Questions to Consider When You Implement Oracle Assets

Questions to Consider When You Implement Oracle Assets

Cindy Cline

Cline Consulting and Training Solutions, LLC

During the implementation of Oracle Assets, several issues will arise and numerous
decisions must be made. Each implementation is unique and each will have unique issues.
In this presentation, we will discuss important decisions and common issues that arise
during an assets implementation, how Oracle Assets handles each issue, and the
consequences of your setup decisions.

Setup steps can be shared with other applications; they can be required or optional within
Oracle Assets. In this presentation, we will not discuss each of the setup steps; rather, we
will review the major decisions made during the implementation of Oracle Assets.

Shared Setup Steps

To implement Oracle Assets, it is necessary to complete setups for related applications. For
example, you must define a set of books in the general ledger before you can proceed with
most of the Asset Setup Steps. The Inventory unit of measure classes and unit of measure
setup steps are necessary only if you use units-of-production depreciation.

If you are using the Payables application, you will establish the numbering schemes for your
suppliers and employees during the Payables setup process. You will also set up your
suppliers during the Payables setup. If you wish to associate assets with invoices in
Payables, it is necessary to set up your suppliers first.

If you wish to assign assets to employees, it is necessary to add employees either in the
Human Resources application or in Assets. Also, if you wish to use Security by Book, you
will need to set up your organizations and the organization hierarchy in either Human
Resources or Assets.

Key Flexfields

A flexfield is a field made up of segments. It appears as a pop–up window that contains a

prompt for each segment. Each segment has a name and a set of valid values. There are
two types of flexfields: key flexfields and descriptive flexfields. Every Oracle Application has
at least one key flexfield; Oracle Assets has three:

• Category Flexfield

• Asset Key Flexfield

• Location Flexfield

Asset Categories

Asset Categories are used to group assets that share common accounting rules and
depreciation parameters. When you add an asset, Oracle uses the category information to

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assign default accounts and depreciation rules to the asset. You can override these values if
you wish, or you can accept the defaults to quickly add the asset.

Accounts for asset cost, depreciation, accumulated depreciation, construction in progress

and other transactions are maintained at the category level. For example, assume that
your company has the following natural account values for property on your balance sheet:
• Land
• Buildings
• Computers
• Furniture and Fixtures
• Vehicles
• Leasehold Improvements
You should set up a major category segment that corresponds to each of these accounts.
Valid values for the major category segment are:
• Land
• Building
• Computer
• Furniture
• Vehicle
• LHI
For some of the categories, you may want to break your assets down into further sub-
categories. For example, in the computer category, you might have desktop computers,
servers, your computer network and software. In vehicles, you may have delivery vans and
cars used by your sales force. If this is the case, you should use a second segment for your
category flexfield. The second segment allows you to further distinguish your assets, as
well as apply different depreciation defaults and accounting rules if you wish.

When you set up your asset categories, you assign default depreciation rules for all of your
depreciation books. This makes it easy to ensure that the appropriate depreciation rules are
applied when you mass copy your assets to the tax books. It is important to work closely
with your tax department when planning your asset categories.

Asset Key Flexfield

The Asset Key Flexfield is used to group assets into non-financial categories such as project
number or department number. The asset key is useful for querying assets in the Asset
Workbench. It is an optional flexfield.

Location Flexfield

The Location Flexfield is used primarily for property tax reporting. It is also very useful to
use the location flexfield to query assets. You need a state segment at a minimum. Other
common segments used for the Location Flexfield include city, county, country, building,
floor, department and school district.

Shorthand Aliases

One feature that you should consider when adding locations is the use of a shorthand alias.
For example, rather than entering the flexfield CO.JEFFERSON.GOLDEN.HQ, you could
establish a shorthand alias so that when you enter HQ, Oracle automatically populates the

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Questions to Consider When You Implement Oracle Assets

entire location flexfield. Shorthand aliases can be used for any key flexfield to simplify data
entry. If you decide to use shorthand aliases, make sure you update the profile option
Flexfields: Shorthand Entry to allow for the use of aliases.

System Controls

System Controls include your company name as it should appear on your asset reports,
asset numbering scheme and the name of the flexfield structures for each of the key
flexfields. You also specify the oldest date placed in service for your assets.

The starting number for your assets is very important. If you are converting from another
system, consider a starting number greater than the number of assets you want to convert
so converted assets keep the same number from the previous system. For example, if you
are converting 10,000 assets, you may want to enter 11,000 as the starting number to
reserve the numbers 1 to 10,000 for manual asset numbering.

