Thursday 10 January 2013
Wednesday 9 January 2013
A Brief History of ERP
Introduction:
The American Institute of Certified Public
Accountants (AICPA) defines accountancy as "the art of recording,
classifying, and summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of financial character,
and interpreting the results thereof."
Accounting is
thousands of years old; the earliest accounting records, which date back more
than 7,000 years, were found in Mesopotamia (Assyrians). The people of that
time relied on primitive accounting methods to record the growth of crops and
herds. Accounting evolved, improving over the years and advancing as business
advanced.
Early
accounts served mainly to assist the memory of the businessperson and the
audience for the account was the proprietor or record keeper alone. Cruder
forms of accounting were inadequate for the problems created by a business
entity involving multiple investors, so double-entry bookkeeping first emerged
in northern Italy in the 14th century, where trading ventures began to require more
capital than a single individual was able to invest. The development of joint
stock companies created wider audiences for accounts, as investors without
firsthand knowledge of their operations relied on accounts to provide the
requisite information. This development resulted in a split of accounting
systems for internal (i.e. management accounting) and external (i.e. financial
accounting) purposes, and subsequently also in accounting and disclosure
regulations and a growing need for independent attestation of external accounts
by auditors.
Today,
accounting is called "the language of business" because it is the
vehicle for reporting financial information about a business entity to many
different groups of people. Accounting that concentrates on reporting to people
inside the business entity is called management accounting and is used to
provide information to employees, managers, owner-managers and auditors.
Management accounting is concerned primarily with providing a basis for making
management or operating decisions. Accounting that provides information to
people outside the business entity is called financial accounting and provides
information to present and potential shareholders, creditors such as banks or
vendors, financial analysts, economists, and government agencies. Because these
users have different needs, the presentation of financial accounts is very
structured and subject to many more rules than management accounting. The body
of rules that governs financial accounting in a given jurisdiction is called
Generally Accepted Accounting Principles, or GAAP. Other rules include
International Financial Reporting Standards, or IFRS, or US GAAP.
ENTERPRISE
RESOURCE PLANNING:
ERP stands for Enterprise Resource Planning. ERP is an enterprise-wide information system that facilitates the flow of information and coordinates all resources and activities within the business organization
Functions typically supported by the system include manufacturing, inventory,
shipping, logistics, distribution, invoicing, and accounting. Some solutions now embed customer relationship management functionality. A wide variety of business activities including sales, marketing, billing, production, inventory management, human resource management, and quality control depend on these systems. The ERP system assists in managing the connections to outside stakeholders as well as enhancing performance management. It uses a centralized database and usually relies on a common computing platform. It provides the user a unified, consistent, uniform environment.
Enterprise resource planning (ERP) systems integrate internal and external management information across an entire organization, embracing finance/accounting,manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.
Functions typically supported by the system include manufacturing, inventory,
shipping, logistics, distribution, invoicing, and accounting. Some solutions now embed customer relationship management functionality. A wide variety of business activities including sales, marketing, billing, production, inventory management, human resource management, and quality control depend on these systems. The ERP system assists in managing the connections to outside stakeholders as well as enhancing performance management. It uses a centralized database and usually relies on a common computing platform. It provides the user a unified, consistent, uniform environment.
Enterprise resource planning (ERP) systems integrate internal and external management information across an entire organization, embracing finance/accounting,manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.
An integrated system that operates in real time (or next to real
time), without relying on periodic updates.
- A common database, which supports all applications.
- A consistent look and feel throughout each module.
- Installation of the system without elaborate application/data integration by the Information Technology (IT) department.
