Asset Retirement White Paper PDF

Retirements in Oracle Assets Ver 2.
0 Page 1

Oracle Applications
WHITE PAPER

Retirements in Oracle Assets

Prepared by

Author: Le Zhong
Updated by: Kathy White
Creation Date: 15-MAY-2000
Last Updated: 02-JUN-2012
Control Number: 2
Version: 3
Copyright (C) 2012 Oracle Corporation
All Rights Reserved
Product Design and Architecture

Retirements in Oracle Assets Ver 2.0 Page 2

Table of Contents

1 Introduction.3
Objective..3
Scope......3
Issues Covered..3
2 Individual Retirement versus Mass Retirement..4
3 Retirement Conventions..7
4 Full vs. Partial Retirement....7
5 Retiring Cost by Source Lines..7
6 Importing Retirements from an External Source....8
7 Retirement Requests..9
8 Retirement/Reinstatement Error Correction..11
9 Complete Retirement.12
10 Journal Entries for Retirement13
11 Retirement Related Reports16
12 Retirement APIs...16
13 Behind the Scenes...17


1 Introduction

Objective

THE PURPOSE OF THIS DOCUMENT IS TO PROVIDE A QUICK LEARNING GUIDE
of the retirement process in Oracle Assets as well as a problem troubleshooting
checklist. The retirement transaction is one of the most frequently used transaction
types in Oracle Assets. Our support experience shows us that an improper retirement
operation could cause potential massive data corruption. We will document how to
avoid this situation. There are numerous retirement reports. We will attempt to
document all of the important reports to give you the whole picture from initiating the
transaction to running the retirement process to reporting.

Scope

THIS PAPER explains how to do an individual retirement versus a mass retirement. It
also discusses how to manipulate the transaction including undo versus reinstate. Basic
table information is provided.

Issues Covered

There are many reasons to retire an asset, such as if that asset is stolen, damaged, out
of date or sold, etc. The Asset retirement transaction is reversible. It takes two steps to
finish a retirement process. Here are those steps and their reversal actions:

ACTION REVERSAL ACTION
Initiate Retirement by Individual or Mass Retirement Undo
Complete Retirement by running Calculate Gains/Losses
program by itself or within Depreciation Request Set
Reinstate


2 Individual Retirement Versus Mass Retirement

Use the retirements form (Figure 1) to retire a single asset.

Figure 1

In the Corporate book, you can choose to retire an assets cost or its units. For a fuller
discussion of this see the section Full or Partial Retirements. In Release 12 and
higher, you can retire an asset in any period including the period of its addition. In
Release 11i, you cannot retire an asset in its period of addition but can use any later
period.

Notice the Reinstate button, if you retire an asset without running Gain/Loss
program, this button will be labeled Undo Retirement. Error correction is
possible. We will talk about this later.


Use the Mass Retirements form (Figure 2) to retire a group of assets. Navigation
path for mass retirement: Mass Transactions/Retirements/Create and Reinstate.

Figure 2

When you define a mass retirement, you must first choose to Create the Mass
Retirement. This will spawn the Create Mass Retirements concurrent request. Once
this completes normally, the Create button will be disabled, and Discard and Retire will
become enabled.

You can choose to go directly to Retire to complete the Mass Retirement or you can use
the Prepare Mass Retirements menu to edit the mass retirement at an asset specific
level. Figure 3 shows the forms that display under this menu.

Note that this functionality allows you to amend specific aspects of each proposed
retirement within the batch. So for instance if you want to retire a batch of 100 assets
and leave the default Retirement Convention on 98 of them, you can still create the
batch within Mass Retirements, then use the Prepare menu to alter the Retirement
Convention on the 2 you want to amend.


Once you are done Preparing, return to the Create and Reinstate menu, query up your
amended mass retirement, and choose Retire to enact the retirement.

Figure 3

Once you have Previewed a Mass Retirement, you can choose to immediately submit
the concurrent request to retire the selected assets, or you can save the mass
retirement definition for future submission. You can change the details of any mass
retirement before you submit the concurrent request as well.

