Tax book in FA is set up to track assets and depreciation as per you Tax laws.Basically there are two depreciation - depreciation for you accounting and financial reporting - This is based on the Corporate Book you set up and depreciation as per you tax laws - which is based on your tax book.
The following setup processes are required for a Tax Book
- Define a Tax Book which is attached to a corporate book
- Define asset categories for those will be maintained in Tax Book
- Copy asset from Corporate Book to Tax Book for the first time. CIP Assets are not copied
- Copy asset from Corporate Book to Tax Book periodically
Tax Book Setup
When a Tax book is defined, it is associated to a Corporate Book. Multiple Tax books can be associated to a corporate book. Tax book can only be associated with Corporate book but not with other Tax book.
Whenever a CIP asset is created in Corporate Book, it will be copied to Tax Book automatically. When the CIP asset is capitalized, the same asset will automatically be capitalized in tax book.
Next you have to decide how your current period, depreciation calendar and Prorate calendar are required for your Tax Book.
Fig 3: Tax Book setup ( Cont.)
If you have Requirement to generate full year depreciation in tax book irrespective to which month the asset is being added. Then you just need to setup a prorate calendar with yearly basis.
Also, the full year depreciation should be able to be generated not just at year end but during any time of the year as fig 4.
Choosing a monthly or yearly depreciation calendar?
Case 1: If your requirement is Yearly calendar
- Full year depreciation can be run at any time during the year.
- Asset retirements cannot be copied to tax book during Periodic Mass Copy as retirement cannot be performed in period of additions (as now Tax book only got one period for the year). Asset has to be retired manually in the next year in Tax Book.
- Tax Book depreciation is required to rollback whenever periodic mass copy is performed from Corporate Book to Tax Book.
- Asset additions to tax book cannot be tracked monthly.
Case 2: If your requirement is Monthly calendar
- Asset retirements can be copied automatically to Tax Book during periodic mass copy.
- Assets additions to tax book can be tracked monthly.
- Deferred tax journals can be generated if both Corporate and Tax book calendar are the same.
- Monthly calendar is supported in both R11 and R11i.
- Full year depreciation can only be generated at end of the year. (Depreciation projection can still be run to generate full year depreciation)
What about asset Categories
You can link the asset categories to the tax books that will maintain those assets. Oracle allows you to exclude, if needed, asset categories from be maintained on the tax books. For each asset category assign the associated accounts (usually same as corp book) and the depreciation default rules. Oracle allows for multiple depreciation default rules based on date placed in service. This is to eliminate the need to define new categories if the depreciation rules change.
Asset Categories which are required for Tax Book will be setup. For those Asset Categories which are not setup in Tax Book, the assets under them will not be copied to Tax Book.
Initial Mass Copy versus Periodic Mass Copy
Initial Mass Copy - Used ONLY when implementing Tax Books with the first period is the year-end period. If used for initial implementation, never use again!!!!!
Periodic Mass Copy - Used monthly to copy Additions, Adjustments, and Retirements from the financial books to the tax books
What is copied during Initial Mass Copy?
It copies all assets added to the Corporate Book before the end of the current tax fiscal year. Retired Assets are not copied.
When you do, the following financial information of the asset is copied
- Original Cost
- Date Placed in Service
- Capacity and unit of measure
- Salvage Value
- Depreciation information comes from the default asset category setup for Tax Book.
- Sources Line and Assignment information are shared between Corporate and Tax Book. No separate source lines can be maintained for Tax Book.
- Retired Assets are not copied to Tax Book. It can only be copied via Periodic Mass Copy.
- If we need to handle historical retired assets in Tax Book, we need to set 1st Tax Book period to an earlier period and from there we can use periodic mass copy to Retirement Asset across to Tax Book.
- If Asset Categories are not setup in Tax Book, they would not be copied to the Tax Book during Initial or Periodic Mass Copy
- To verify the Initial Mass Copy, a Tax Addition Report can be run.
Tax Related Profile Options
Set Profile Option FA:Mass Copy All Cost Adjustments to ‘Yes’.
- If set to NO – this option will not allow cost adjustments to be copied from the corporate book to the tax book if the cost basis is different between the books.
- If set to YES – this option will allow the cost adjustment to be copied from the corporate book to the tax book.