Functional areas
The following are common functional areas covered in an ERP
System. In many ERP Systems these are called and grouped together as ERP
Modules:
- Financial Accounting
- General Ledger, Fixed Asset, Payables, Receivables, Cash Management, Financial Consolidation[disambiguation needed]
- Management Accounting
- Budgeting, Costing, Cost Management, Activity Based Costing
- Human Resources
- Recruiting, Training, Payroll, Benefits, 401K, Diversity Management, Retirement, Separation
- Manufacturing
- Engineering, Bill of Materials, Work Orders, Scheduling, Capacity, Workflow Management, Quality Control, Manufacturing Process, Manufacturing Projects, Manufacturing Flow, Product Life Cycle Management
- Supply Chain Management
- Supply Chain Planning, Supplier Scheduling, Order to Cash, Purchasing, Inventory, Product Configurator, Claim Processing
- Project Management
- Project Planning, Resource Planning, Project Costing, Work Break Down Structure, Billing, Time and Expense, Performance Units, Activity Management
- Customer Relationship Management
- Sales and Marketing, Commissions, Service, Customer Contact, Call Center Support - CRM systems are not always considered part of ERP systems but rather BSS systems . Specifically in Telecom scenario
- Data Services
- Various "self–service" interfaces for customers, suppliers and/or employees
- Access Control
- Management of user privileges for various processes
The term ERP was coined in 1990 by Gartner1, but its roots date
to the 1960s. Back then, the concept applied to inventory management and
control in the manufacturing sector. Software engineers created programs to
monitor inventory, reconcile balances, and report on status. By the 1970s, this
had evolved into Material Requirements Planning (MRP) systems for scheduling
production processes.
In the 1980s, MRP grew to encompass more manufacturing
processes, prompting many to call it MRP-II or Manufacturing Resource Planning.
By 1990, these systems had expanded beyond inventory control and other
operational processes to other back-office functions like accounting and human
resources, setting the stage for ERP as we've come to know it.
Today, ERP has expanded to encompass business intelligence (BI)
while also handling "front-office" functions such as sales force
automation (SFA), marketing automation and ecommerce. With these product
advancements and the success stories coming out of these systems, companies in
a broad range of industries—from wholesale distribution to ecommerce—use ERP
solutions.
Moreover, even though the "e" in ERP stands for
"enterprise," high-growth and mid-size companies are now rapidly
adopting ERP systems. Software-as-a-Service (SaaS) solutions—also referred to
as "cloud computing"—have helped fuel this growth. Cloud-based
solutions not only make ERP software more affordable, they also make these
systems easier to implement and manage. Perhaps even more importantly, cloud
ERP enables real-time reporting and BI, making them even valuable to executives
and staff seeking visibility into the business.
As a result, companies of all sizes and a wide range of
industries are transitioning to cloud ERP systems. In fact, Forrester predicts
that SaaS-based ERP adoption will rise 21 percent annually through 2015.2 When
you stop to consider the benefits of ERP, it's easy to see why it's become so
popular and why its use will continue to grow so rapidly.
The Business Value of ERP
At its core, ERP helps employees do their jobs more efficiently
by breaking down barriers between business units. More specifically, an ERP
solution:
- Gives a global, real-time view of data that can enable companies to address concerns proactively and drive improvements
- Improves financial compliance with regulatory standards and reduces risk
- Automates core business operations such as lead-to-cash, order-to-fulfillment, and procure-to-pay processes
- Enhances customer service by providing one source for billing and relationship tracking.
When you add up these advantages, the value of ERP—particularly
cloud ERP—is clear. With an ERP solution, employees have access to accurate
information that enables them to make better decisions faster. Not only that,
but ERP software helps to eliminate redundant processes and systems,
dramatically lowering the cost of doing business overall.
Oracle Applications: Introduction
Oracle Applications comprise the applications software or business software of
Oracle Corporation. The term refers to the non-database and non-middleware
parts of Oracle's software portfolio.
Oracle sells many functional modules which use the Oracle RDBMS
as a back-end, notably Oracle Financials, Oracle HRMS, Oracle Projects, Oracle
CRM, Oracle Procurement, etc.
Oracle initially launched its application suite with financials
software in the late 1980s. The offering as of 2009 extends to supply-chain
management, human-resource management, warehouse-management,
customer-relationship management, call-center services, product-lifecycle
management, and many other areas. Both in-house expansion and the acquisition
of other companies have vastly expanded Oracle's application software business.
Oracle released Oracle E-Business Suite (EBS/ e-BS) Release 12
(R12) — a bundling of several Oracle Applications applications — in February
2007. The release date coincided with new releases of other Oracle-owned
products: JD Edwards EnterpriseOne, Siebel Systems and PeopleSoft. As of 2012
Oracle supports Release 11.5.10.2, Release 12.0.X, and Release 12.1.X of the
Oracle E-Business Suite. The latest release of the software is called Oracle
EBS R12.