When you submit a mass retirement, Oracle Assets automatically runs the Mass
Retirements Report and the Mass Retirements Exception Report. Please review
those two reports before running the Calculate Gains and Losses Program. This will
allow you to find errors more quickly and rectify them more easily.

If you wish to simultaneously run this program in more than one process to reduce
processing time, Oracle Assets can be set up to run this program in parallel. See the
User Guide, Profile Options and Profile Options Categories Overview, page B-1.

Note: This document will only touch upon retirements in Group Depreciation. Please
see the User Guide, Group Depreciation chapter, heading Retirements, for greater
detail.


3 Retirement Conventions

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. You can change the retirement convention for an individual
asset in the Retirements window before running the Calculate Gains and Losses
program.

4 Full Versus Partial Retirement

You can do full or a partial retirement of any asset. Your options for this will be to retire
by units or retire by cost, when choosing to do a partial retirement.

When you retire an asset by units, Oracle Assets automatically calculates the
fraction of the cost retired. When you retire an asset by cost, the units remain
unchanged and the cost retired is spread evenly over all assignment
(distribution) lines.

Partial Retirement Restrictions:

Assets can only be retired by units in the Corporate book. Assets retired by units
in the Corporate Book which have their retirements copied to Tax Books via
Periodic Mass Copy will have the applicable cost percentage retired in Tax.
You cannot partially retire CIP assets. You can only fully retire them by cost.
If you make more than one partial retirement in the same period, you will need to
run Calculate Gains and Losses after the each retirement and before entering
any subsequent retirement.
You can only reinstate the most recent partial retirement.
If you partially retire a units of production asset, you must manually adjust the
capacity to reflect the portion retired.
Group Assets cannot be retired, only member assets.
If you enter a mass retirement by units against the members of a Group Asset,
by specifying the Group Asset on the Additional Criteria tab in the Mass
Retirement, units will be selected on a first in first out basis for the Group Asset,
thus retiring the oldest member first until sufficient units are used up to account
for the whole partial retirement.

5 Retiring Cost by Source Lines

Source Lines represent invoices that add up to an assets cost. You can retire source
lines individually.

To retire asset costs using Source Lines:

1. Select Assets > Asset Workbench from the Navigator window.

2. Find the asset whose invoice information you want to change.
Tip: For best performance, find by unique values, such as asset
number or tag number.

3. Select Find to navigate to the Assets window.

4. Choose the asset whose source lines you want to retire.

5. Select Source Lines to navigate to the Source Lines window.

6. Choose the source line or enter the amount you want to retire.

7. Select Retire to navigate to the Source Line Retirement window.

8. Modify the necessary fields.

Note: You cannot modify units retired or cost retired. You must
cancel out of the retire window before changing the units or cost
information. You can change this information in the Source Lines
window. Source Line window changes are propagated to the Retire
window when you navigate to it.

9. Select Done to save your work.

6 Importing Retirements from an External Source

You can use Oracle Assets to retire a group of assets by populating an external
interface table with these assets, setting the line status to POST, and running the Post
Mass Retirements process.

Oracle Assets allows both partial cost and partial unit retirements. However,
retirements can only be grouped using a Batch Number, which restricts you from fully
utilizing the benefit of the Oracle Assets Mass Retirements feature. To process the cost
or unit retirements for the external retirement batch, you must populate the
FA_MASS_EXT_RETIREMENTS table with the correct retirement batch. To perform
the source line retirement you need to populate the source line details in the table
FA_EXT_INV_RETIREMENTS in addition to populating values in
FA_MASS_EXT_RETIREMENTS.

The following business rules apply to Mass External Retirements:

The Review Status should be initially set to NEW, ON HOLD or POST by an
external system.


A Review Status of NEW indicates that the data is new and may require additional
information before retirement can take place in the Post Mass Retirements process.

A Review Status of ON HOLD indicates that the data should remain unprocessed by
the Post Mass Retirements process until it is set to a Review Status of POST.

A Review Status of POST indicates that the data is ready for retirement to take place
in the Post Mass Retirements process.

A Review Status of ERROR indicates that the data was invalid and will not be
submitted for retirement in the Post Mass Retirements process. You can set these
errored records to DELETE if they need to be removed from the database. Remove
them by running the Purge Mass External Retirements program.

