthly depreciation. Group A

This depreciation charged for the group will be allocated to the member asset based on their depreciation basis. Allocation of Group depreciation happens as follows: =Group asset depreciation * (member asset depreciation basis/Group Assets

Depreciation basis) Member 1 = 1000* (10000/15000) = 666.67 Member 2 = 1000* (5000/15000) = 333.33 The same way the unplanned depreciation is also allocated: Member 1 = 12000* (10000/15000) = 8000 Member 2 = 12000* (5000/15000) = 4000 Thus total depreciation charged for the member assets are as follows: =Allocated unplanned depreciation +monthly depreciation Member 1 =8000+666.67 = 8667.67 Member 2 = 4000+333.33= 4333.33 Member 1


Member 2

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.

13.6.1.2 Unplanned depreciation performed at Member level The unplanned depreciation is added to the depreciation allocated from the group asset. When ever an unplanned depreciation is entered for the member asset a validation happens as to whether the unplanned depreciation is more than the NBV of the member asset. 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


The Monthly depreciation is =(Group asset depreciation basis* Rate)/No of periods in a year

= (15000*0.80)/12 = 1000 In the second period (period counter 24011) an unplanned depreciation of 8333.33 is entered for Member1.Thus the group depreciation for the period is 9333.33 i.e. 8333.33 unplanned depreciation plus 1000 Monthly depreciation. The depreciation is entered at the member asset level but the journal entry is posted from the Group asset level only. Group A

The net unplanned depreciation entered is 9000-666.67 that is 8333.33.

Allocation of Group depreciation happens as follows: =Group asset depreciation * (member asset depreciation basis/Group Assets

Depreciation basis) Member 1 = 1000* (10000/15000) = 666.67 Member 2 = 1000* (5000/15000) = 333.33 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 1

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


The depreciation for the group in the period is 1900 i.e. 900 unplanned depreciation and 1000 monthly depreciation (period counter 24012). Allocation of Group depreciation happens as follows: =Group asset depreciation * (member asset depreciation basis/Group Assets

Depreciation basis) Member 1 = 1000* (10000/15000) = 666.67 Member 2 = 1000* (5000/15000) = 333.33 The same way the unplanned depreciation is also allocated: Member 1 = 900* (10000/15000) = 600 Member 2 = 900* (5000/15000) = 300 Member 1

Thus total depreciation charged for the member assets are as follows: = Allocated unplanned depreciation+ monthly depreciation Member 1 =600+666.7 = 1266.67. After allocation of current period (period counter 24012) the member asset reserve will be: = 9666.67+1266.67 = 10933.34 The cost of Member asset is 10000. Out of the unplanned depreciation of 600 to be allocated to the Member one only 333.33 can be allocated to member 1 as it is becoming fully reserved. Thus excess depreciation allocated to member 1 =10933.34-10000

=933.34


Will be charged to member 2 in addition to the already allocated depreciation amount. Member 2 =(300+333.33)+933.37= 1566.67 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).


13.6.2 Calculate member amount Unplanned depreciation can be entered for the group as well as the member when the tracking method is set to calculate member amount. If sum up option is enabled than unplanned depreciation cannot be entered at the group asset level. 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

The Monthly depreciation for Member 1 is =(Group asset depreciation basis* Rate)/No of periods in a year

= (15000*0.60)/12 = 750 The Monthly depreciation for Member 2 is =(Cost* Rate)/No of periods in a year

= (20000*0.60)/12 = 1000 An unplanned depreciation has been performed on Member 1 of 1500 in Jul-00 (Period counter 24007). Member 1

The depreciation for the month of Jul-00 (Period counter 24007) is = Unplanned depreciation + monthly depreciation = 1500+750 = 2250


The member 2 or the Group A are unaffected by the unplanned depreciation performed on Member 1. Member 2

Group A


The depreciation charged for the member assets are as follows: Member 1 = 2250 Member 2 = 1000 Depreciation will be posted to GL from member asset only. Thus the group A will show 3250 for the period Jul-00 (Period Counter 24007) on the asset workbench as well as inquiry form. Though this amount will not be visible at the table level (fa_deprn_summary table). The sum up option will sum member asset depreciation amounts and show it on the forms.

14 JOURNAL ENTRIES FOR GROUP ASSETS 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.


The retirement of a member asset is a Group adjustment for the Group asset thus all other lines except the cost line come with the transaction type of Group Adjustment. The cost line has the transaction type of Full retirement 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.


Depreciation journal is always posted to General Ledger at the group Asset level only. If member tracking is enabled and tracking method is Allocate group amount than depreciation figures might be allocated to the member assets but the journals will be posted from the group asset only. No depreciation journal will be created for the member asset. The one exception to the above, is a situation when tracking method is calculate member amount and sum member asset depreciation to group enabled. Here the depreciation journal will be posted to General ledger at the member asset level. For example: Take four group assets. Group Asset Number

Member Asset Number

Tracking method Depreciation for the period

DEPRN1 Member tracking not enabled 500 MEMDEPRN1 0 DEPRN2 Member tracking not enabled 500 MEMDEPRN2 0 DEPRN3 Allocate Group amount 2500 MEMDEPRN31 500 MEMDEPRN32 750 MEMDEPRN33 1250 DEPRN4 Calculate Member asset

amount with sum up option enabled

0

MEMDEPRN41 7500 MEMDEPRN42 1000


The above drill down report shows the depreciation charged for Feb-00 in the book. DEPRN1 and DEPRN2 are group Assets, which do not have Member tracking enabled While DEPRN3 has member tracking set to Allocate group amount. For all the three groups the depreciation is posted to GL only at the Group asset level. DEPRN4 has member asset tracking set to calculate member amount and sum up option enabled. Here the depreciation is posted to GL only at the member asset level. Besides the depreciation calculated via the depreciation engine there are two ways of manually entering depreciation. They are depreciation override and unplanned depreciation and are handled in the following sections. 14.1 Depreciation Override Depreciation Override entered for the group asset is posted to GL at the level of the group asset in all scenarios. Whether the Override has been entered for the group or the member asset depreciation override is booked from the Group asset level only. 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. Group Asset Number