Oracle Applications an Enterprise
Resource Planning software:
Oracle E-Business Suite is the most comprehensive suite of
integrated, global business applications that enable organizations to make
better decisions, reduce costs, and increase performance.
Why Oracle?
With hundreds of
cross-industry capabilities spanning enterprise resource planning, customer
relationship management, and supply chain planning, Oracle E-Business Suite
applications help customers manage the complexities of global business
environments no matter if the organization is small, medium, or large in size.
As part of Oracle’s Applications Unlimited strategy, Oracle E-Business Suite
applications will continue to be enhanced, thus protecting and extending the
value of your software investment.
Within the overall rubric of Oracle Applications - Apps, Oracle Corporation's E-Business Suite (also known as Applications/Apps or EB-Suite/EBS) consists of a collection of enterprise resource planning (ERP), customer relationship management (CRM), and supply-chain management (SCM) computer applications either developed or acquired by Oracle. The software utilizes Oracle's core Oracle relational database management system technology. The E-Business Suite (current version: 12.1) contains several product lines, including:
- Oracle CRM
- Oracle Financials
- Oracle HRMS
- Oracle Mobile Supply Chain Applications
- Oracle Order Management
- Oracle Procurement
- Oracle Project Portfolio Management
- Oracle Quotes
- Oracle Transportation Management
- Oracle Warehouse Management Systems
- Oracle Inventory
- Oracle Enterprise Asset Management
Each product comprises several modules, each separately licensed.
Significant technologies incorporated into the applications include the Oracle database technologies, (engines for RDBMS, PL/SQL, Java, .NET, HTML and XML), the "technology stack" (Oracle Forms Server, Oracle Reports Server, Apache Web Server, Oracle Discoverer, Jinitiator and Sun's Java)
Oracle's next-generation Enterprise Resource Planning (ERP)
applications for midsize organizations offer enterprise-class technology at an
affordable price. With Oracle, you can leverage proven best practices to
optimize business processes, reduce costs, and respond more quickly to changing
market conditions.
Flexible, open, and
scalable, Oracle ERP solutions provide a rapid return on investment and a low
total cost of ownership.
The Oracle E-Business
Suite is a packaged ERP made up of more than 150 software modules which
includes solution for various departments of an enterprise viz. financial
management, supply chain management, manufacturing, project systems, human
resources, and customer relationship management. Oracle E-Biz is a web based
ERP which can be accesses over internet.
Oracle Corporation was always known for its robust database,
over the last decade it has grown into an applications company.
Oracle is being used by a PC-Based company to Fortune500
companies having its geographical spread all over the world.
Strategic Acquisitions by Oracle:
Career in Oracle Application:
Today’s market for the professionals who have the domain knowledge of
any business stream like finance, supply chain, manufacturing and they know the
functionality and application of Oracle e-Business suite( also called as e-Biz)
has a huge demand in the market and is ever increasing.
Today
Oracle application is world leader in ERP(Enterprise Resource Planning) market
which has in the near past acquired many established ERPs like JD-Edwards,
Peoplesoft, Seibel to name a few.
Currently
Oracle e-Biz is having couple of versions in the market which has still
not been upgraded. The versions are E-biz 11i, E-biz R12 and Fusion. Fusion is
the latest version in the portfolio of Oracle applications.
There
are three different tracks in which you can get experts to get a good job in
the ERP market they are:
- Functional Consultant
- Technical Expert
- Apps DBA
Functional
Consultant: Functional Consultants are
people who have done there basic studies in the relevant domain area (domain
area can be Finance, Supply Chain, procurement, etc,) and have atleast two to
three years of working experience in the specific domain area. For example if
one wants to be a Functional Consultant (functional) then he needs to be a post
graduate in commerce or Maters in business administration with two years of
experience (or a graduate in commerce with 3+ years of experience) and should
have under gone Oracle Functional consultant training.