A Review Status of DELETE indicates that the data will not be submitted for
retirement in the Post Mass Retirements process.

You can use the Purge Mass External Retirements process to remove posted or
deleted records completely from the database.

All displayed data passed from an external system or Oracle Projects is subject to
modification.

7 Retirement Requests

Field employees can use the Retirement Requests feature to identify and submit
requests for asset retirements. These requests are received and reviewed by those
responsible for asset retirements in Oracle Assets, who then edit the requests and
complete the retirement process.

The retirement request captures all of the information about the asset that is available in
the field, such as asset category, location, date placed in service, quantity retired, serial
number, manufacturer, model number, tag number, and more. Information captured
about the retirement transaction also includes project, task, and any removal cost or
sales proceeds. The person responsible for asset retirements in Oracle Assets, the
fixed asset accountant, reviews the request, makes any necessary additions or
corrections, and completes processing of the retirement request.

An inbound API enables retirement information from external asset tracking systems to
be interfaced directly into Oracle Assets as retirement requests. Since the imported
retirement requests may result in high volumes of required processing each period, you
have the option of batch processing all imported retirement requests. Using batch
processing can eliminate the need for manual intervention and review of individual
requests. This feature can also be used if you have Oracle Projects enabled. See the
User Guide for entering Retirement Requests from Projects.


The retirement request captures all of the information about the asset that is available in
the field, such as asset category, location, date placed in service, quantity retired, serial
number, manufacturer, model number, tag number, and more. Information captured
about the retirement transaction also includes project, task, and any removal cost or
sales proceeds. The person responsible for asset retirements in Oracle Assets, the
fixed
asset accountant, reviews the request, makes any necessary additions or corrections,
and completes processing of the retirement request.

An inbound API (the Retirement Requests API) enables retirement information from
external asset tracking systems to be interfaced directly into Oracle Assets as
retirement requests. Since the imported retirement requests may result in high volumes
of required processing each period, you have the option of batch processing all
imported retirement requests. Using batch processing can eliminate the need for
manual intervention and review of individual requests.

To process retirement requests - Fixed Asset Accountant:

1. Navigate to the Mass Retirements window.

2. Query the retirement request you wish to review. Add or correct information if
needed.

Note: All new retirement requests have a status of New. You can change the status to
Pending or On Hold.

3. Select the Create button to create a mass retirement batch containing assets meeting
the retirement request criteria. The selection process also applies retirement cost to
each selected retirement, based on the cost retired. The status of the request changes
from New or Pending to Created.

4. To discard the mass retirement and end further processing, select the Discard button.
5. Optionally, navigate to Find Mass Retirements window to review, edit, or delete
any of the individual retirements.

You can enter or modify the cost of removal and proceeds of sale for non-project related
assets. For project related assets, the cost of removal and proceeds of sale cannot be
changed, since the retirement costs are handled separately using the retirement cost
processing feature.

6. In the Mass Retirements window, select the Retire button to submit the Post Mass
Retirements process and posts the mass retirement. The Mass Retirements Report and
the Mass Retirements Exception Report run automatically when the process completes.
The status of the mass retirement will change from Created to Pending momentarily,
and finally to Completed when the process completes.


Further information on the Retirement Request functionality and the API for external
request imports is available in the iAssets User Guide.

8 Retirement/Reinstatement Error Correction

A new retirement receives the status PENDING. After running the Depreciation Request
Set (which includes Calculate Gains and Losses) or running Calculate Gains and
Losses individually, the status changes to PROCESSED.

When you reinstate a PENDING retirement, the application deletes the retirement
transaction and the asset is immediately reinstated. It does not leave any trace of
retirement at all. Oracle Assets only keeps the retirement record permanently after
running Gain/Loss program. If you reinstate a PROCESSED retirement, the application
changes the status to REINSTATED, and you must rerun the Calculate Gains and
losses program or run depreciation process the reinstatement.

So when you perform an individual retirement or a mass retirement, the application
creates a PENDING retirement transaction and they are completely reversible without
leaving any trace.

Note: If you submit a mass reinstatement before running the Calculate Gains
and Losses, the application immediately reinstates these assets. If you submit a
mass reinstatement to reinstate PROCESSED retirements, you must rerun the
Calculate Gains and Losses or run depreciation to process the reinstatement.