If you want to use assets with letters in the asset number, you will need to enter the asset
number manually. Automatic numbering does not support the use of letters. Also, Oracle
has reserved the numbers between 1,000,000,000 and 2,000,000,000 for manual
numbering. Oracle Assets does not support asset numbers that exceed 2,000,000,000.

Account Generator

Account Generator uses Oracle Workflow to derive account code combinations for asset
entries in the Oracle General Ledger. It is important for you to understand how Account
Generator derives each segment value and account combination during the setup process.
If the default Account Generator process meets your accounting needs, there is no need to
make any modifications to the workflow. However, if you need to modify the process, you
should work with your developer to properly create a custom workflow. The following
diagram depicts the default Account Generator Workflow process:

Account Generator Process

Before you can customize your Account Generator Workflow, you must set up your
accounting flexfield in General Ledger. For purposes of our discussion of Account
Generator, assume the accounting flexfield structure:

Company.Department.Account.Sub-account.Product

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The first step in the Account Generator Process (after start) is to determine the account
group into which your transaction falls. The group is used to determine the method used to
derive each segment value for your account code combination. For book level accounts,
account generator will follow the top path in the diagram, for category level, account
generator will follow the middle path; and for asset level, account generator will follow the
bottom path. Transactions are grouped as follows:

Book Level Category Level Asset Level

• Cost of Removal Clearing • Asset Clearing • Depreciation Expense
• Cost of Removal Gain • Asset Cost
• Cost of Removal Loss • Construction–In–Process
• Deferred Depreciation Clearing
Expense • Construction–In–Process
• Deferred Depreciation Cost
Reserve • Depreciation Reserve
• Depreciation Adjustment • Revaluation Amortization
• Intercompany Accounts • Revaluation Reserve
Payable
• Intercompany Accounts
Receivable
• Net Book Value Retired
Gain
• Net Book Value Retired
Loss
• Proceeds of Sale Clearing
• Proceeds of Sale Gain
• Proceeds of Sale Loss
• Revaluation Reserve
• Retired Gain
• Revaluation Reserve
• Retired Loss

For Book Level Transactions, segment values are derived as follows:

Segment Source

Company Asset Assignment

Department Book Controls default account

Account Book Controls

Sub-account Book Controls default account

Product Book Controls default account

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For Category Level Transactions, segment values are derived as follows:

Segment Source

Company Asset Assignment

Department Book Controls default account

Account Asset Category

Sub-account Book Controls default account

Product Book Controls default account

For Asset Level Transactions, segment values are derived as follows:

Segment Source

Company Asset Assignment

Department Asset Assignment

Account Asset Assignment

Sub-account Asset Assignment

Product Asset Assignment

Calendars

Each depreciation book requires a depreciation calendar and a prorate calendar. The
depreciation calendar determines the number of accounting periods in a fiscal year, and the
prorate calendar determines the number of prorate periods in your fiscal year. Your
corporate books can share the same calendar. A tax book can have a different depreciation
calendar than its associated corporate book; however, this is not recommended. Your
calendars must start with the period corresponding to the oldest date placed in service. You
must set up at least one period before the current period. Oracle Assets automatically sets
up the periods for the next fiscal year when you close the last period in your fiscal year.

Fiscal Years

Set up all your fiscal years starting with the year of your oldest date placed in service. You
can set up multiple fiscal year calendars, but related corporate and tax books must use the
same fiscal year calendars. To set up your fiscal years, enter the start and end dates for
each year starting with the year of the oldest date placed in service through one year past
the current fiscal year.

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Depreciation Calendars

If you use a depreciation calendar in a depreciation book from which you create journal
entries for your general ledger, you must make the period names identical to the period
names you have set up in your general ledger.

You can define any kind of calendar with any number of periods from daily to quarterly. For
example, to define a 4-4-5 calendar, first, set up your fiscal years. Then, define your
calendar with the appropriate start and end dates for each period. Oracle automatically
assigns a period suffix to the period name or you can enter your own.