Technical
Expert is one who has the basic education like Degree in Engineering (BE) or
B.Sc.(computer science) and has undergone additional training on the technology
used in Oracle Applications. The technological skills to be possessed by a
technical expert are as below:
- SQL/ PL SQL
- Developer 2000 (D2k)
- Reports
- Forms
- Knowledge of unix
- Java
DBA (Data base
administrators): Each database requires at least one database administrator
(DBA) to administer it. Because an Oracle database system can be large and can
have many users, often this is not a one person job. In such cases, there is a
group of DBAs who share responsibility.
A database administrator's
responsibilities can include the following tasks:
- Installing and upgrading the Oracle server and application tools
- Allocating system storage and planning future storage requirements for the database system
- Creating primary database storage structures (tablespaces) after application developers have designed an application
- Creating primary objects (tables, views, indexes) once application developers have designed an application
- Modifying the database structure, as necessary, from information given by application developers
- Enrolling users and maintaining system security
- Ensuring compliance with your Oracle license agreement
- Controlling and monitoring user access to the database
- Monitoring and optimizing the performance of the database
- Planning for backup and recovery of database information
- Maintaining archived data on tape
- Backing up and restoring the database
- Contacting Oracle Corporation for technical support
Tuesday 8 January 2013
Basic Of E-Business suite
As discussed in our earlier section that there are three different tracks in which you can get experts to get a good job in the ERP market they are:
- Functional Consultant
- Technical Expert
- Apps DBA
Functional Consultants:
Functional Consultants are the bridge between the client/ customer who is
implementing Oracle applications and the technical team. Functional consultants
role is very critical in implementing ERP. He has to correctly understand the requirement
and then map to the functionalities to Oracle applications.
Oracle E-Business Suite is easy
to implement and easy to adapt. In a survey it is found that the Total Cost of
ownership of Oracle E-Biz the the lowest. It is also found that the average
time to market is the least for the implementation of Oracle application.
Oracle E-Biz provides a variety
of features and business processes that can improve the oraganizations
productivity and effeciency.Success of any ERP implementation depends upon the
involvement of Top management in the driving the implementation. The sucess
also depends upon the decision taken during the requirement gathering sessions
by the functional consultants. so it becomes responsibility from the functional
consultant's part to make the customer unsderstand what the functional
consultant wants to get from the customer. All the functional consutant should
remember the golden rule "Input Grabage and the output will also be
Grabage".
Some of the points to be kept in
mind during the implementations are as follows:
1) first you should have a
workshop for the customer to understand the concepts of implementation of
Oracle E-Biz.
2) As a consultant you should
fecilitate the customer in taking the decision( please bear in mind that you
should not influence the customer in decision making.)
3) for each decisions made it
would be advisable to debate on the pros and cons of the decision.
4) Try to involve all the
stakeholders into decision making. this will avoid resentment in the users once
Oracle E-Biz is implemented.
5) Avoid taking shortsighted
implementation decisions which may loose the essence of implementing Oracle
E-Biz.
6) As far as possible
customizations should be discouraged. this will help in better maintanace of
Oracle E-Biz after the implementation.
Monday 7 January 2013
Overview of information flow between Oracle Application
Before we get into the basics of Essential setups and
implementation steps it is necessary to know how information flows
between different modules of Oracle Applications.
In Oracle application there are different modules. The
modules can be considered as different departments of an organization. So, If we take an bird's eye view of an organization it would look like as shown in the picture below:
Oracle General Ledger, Accounts Payable, Accounts
Receivables etc. these modules have effect on each other. This means that when
any transaction is entered in accounts payable, there would be accounting
entries generated for this. And these accounting entries are then posted to
Oracle general ledger. Below is the high level schematic diagram of the
application.
Click on the image to Zoom.
Click on the image to Zoom.
If we see the above diagram we can see that there are many modules
between which the information flows. Here only some of the flows are shown due
to complexity of flows.
Now, these modules can be grouped for ease of understanding
the way oracle applications works. This grouping can be called as Business
Process Flows or Business Flows. The different flows are as follows:
- Recruit to Retire
- Purchase to Pay
- Order to Make to Cash
- Record to report
We will see each of these business flows in detail.