The one place where the above discussion is not applicable is within Group
Depreciation. In that functionality only, Calculate Gains and Losses is submitted at the
transaction level as part of the retirement transaction. Thus no member retirements can
be Undone. They will all need to be Reinstated. This is to prevent corruption should a
user not run Calculate Gains and Losses promptly and while the retirement is not
realized do other transactions on the same Group Assets members.

Now, lets see how to correct errors for individual retirement.

Retirement:
1. Go to Assets->Assets Workbench, query up the asset with the wrong retirement and
click Retirements button.

2. Find the Retirement Transaction that you want to undo by specifying its retirement
number. If you do not know the retirement number, look for it in the Transaction History
window of the Inquiry window.

3. Click Reinstate if the retirement has the status of PROCESSED or click Undo
Retirement if the retirement has the status of PENDING.

Reinstatement:


1. Go to Asset/Asset Workbench, query up the asset with the wrong reinstatement and
click the Retirement button.

2. Find the Reinstatement transaction that you want to undo and click Undo
Reinstatement.

How to correct errors for mass retirement:

In the Mass Retirements window, use the mass transaction number to find and select
the transaction you want to reinstate and click Reinstate. Oracle Assets reverses the
mass retirement as follows:

1. If the Calculate Gains and Losses Program has been run, Oracle Assets resets the
status of the appropriate assets from PROCESSED to REINSTATE. Run the program
again to process the mass reinstatement. The assets are then reinstated when
depreciation is run.

2. If the Calculate Gains and Losses Pogram has not been run, Oracle Assets simply
deletes the appropriate PENDING retirement transactions. The associated assets are
reinstated immediately without leaving any trace.

Restriction: You can only reinstate a retirement in the same fiscal year it was entered
in.

Also, you can retire and reinstate independently in Tax Books, but can also use Periodic
Mass Copy for these transactions. If the cost basis is not the same in the Tax Book and
you copy a retirement, the amount of the retirement will be adjusted to reflect the same
percent of the asset that was retired in the Corporate Book.

9 Complete Retirement

Retirements and PROCESSED reinstatements are not complete until you run the
concurrent request Calculate Gains and Losses.

Here is how Assets figures it out:

Gain/Loss = [Proceeds of Sale] - [Cost of Removal] - [Net Book Value Retired] +
[Revaluation Reserve Retired Retirement/Reinstatement and Depreciation
Depreciation and Retirements/Reinstatements]

1) The retirement convention, date retired, and depreciation method determine how
much depreciation Oracle Assets takes when you retire an asset. Oracle Assets
reserves the year-to-date depreciation if the assets depreciation method does not
depreciate it in the year of retirement. In this case, when you perform a full retirement,
Oracle Assets reserves the year-to-date depreciation of the asset, and computes the

gain or loss using the resulting net book value. For partial retirements, Oracle Assets
reverses the appropriate fraction of the year-to-date depreciation and computes the gain
or loss using the appropriate fraction of the resulting net book value. If the depreciation
method takes depreciation in the year of retirement, Oracle Assets uses the retirement
convention to determine whether the asset is eligible for additional depreciation
in that year or whether some of that years depreciation must be reversed. When
you perform a partial retirement, Oracle Assets depreciates the portion of the
asset you did not retire based on the method you use. If your depreciation
method multiplies a flat rate by the cost, Oracle assets depreciates the assets
cost remaining after a partial retirement.

2) The retirement convention, date retired, and period in which you reinstate
an asset controls how much depreciation Oracle Assets calculates when you
reinstate an asset.

When you reinstate a retired asset, Oracle Assets usually calculates some
additional depreciation expense in the period in which you perform the
reinstatement, unless you perform it in the same period that you retired the
asset. This additional depreciation is the depreciation that would have been
taken if you had not retired the asset.

Sometimes, however, a reinstatement results in a reversal of depreciation. This
occurs if the retirement convention caused some additional depreciation when
you retired the asset, and then you reinstate the asset before the retirement
prorate date. Then Oracle Assets reverses the extra depreciation that it took at
retirement until the appropriate accounting periods take it.