Prorate Calendars

The prorate calendar is used to determine the depreciation period from which Assets will
choose the depreciation rate. To set up the prorate calendar, enter the from and to dates to
compare to an asset’s date placed in service as well as the date the asset should begin to
depreciate. For example, assume that you wish to use the Following Month convention on a
calendar year basis. Your entries would look like this:
From Date To Date Prorate Date
01-Jan-2008 31-Jan-2008 01-Feb-2008
01-Feb-2008 29-Feb-2008 01-Mar-2008
01-Mar-2008 31-Mar-2008 01-Apr-2008
01-Apr-2008 30-Apr-2008 01-May-2008
01-May-2008 31-May-2008 01-Jun-2008
01-Jun-2008 30-Jun-2008 01-Jul-2008
01-Jul-2008 31-Jul-2008 01-Aug-2008
01-Aug-2008 31-Aug-2008 01-Sep-2008
01-Sep-2008 30-Sep-2008 01-Oct-2008
01-Oct-2008 31-Oct-2008 01-Nov-2008
01-Nov-2008 30-Nov-2008 01-Dec-2008
01-Dec-2008 31-Dec-2008 01-Jan-2009
If you decide to depreciate the asset when placed in service, assets will begin depreciating
in the period placed in service using the rate from the following month. You can set up
multiple prorate conventions for corporate and tax purposes. Typical conventions include
same month, following month, mid-month, half year and mid-quarter.

Depreciation Books

Assets are stored in Depreciation Books. You can have one corporate depreciation book, or
you can set up multiple corporate books. Corporate books can be used to create journal
entries to a single set of books on your general ledger, or multiple corporate books can be
used to post journal entries to multiple sets of books on the general ledger. Each corporate
book can be associated with multiple tax and budget books. When you define a
depreciation book, be prepared to define the following:
• The name of your book. Typically, companies use a name like “CORP”.
• A brief description of your book.
• The class for your book (Corporate, Tax or Budget).
• For tax books, the associated corporate book.
• The GL Set of Books you will post journals to.
• The name of the Depreciation Calendar.

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• The name of the Fiscal Year Calendar.

• The name of the Prorate Calendar.
• The name of the current open period. Refer to the “Converting Assets” section of
this document for additional information related to the current open period.
• Whether to divide depreciation evenly across all periods or allocate based on number
of days.
• Whether assets retired in the first year should be depreciated.
You also define accounting rules associated with your book such as:
• Do you want to allow amortized changes for this book?
• Do you want to allow mass changes for this book?
• What is the capital gain threshold for this book?
• If you allow revaluation, select the appropriate treatment for the depreciation
reserve and YTD depreciation.
• For Tax Books, select the appropriate tax treatment for certain transactions.
• For Tax Books, select the types of transactions to be mass copied from the corporate
book.
Natural Accounts to be used for book-level asset transactions are defined in book controls.
These are the accounts used by account generator to populate the natural account segment
of your accounting flexfield for retirements, Intercompany, deferred depreciation and any
depreciation adjustments. The account generator defaults are used for various segments of
your accounting flexfield as discussed in the Account Generator Section of this document.

Finally, you define the journal categories for your journal entries. There are default journal
categories that are seeded with the Oracle Assets application. There is generally no reason
to change the journal categories.

Depreciation Methods

Oracle is delivered with many seeded depreciation methods and lives including common
corporate depreciation methods such as straight-line and most tax methods such as MACRS.
If you use depreciation methods or lives that are not seeded with the application, you can
add new ones. Depreciation Methods can be calculated, table-based or formula-based.

Table-based Methods

When you select a table-based method, Oracle enables you to enter your rates for each
period for the life of the asset. Simply enter the rates for each period of each year for the
asset life you define. The rates must total 100% over the life of the asset. For the method
displayed below (150% declining-balance with a three-year life), the rates vary based on
the period the asset is placed in service.

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100%

Remember that the prorate calendar points to the appropriate period in the depreciation
rate tables based on the asset’s date placed in service. For an asset placed in service in the
first period using a current-month prorate convention, depreciation will be calculated using
the Period 1 rates. For the same asset placed in service in the first period, depreciation is
calculated using Period 2 rates if the Following Month prorate convention applies.

Formula-based Methods

When all else fails, you can use formulas to define custom depreciation methods. This is
particularly useful for short year depreciation. Building formulas does require some
knowledge of SQL.

Security by Book

To establish security for your depreciation books, it is necessary to set up an organization

hierarchy. This setup step is shared with Oracle HRMS. If you do not currently use Oracle
HRMS, define organizations using the HRMS setups provided with Oracle Assets. You must
define the top and at least one subordinate organization. When you define the
organizations, identify those that should be associated with a depreciation book. Then,
assign the books that should be visible to that organization. Beginning with release
11.5.10, you can restrict access to tax books or corporate books. In prior releases, you are
not able to restrict access to corporate books if the associated tax books must be visible to
the user.