Sunday 6 January 2013
High Level Business Process Flow
Business Process flow is the graphical presentation for specifying business process usinf flowcharts. the objective of Business Process Flow is to support both technical users and business users. By providing a graphical representation business usres can easily understand complex business processes.
The primary objective of Business process Flows is to provide standard notation readily understandable by all business stakeholders. These include the business analysts who create and refine the processes, the technical developers responsible for implementing them, and the business managers who monitor and manage them. Consequently, Business Process Flows serves as a common language, bridging the communication gap that frequently occurs between business process design and implementation.
Here I am depicting the high level business process flows for the above mentioned flows. We will get into the details when we go to the specific chapter:
Hire (Recruit) to Retire: As the name suggest this flow takes care of all the organizational aspects from the time a person is recruited in an organization till he retires. Retirement can be of any kind. It can be age related retirement, employee resigns from the services or any other type where the person leaves the organization.
Click on the image to zoom:
The Record to Report management process provides strategic, financial and operational feedback about how a business is performing. this process involves collecting, transforming and delivering relevant, timely and accurate information to stakeholders inside and outside the organization. such feedback provides insight into whether stakeholder expectations have been met.
Click on the image to zoom:
Order to cash (O2C) is a set of business processes that involve receiving and fulfilling customer requests for goods or services. O2C is the process of obtaining and managing the orders from the customer, this information is fed to the manufacturing department for manufacturing a product or providing a service. It involves the transactional flow of data that is sent from a customer as well as the data that surrounds the fulfilment of the actual order and receiving payment for the product or service.
Click on the image to zoom:
Procure to pay (purchase to pay or P2P) is the process of obtaining and managing the raw materials needed for manufacturing a product or providing a service. It involves the transactional flow of data that is sent to a supplier as well as the data that surrounds the fulfillment of the actual order and payment for the product or service. According to the Chartered Institute of Purchasing and Supply, procure to pay should be a seamless process from point of order to payment. Technology can assist this process.
The goal of a procure-to-pay software system is to automate processes by introducing efficiency controls. For instance, to enforce buying controls, the software might cross-reference purchasing budgets to ensure compliance with pre-defined buying limits. A requisition that was within pre-defined limits would be programmatically routed for approval, converted into a purchase order once approved and immediately sent to the correct supplier by email.
A sophisticated procure to pay system is capable of extracting invoice and payment data from a general ledger, enterprise resource planning (ERP) or customer relationship management (CRM) systems while also accepting transaction data from banks, vendors, shipping and other outside sources and reconciling complex and multiple supplier statements to payments and good received.
Click on the image to zoom:
The Record to Report management process provides strategic, financial and operational feedback about how a business is performing. this process involves collecting, transforming and delivering relevant, timely and accurate information to stakeholders inside and outside the organization. such feedback provides insight into whether stakeholder expectations have been met.
Click on the image to zoom:
Order to cash (O2C) is a set of business processes that involve receiving and fulfilling customer requests for goods or services. O2C is the process of obtaining and managing the orders from the customer, this information is fed to the manufacturing department for manufacturing a product or providing a service. It involves the transactional flow of data that is sent from a customer as well as the data that surrounds the fulfilment of the actual order and receiving payment for the product or service.
Click on the image to zoom:
Saturday 5 January 2013
Amortized Adjustments
After an amortized adjustment, the depreciation amount is adjusted by a Rate
Adjustment Factor (RAF) which allocates amortized change over the remaining life.
The RAF is not visible via the forms but can be viewed in an asset trace.