10 Journal Entries for Retirement

Current Period Retirements

Example: You place an asset in service in Year 1, Quarter 1. The asset cost is
$4,000. The life is 4 years, and you are using straight-line depreciation. In Year 3,
Quarter 3, you sell the asset for $2,000. The cost to remove the asset is $500. The
asset uses a retirement convention and depreciation method which takes
depreciation in the period of retirement. You retire revaluation reserve in this
book.

Dr. Accumulated Depreciation 2,500.00
Dr. Proceeds of Sale Clearing 2,000.00
Dr. Cost of Removal Gain 500.00
Dr. Revaluation Reserve 600.00
Dr. Net Book Value Retired Gain 1,500.00
Cr. Asset Cost 4,000.00
Cr. Proceeds of Sale Gain 2,000.00

Cr. Cost of Removal Clearing 500.00
Cr. Revaluation Reserve Retired Gain 600.00

If you enter the same account for each gain and loss account, Oracle Assets
creates a single journal entry for the net gain or loss.

Dr. Revaluation Reserve 600.00
Cr. Gain/Loss 600.00

Prior Period Retirement

$4,000, the life is 4 years, and you are using straight-line depreciation. In Year 3,
Quarter 3, you discover that the asset was sold in Year 3, Quarter 1 for $2000.
The removal cost was $500. The asset uses a retirement convention and depreciation
method, which allow you to take depreciation in the period of retirement.

Dr. Cost of Removal Loss 500.00
Dr. Net Book Value Retired Loss 1,750.00
Cr. Proceeds of Sale Loss 2,000.00
Cr. Depreciation Expense 250.00

Current Period Reinstatement.

Example: You discover that you retired the wrong asset. Oracle Assets creates journal
entries for the reinstatement to debit asset cost, credit accumulated depreciation, and
reverse the gain or loss you recognized for the retirement.

Oracle Assets reverses the journal entries for proceeds of sale, cost of removal, net
book value retired, and revaluation reserve retired. Oracle Assets also reverses the
journal entries you made to clear the proceeds of sale and cost of removal.

Oracle Assets also creates journal entries to recover the depreciation not
charged to the asset and for the current period depreciation expense.

Dr. Asset cost 4,000.00
Dr. Cost of Removal Clearing 500.00

Dr. Gain/Loss 600.00
Dr. Depreciation Expense 250.00
Cr. Accumulated Depreciation 2,750.00
Cr. Proceeds of Sale Clearing 2,000.00
Cr. Revaluation Reserve 600.00

Prior Period Reinstatement

$4,000.00, the life is 4 years, and you are using straight-line depreciation. In Year2,
Quarter 1, you retire the asset, In Year 2, Quarter 4, you realize that you retired the
wrong asset so you reinstate it.

Dr. Asset cost 4,000.00
Dr. Cost of Removal Clearing 500.00
(adjustment)
Cr. Net book Value Retired Loss 2,750.00
Cr. Cost of Removal Loss 500.00
Cr. Proceeds of Sale Clearing 2,000.00
Cr. Accumulated Depreciation 2,000.00

Assets Fully Reserved upon Addition

If you add an asset with an accumulated depreciation equal to the recoverable cost, it is
fully reserved upon addition. When you retire it, Oracle Assets does not back out any
depreciation, even if you assigned the asset a depreciation method that backs out all
depreciation in the year of retirement. However, it creates all the other journal entries
associated with retiring a capitalized asset.

Non-Depreciated Capitalized/Construction-in-Process (CIP) Assets

A non-depreciated capitalized asset or a CIP asset has no accumulated depreciation.
Therefore, Oracle Assets does not create journal entries to catch up depreciation.
However, Oracle Assets creates all other journal entries associated with retiring a
capitalized asset.