Member Asset Number


DEPRN1 Member tracking not enabled 500 MEMDEPRN1 0 DEPRN2 Member tracking not enabled 500 MEMDEPRN2 0 DEPRN3 Allocate Group amount 2500 MEMDEPRN31 500 MEMDEPRN32 750 MEMDEPRN33 1250 DEPRN4 Calculate Member asset

amount with sum up option enabled

0

MEMDEPRN41 750 MEMDEPRN42 1000 DEPRN5 Allocate Group amount 1500 MEMDEPRN51 500 MEMDEPRN52 1000


An override of 7000 and 2000 respectively has been set for the Group asset DEPRN1 and DEPRN2 while an override of 7500 is entered for member asset MEMDEPRN31.

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:


MEMDEPRN31 7500 (Override amount entered) MEMDEPRN32 750 (Monthly amount allocated from the group depreciation of 2500) MEMDEPRN33 1250 (Monthly amount allocated from the group depreciation of 2500) --------- 9500 --------- 14.2 Unplanned depreciation Unplanned depreciation entered for the group asset is posted to GL at the level of the group asset. Unplanned depreciation cannot be entered for the member asset if member tracking is not enabled. 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. Group Asset No.

Member Asset No.


Unplanned depreciation

ALL3 Member tracking not enabled

800

MEMAll3 0 ALL6 Allocate Group amount 1000 12000 MEMALL61 666.66 MEMALL62 333.34 ALL7 Allocate Group amount 1000 MEMALL7 666.66 8333.33 MEMALL72 333.34 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


ALL6

MEMALL61

MEMALL62

The unplanned depreciation entry comes as a debit to Expense account. But the same debit is allocated to the member asset assets. In the drilldown report, the unplanned depreciation will be shown on JE_LINE_NUM 3 and the normal depreciation will be shown in JE_LINE_NUM 1. The total depreciation posted for ALL6 is 13000, out of which 12000 is unplanned depreciation and 1000 is monthly depreciation. The drill down report will show the unplanned depreciation allocated to the member asset amounts as well in JE_LINE_NUM 5 but the depreciation is only booked from the group asset ALL6. This is due to the fact that the unplanned depreciation allocated to the member asset also needs to be tracked.


Due to the member asset amounts also figuring in the drilldown report the batch total seem to be mismatched but the journal entries are balanced as shown below:

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.


ALL7

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.


Thus to summarize if the unplanned depreciation is entered at the group asset level it is allocated to member asset in addition to the normal depreciation being allocated but the journal is posted from the Group asset only. Though there is a drill down to the member also in this case. But if the unplanned depreciation is entered at the member asset level it is allocated to that member asset though the journal is posted from the group asset level only and no drill is available to the member.

15 SUMMARY 15.1 Group Asset Rules

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.

3. Asset cost will be posted to GL from the member asset. 4. Group Assets’s date placed in service is used to determine when depreciation

starts for the group. This date cannot be updated after depreciation has started for the group asset.


5. Depreciation rules defined for the group asset generally supersede its member asset’s depreciation rules. Depreciation is generally calculated and stored for the group asset only. However, if Member Asset Tracking is enabled depreciation may also be calculated and stored at the member asset level.

6. 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.

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.

8. Member asset Transactions (including addition, adjustment and group

reclassification) will be treated as a cost adjustment to the group asset. All adjustment to the group asset will be treated as amortize adjustments to the group asset, because expense adjustment is not possible for a group asset.

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.

15.2 Member Asset Rules

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 = sun of member assets’s cost.

3. Asset cost will be posted to GL from the member asset. 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.

6. Member asset Transactions (including addition, adjustment and group

reclassification) will be treated as a cost adjustment to the group asset. All adjustment to the group asset will be treated as amortize adjustments to the group asset, because expense adjustment is not possible for a group asset.

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.


16 APPENDICES 16.1 Appendix 1: How to read the Group and Member asset traces? The asset trace is now available from the front end. The “Generate Asset Trace” concurrent programme provides an insight into all the transaction and setups for an asset. The asset trace gives us the full history of the asset, which helps us not only to check the parameters but also to see the affects of the transaction performed on the asset as the table level. To be able to read the transactions performed on a group asset it is required to read the group asset as well as member asset traces together. At times the same transaction can be figuring in both the group as well its member assets. This section will help to guide how to read the asset trace of the group and its memebr together.

A. How to find which asset trace is of a GroupAssets or a Member Asset?

The FA_ADDITIONS_B table will show whether the asset is of the ASSET_TYPE GROUP. The member assets will have the ASSET_TYPE as CAPITALIZED.

B. How to find which Group asset does this member belong to?

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?


The Transaction_header_id 15559 for the group asset is the addition of the member via transaction header id 15557. Similary the transaction header id 15582 for the group asset is the addition of the member asset via transaction header id 15560. This way we can find which transaction for the group asset was performed on which member asset. Follow the same transaction header ids in the FA_BOOKS table to find which field the transaction updates.

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



E. Which table to look for if a backdated transaction has been performed on the

group asset and not able to figure out the depreciation calculation? FA_BOOKS_SUMMARY 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. This Table will show the affect on FA tables if the backdated transaction was actually performed on the date effective in the prior period. Thus helping in figuring out how complex group depreciation calculation are done by the application.

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.


16.2 Appendix 2: New Tables Created for Group asset 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.

Documents

Group Depreciation White Paper