Formula for the Rate Adjustment Factor is:
RAF = (New Recoverable Cost - Recalculated Depreciation Reserve) / New Recoverable Cost
For example:
Cost: 6000
Life: 60 months
Method: STL
DPIS: JAN 01, 2000
Prorate Date: JAN 01, 2000
Depreciation = 6000/ 5 years/ 12 periods per year = $100 per period
Status in JUL-00 after six months depreciation:
Cost: 6000
Reserve: 600
NBV: 5400
In JUL-00, post an amortized cost adjustment (increase in cost) of 6000
resulting in:
Cost: 12000
Reserve: 600
NBV: 11400
RAF = (12000 - (12000/ 5 years/12 periods per year * 6 periods)) / 12000
= (12000 - 1200) / 12000
= 10800 / 12000 = .9
Depreciation calculation in subsequent months:
periodic depreciation = adjusted cost / life in years / periods per year / RAF
11400 / 5 / 12 / .9 = 211.11
Current reserve: 6 periods @ 100.00 = 600
Remaining: 54 periods @ 211.11 = 11399.94
Total Accumulated Depreciation after 60 months = 11999.94 (.06 due to rounding)
Reference: R11i How is Depreciation Calculated After an Amortized Adjustment? [ID 166260.1]
Depreciation In Oracle Assets (FADEPR)
Applies to:
Oracle Assets - Version 11.5.9 to 11.5.10.2 [Release 11.5]Information in this document applies to any platform.
Depreciation Program - FADEPR
***Checked for relevance on 08-Jan-2013***
Purpose
To provide information on the depreciation process in Oracle Assets.Scope
This article is for general use as reference material only.Details
DEPRECIATION IN ORACLE ASSETS~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Depreciation Program (FADEPR) calculates depreciation expense and
adjustments, and updates the accumulated depreciation and year-to-date
depreciation. When you run depreciation, the Depreciation Program submits
three or four separate requests, depending on release version:
- Generate Accounts (FAGDA - Release 11 and 11i)
- Calculate Gain/Loss (FARET)
- Depreciation (FADEPR)
- Journal Entry Reserve Ledger Report (FAS400) for a Corporate book
or Tax Reserve Ledger Report (FAS480) for a TAX book.
- Process Pending Transactions (11i only)
The Generate Accounts process will generate all necessary GL code combinations
and populate the FA_DISTRIBUTION_ACCOUNTS table. FAGDA is independent of the
depreciation program and is intended as a performance enhancer. If you are
running depreciation for the first time, you should consider running
Generate Accounts first (Other-Requests-Run) because it can take an extended
length of time to run, depending on the number of assets and distributions.
The Calculate Gain/Loss process will calculate gains and losses for retired
assets and catch up depreciation for retired and reinstated assets in the
current period. FARET should be run standalone whenever you retire or
reinstate assets throughout the period.
The depreciation process will calculate depreciation expense and adjustments
and close the current period for the book. You should be sure you have entered
all transactions for the period before running depreciation because you cannot
reopen the period once it is closed.
The Process Pending Transactions program has added an additional Mass
Addition Post job in the Depreciation request set. When Depreciation runs and
opens the next period, a Mass Additions Post job will automatically be
submitted to process any mass additions for that period.
JOURNAL ENTRIES FOR DEPRECIATION
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Oracle Assets creates the following journal entries for depreciation:
Depreciation Expense DR
Accumulated Depreciation CR
CALCULATING DEPRECIATION - THE BASICS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1. Use the Run Depreciation form to submit a concurrent request, which will
calculate depreciation for the current period for all assets in a book.
2. Oracle Assets will first run the Calculate Gains and Losses program to
process any pending retirements or reinstatements.
3. After depreciation has completed, Oracle Assets will automatically run
the Journal Entry Reserve Ledger Report or the Tax Reserve Ledger Report.
For release 10.7 and 11, once you run depreciation for a book, Oracle Assets
closes the period. All subsequent transactions you enter for this book will
be processed in the following period.
For release 11i, you have the option of whether you want to close the period or not.
The new functionality of rerunable depreciation and rerunable Create Journals was introduced in 11i.
Oracle Assets takes the following steps to calculate depreciation:
1. Use the date placed in service (DPIS) and the prorate convention to
determine the prorate date.
2. Use the prorate date and the prorate calendar to determine the prorate
period.
3. Determine the depreciation rate.
- For flat-rate depreciation methods, use the adjusted rate.
- For table-based depreciation methods, use the prorate period
and the rate table.
- For calculated depreciation methods, use the life.
- For units of production assets, use the capacity and the periodic
production.
4. Determine the depreciable basis.
- For cost-based depreciation methods, this is usually the cost minus
salvage value.
- For net book value based depreciation methods, this is usually the cost
minus accumulated depreciation.
- In TAX books, the depreciable basis may be limited by a cost ceiling.