11 Retirement Related Reports

Report Name Purpose
Asset Retirement Report Shows the assets you retired for the
Book and accounting period range you
select

Rxi: Retirements Report Variable format report that provides same
data as the Asset Retirements Report
Asset Retirements by Cost Center Report Shows the assets you retired for the
select, with a range for from and to Cost
Center
Asset Disposals Responsibility
Report
Shows the assets that you removed from
the cost centers through retirements and
transfers and the location of each unit
Form 4684: Casualties and Thefts Report Shows the asset retirements with the
retirement type you request, including but
not limited to Casualty, or Theft.
Retired Assets Without
Retirement Types Report
Shows the asset retirements for each
cost center for the book and period that
you select; an asterisk (*) is displayed
next to reinstated assets
Tax Retirement Report Shows Gain or loss and any ITC
recapture for asset retirements
Retired Assets Without Property Class
Report
Shows the retired assets without a 1245
or 1250 property class
Form 4797 Reports Four variants of this exist to meet various
reporting requirements.
Revalued Assets Retirement Report Shows the assets you retired for the
select, when the asset has revaluation
retired.
Reinstated Assets Report Shows retirements you that reinstated
for the Book and From/To Period range
Mass Retirements Report Reviews the mass retirement effect
before you process it
Mass Retirements Exception
Report
Identifies exception assets that were not
retired as part of the mass retirement
transaction
External Retirements Report Report that details the Mass External
Retirements.

12 Retirement APIs

You can use this API if you have a custom interface that makes it difficult to use with
the existing interfaces in Oracle Assets. The Retirement/Reinstatement APIs uses the
FA_RETIREMENT_PUB.DO_RETIREMENT (),
FA_RETIREMENT_PUB.UNDO_RETIREMENT (),
FA_RETIREMENT_PUB.DO_REINSTATEMENT (), and
FA_RETIREMENT_PUB.UNDO_REINSTATEMENT () modules.


You can use this API if you have a custom interface that makes it difficult to use with the
existing asset retirement interfaces in Oracle Assets.

Sample code to call each one is available in the Assets User Guide Appendix R Oracle
Assets Retirements and Reinstatements API. Support cannot assist you with writing a
wrapper for the APIs but will handle any questions on functionality or potential bugs, as
these are standard, fully supported interfaces.

13 Behind the Scenes

In this section, we will go behind the scenes to see what is happening for this
transaction type. You will see what data is updated in what tables for a retirement in
Oracle Assets.

When you fully retire an asset, the following tables are updated:

<fa_transaction_headers> A row marked FULL RETIREMENT is created.
<fa_books> The current row is terminated and a new row is created with cost
and reserve equal to 0.

<fa_distribution_history> Oracle Assets populates the transaction_units and the
retirement_id columns of the active rows.
<fa_asset_history> Oracle Assets populates the date_ineffective for the active
row.
<fa_retirements> A row in inserted with the details of the retirement.

When you partially retire an asset, the following tables are updated:

<fa_transaction_headers> Two rows, one marked PARTIAL RETIREMENT and
the other marked TRANSFER OUT.

<fa_additions> The row is updated to reflect the new number of units.

<fa_asset_history> The current row is terminated and a new row is created with
the new number of units.

<fa_distribution_history> The affected rows are terminated and new ones are
created, if necessary.

<fa_books> The current row is terminated and a new row is created with the
reduce cost and accumulated depreciation.

<fa_retirements> Inserts a PENDING row with the retirement details.

When you reinstate as asset, the following tables are updated:

<fa_transaction_headers> A row marked REINSTATEMENT is created.

<fa_retirements> Status of the fa_retirements row is set to REINSTATE.

The Calculate Gains and Losses program updates the following tables for
retirement:

<fa_adjustments> Rows inserted with source_type_ code = RETIREMENT
remove cost and reserve from ALL distributions and redistribute as
necessary.

<fa_retirements> The retirement row is updated with the proper
net_book_value _retired and gain_loss_amount. The status is set
to PROCESSED.

<fa_additions> If the reinstatement is for a partial unit retirement, the
current_units column must be restored.

<fa_asset_history> If the reinstatement is for a partial unit retirement, the
current row is terminated and a new row is created.

<fa_distribution_history> All of the (semi-)current rows are fully terminated
and new rows are created.

<fa_books> The current row is terminated and a new row is created.

<fa_adjustments> Rows are inserted which exactly balance the rows inserted for
the retirement row by row. Source_type_code is still set to
RETIREMENT.
<fa_retirements> The retirement row is terminated. Its status is set to
DELETED.

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