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Fixed Asset :Retirement & Disposal

Posted on June 23rd, 2008 by Sanjit Anand ||Email This Post Email This Post

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Oracle Asset does not draw a distinction between the retirement and the disposal of an asset. Since there may be a significant time elapse between the retirement of an asset (it is no longer being used) and the physical disposal of the asset.

The generic retirement Procedure normally consist of these sub-procedures from place to place.

  1. Identification of assets to be retired.
  2. Collection of details and supporting documentation including proper authorization.
  3. Data entry of disposal information.
  4. Data entry of retirement information.

dgreybarrowThe Oracle Asset Retirement Process

You can retire all or part of an asset when it is no longer in service. For example, you can retire an asset that was lost, stolen, damaged, sold, returned, or any other reason that caused you to stop using it. If necessary, you can undo the retirement. Oracle Assets will continue to track a fully reserved asset until you retire it.

The other feature and functionality that Oracle handles are:

  • Retiring assets by units or cost.
  • Performing a mass retirement by retiring a group of assets if using.
  • You can synchronize asset disposal information between Oracle Assets and external systems , this can be achieved by Mass External Retirements interface, which is discussed at the end.
  • You can create journal entries to separate accounts for each component of the gain or loss.

dgreybarrow Retirement Limitation

These Limitation you should be familiar:

  • You can only retire assets that were added in previous periods and are effective in the current fiscal year.
  • You cannot retire an asset that you added in the current period. Therefore it is advisable that you must enter your retirement as a prior period retirement after you run depreciation. [[This is 11i Functionality]

You perform current and prior period retirements and reinstatements within the same fiscal year.

You create journal entries to separate accounts for each component of the gain or loss.

dgreybarrowOracle Processes & Navigation

(N) Assets > Asset Workbench (B) Retirements

1Full Retirement

This mean retiring an entire asset including all of its units and cost.

When entering the date of the retirement, it must be in the current fiscal year, and cannot be before any other transaction on the asset.

Oracle Assets lets you use a different prorate convention when you retire an asset than when you added it. The retirement convention in the Retirements window and the Mass Retirements window defaults from the retirement convention you set up in the Asset Categories window.
If you perform a prior period retirement, Oracle Assets backs out the depreciation expense through the date of retirement.

2 Partially Retiring an Asset

You can retire part of an asset by cost or by units or by By Source Line in your corporate book. You cannot perform partial unit retirements in your tax books; you can only perform cost retirements (partial and full) in your tax books. The procedure to partially retire an asset is identical to the procedure for fully retiring the asset. The only difference occurs when you specify the cost or units to retire.

If you perform multiple partial retirements on an asset within a period, you must run the Calculate Gains and Losses program between transactions.

dgreybarrow Processing Retirements

Retirements with Status PENDING Oracle Assets calculates the gain or loss for a retirement and removes the asset cost and accumulated depreciation from the appropriate accounts.

  • It takes depreciation during the period of retirement according to the retirement convention.
  • It takes any necessary ITC recapture.
  • It also updates the status of the retirement to PROCESSED. Take a note that partial unit retirements terminate the existing distribution and create a new distribution.

dgreybarrowGL Journal entries

The following journal entries are created for a retirement.

asset Retirement

You should take a note that Oracle Assets does not create any journal entries when you retire an expensed item.

dgreybarrowHow does Oracle uses retirement convention?

The fixed asset application uses the prorate convention to determine how much depreciation to take in the first and last year of an asset’s life based on when you place the asset in service. In case of earlier retirement of the asset before it is fully reserved, Oracle uses the retirement convention to determine how much depreciation to take in the year retired based on the retirement date.

dgreybarrowAsset Retirements – Effect on Depreciation

After retirement the YTD Depreciation remains unchanged but the Accumulated Depreciation is set to zero. this is because as mention above depending on the prorate convention and whether you choose to take depreciation in the year retired, when you retire an asset, the current YTD expense does not change. The only impact is to the balance sheet – the asset cost and reserve together (NBV) now = 0.

dgreybarrow Some more customer’s requirement in Fixed Asset Area

  1. If customer wishes to have separate processes for retirements and disposals. Both processes have accounting consequences retirement ends depreciation and effectively writes off the remaining net book value, while disposal may involve proceeds of sale and/or cost of removal of the asset.
  2. Requirement may required approval, as Oracle does not have this feature, therefore this can be achieved by workflow or Oracle Alert , depends how approval mechanism can be trigged.
  3. Retirement Notification

dgreybarrowOthers Options for Asset Retirements in Oracle

Retirements in Oracle can be done several ways:

  1. Asset Workbench (manually)
  2. Mass Transactions > Retirements
  3. Retirement API
    • You can also perform asset retirements and their related transactions by using Retirements API.
  4. Through FA_MASS_EXT_RETIREMENTS interface
    • The step consist of populating the table with FA_MASS_EXT_RETIREMENTS interface table and then calling the “Post Mass External Retirements” concurrent program that starts the retirement processes for each asset is started from the Submit Requests form.
    • Once the concurrent program has completed, you need view the output file from the request and verify that no errors have been reported.
    • At the end run the gain/loss program.
    • Your Navigation should be (N) Depreciation > Calculate Gains and Losses
      Although the depreciation program automatically processes retirements, you can run the Calculate Gains and Losses program several times during the period to reduce period end processing time.
    • Formula for Gain/Loss is:

      Gain/Loss = Proceeds of Sale – Cost of Removal – Net Book Value Retired + Revaluation Reserve Retired

  5. Retirement Requests in Oracle Projects
    • The Retirement Requests feature streamlines the process of retiring massive numbers of assets. Users in the field can raise retirement notifications to fixed assets accountants by specifying certain options such as the category, the number of units, the project number, and the task number. The system selects assets based on the selected criteria and retires them when the fixed assets accountants approve the selection
  6. iAssets (transfers)

dgreybarrow Asset Retirement for reporting Need

Oracle does provide some 5-6 reports for asset retirement which consist of

  1. Asset Retirements by Cost Center Report
    • This report shows the asset retirements for each of your cost centers for the Book and during the Period you select. Optionally enter a Cost Center range to limit report output. The report is sorted by balancing segment, cost center, employee name, location, asset account, and asset number. It prints totals for each owner, cost center, and balancing segment.
  2. Asset Retirements Report
    • Use this report to review the assets you retired for the Book and accounting Period range you choose. The report is sorted by balancing segment, asset type, asset account, cost center, and asset number. It prints totals for each cost center, account, asset type, and balancing segment.
  3. Asset Disposals Responsibility Report
    • This report shows assets that you removed from your cost centers through retirements and transfers. It also shows the location of each unit. The report is sorted by, and prints totals for each balancing segment, cost center, and owner. You must enter a Book and Period when you request this report. Optionally enter a From/To Cost Center range to limit report output.
  4. Retirements Report
  5. Tax Retirements Report : You can use this to review retirements in your tax books

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