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Fixed Asset :Retirement & Disposal
Posted By Sanjit Anand On June 23, 2008 @ 7:59 am In Oracle Asset | 1 Comment
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.
The 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:
These Limitation you should be familiar:
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.
Oracle Processes & Navigation
(N) Assets > Asset Workbench (B) Retirements
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.
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.
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.
GL Journal entries
The following journal entries are created for a retirement.
You should take a note that Oracle Assets does not create any journal entries when you retire an expensed item.
How 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.
Asset 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.
Some more customer's requirement in Fixed Asset Area
Others Options for Asset Retirements in Oracle
Retirements in Oracle can be done several ways:
Formula for Gain/Loss is:
Gain/Loss = Proceeds of Sale - Cost of Removal - Net Book Value Retired + Revaluation Reserve Retired
Asset Retirement for reporting Need
Oracle does provide some 5-6 reports for asset retirement which consist of
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 Oracle Fixed Assets Process Overview: http://www.oracleappshub.com/asset/oracle-fixed-assets-process-overview/
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