Next, you should define security profiles. The security profile identifies the top organization
that can be viewed by users with that profile. You should work with your System
Administrator to set up Assets responsibilities and assign the security profiles to those
responsibilities.

Converting Assets

Timing of your conversion

The timing of your conversion is critical to the success of your implementation. You need to
answer the following questions:

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• Do I need to close my year-end on Oracle?

• How much information do I process each month?
• Can I run the systems in parallel?
• Can I convert at year-end?
• Will I convert accumulated depreciation?
Typically, it is best to convert at fiscal year end. If you set up your initial depreciation run
as the last period of the prior fiscal year, you will be able to reconcile your asset cost and
accumulated depreciation to your published financials. Also, your year-to-date additions,
retirements and depreciation reports will be correct for the current fiscal year. You should
discuss this decision with your tax department to ensure that they can get the numbers
they need for tax purposes.

Another consideration is whether you will be converting accumulated depreciation. If you

decide to convert depreciation, Oracle will not change the life-to-date depreciation amount
unless you adjust the asset. If you decide not to convert accumulated depreciation, Oracle
will calculate “catch-up” depreciation in the period you convert your assets and the entire
depreciation amount will be charged to expense and included in year-to-date depreciation
on your asset reports.

If you convert in mid-year, and you want to convert year-to-date depreciation as well as
accumulated depreciation, keep in mind that the converted year-to-date depreciation will
not be included in your asset reports.

ADI

You can use the Asset Wizard in ADI to convert your assets. Using Asset Wizard enables
your users to review the data easily and make changes. They can reconcile the converted
assets in Excel prior to conversion. Asset Wizard loads the assets into the Mass Additions
table and takes advantage of the power of Mass Additions to populate the Assets tables.

Mass Additions

Rather than using Asset Wizard, you can load your conversion assets directly into the
FA_MASS_ADDITIONS table. This allows you to use the power of the Post Mass Additions
process, but facilitates converting a large number of assets quickly from your legacy
system.

Tax Books

You can create as many tax books as you need. For example, you may require a federal tax
depreciation book, an AMT book, and a state tax depreciation book and a property tax book.
With Oracle Assets you maintain asset information in your corporate book and then copy
asset transactions to your tax books.

The conversion (current) period in your tax books should typically be the last period of a
fiscal year. If you’ve been using your Corporate Book for a while, you must use the Initial
Mass Copy process to copy the active assets to your tax books. Oracle will copy all of the
assets from your corporate book excluding any assets retired during the current fiscal year
and assets with a cost of zero on the Corporate Book. During the mass copy process,
Oracle automatically assigns the appropriate depreciation rules for your tax book based on
each asset’s category.

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After the first period, use Periodic Mass Copy to copy additions, retirements and
adjustments to the tax books. Make sure you’ve allowed for mass copy of these
transactions in the Book Controls setup for your tax books. If the cost of an asset is the
same across the corporate and tax books, adjustments will be copied. If cost is not the
same, adjustments are not copied and a warning will appear in your mass copy log file.
However, you can use the FA: Copy All Cost Adjustments profile option to allow the Mass
Copy program to copy all cost adjustments, even when the cost is different in the corporate
book and the associated tax books. Partial retirements are prorated when copied to the tax
books if the cost basis is different.

Tax Book Upload Interface

In this day and age, it is not unusual at all to have basis differences between your corporate
and tax books. When you copy assets from the corporate to the tax books, the assets
automatically use the cost from the corporate book and the depreciation rules from the
asset category. Unfortunately, this may not be what you need when you’re setting up your
tax books.

The Tax Book Upload Interface allows you to override tax information copied from the
corporate book via SQL. Once assets have been copied into your tax books, the Tax Book
Upload Interface enables you to change basic financial information, such as year-to-date
depreciation, accumulated reserve, cost, and salvage value, for an unlimited number of
assets in the tax books. The Tax Book Upload Interface can only be used in the period you
added the assets to your tax book. What this means is that you can adjust new assets after
the initial mass copy and then any additions copied during periodic mass copy in subsequent
periods.

You should work with your developer to set up the Tax Book Upload Interface for your
conversion.

Conclusion

In this paper, we have examined many items to consider during your implementation of
Oracle Assets. There is a lot to think about. But, if you take the time to set the application
up correctly, you will find that Oracle Assets is a very powerful tool. It can be used to track
assets, calculate depreciation, remind you when maintenance should be performed, keep
track of insurance values and warranties, perform physical inventories, and much more.

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