5. Calculate the current year depreciation.
- Use the depreciation rate, the depreciable basis, and the prorate
calendar to calculate the current year depreciation.
- In TAX books, the annual depreciation may be limited by an expense
ceiling.
6. Determine the current period depreciation.
- For the first period of the asset life, use the depreciation calendar,
prorate calendar, depreciation start date, and current year
depreciation.
- For the last period of the asset's life, use the recoverable cost minus
accumulated depreciation.
- For the last period of the fiscal year, use the current year
Depreciation minus year-to-date depreciation.
- For other periods, use the depreciation calendar and the current year
depreciation.
There are specific cases that FADEPR checks when running depreciation:
- AMORTIZED ADJUSTMENTS (COST OR LIFE CHANGES)
Oracle Assets uses the (ADJUSTED_COST)/(RATE_ADJUSTMENT_FACTOR) to calculate
current period depreciation. In normal cases this is equal to Asset Cost,
but when there is an amortized change, the ADJUSTED_COST is the new asset
cost and the RATE_ADJUSTMENT_FACTOR is used to spread depreciation over the
remaining life of an asset after amortization or revaluation.
- FIRST YEAR OF ASSET'S LIFE
For the first year of asset's life, DPIS, prorate convention, and Depreciate
When Placed in Service are taken into account for calculating the depreciation
for the period. For this fiscal year, current period depreciation will be
calculated based on the following formula:
Annual Depreciation Amount x Fraction of Year Held /(number of periods the
asset will depreciate during this fiscal year)
- LAST YEAR OF THE ASSET'S LIFE
For the last year of asset's life, retirement date and retirement convention are
taken into account for calculating the depreciation for the period. For this
fiscal year, current period depreciation will be calculated based on the
following formula:
Annual Depreciation Amount x Fraction of Year Held /(number of periods the
asset will depreciate during this fiscal year)
- DEPRECIATION CEILINGS
If the asset has a depreciation ceiling and the calculated depreciation amount
is greater than the ceiling amount, then Oracle Assets uses the ceiling amount.
DEPRECIATION EXAMPLE
====================
An asset is added to the CORPorate book with the following parameters:
Cost = $1,000,000
Salvage Value = $100,000
Depreciation Method = STL 2 year
Date Placed in Service = 11-APR-98
Prorate Convention = Mid Quarter
The depreciation calendar for the book is MONTHLY.
The prorate calendar for the book is FOL MONTH.
The book is set to divide depreciation EVENLY.
The fiscal year goes from January to December.
Calculate depreciation for this asset:
1. The prorate date is 01-MAY-98.
2. The prorate period is MAY-98. (period number 5)
3. The depreciation rate is 1 life, or .5 .
4. Since STL is a cost-based depreciation method, the depreciable basis is
1,000,000 - 100,000 = 900,000.
5. The annual depreciation is 900,000 x .5 = 450,000. Since there are only
8 periods left in the current fiscal year according to the prorate calendar,
the current year depreciation is as follows: 450,000 x 8/12 = 300,000.
6. The current depreciation period spans from April through June. The asset
is to be depreciated starting in May (according to the prorate calendar),
so the current period depreciation is two (2) months' worth, or 75,000.
BEHIND THE SCENE
~~~~~~~~~~~~~~~~
When you run depreciation, Oracle Assets processes each asset according to the
transactions that you have performed on the asset since the last depreciation.
FADEPR uses the following tables:
FA_DEPRN_DETAIL
For each depreciable asset, Oracle Assets inserts one row per distribution line
that was active at any time during the current period.
BOOK_TYPE_CODE ASSET_ID PERIOD_COUNTER DISTRIBUTION_ID D DEPRN_RUN_DATE
--------------- ---------- -------------- --------------- - --------------------
DEPRN_AMOUNT YTD_DEPRN DEPRN_RESERVE ADDITION_COST_TO_CLEAR COST
------------ ---------- ------------- ---------------------- ----------
DEPRN_ADJUSTMENT_AMOUNT DEPRN_EXPENSE_JE_LINE_NUM DEPRN_RESERVE_JE_LINE_NUM
----------------------- ------------------------- -------------------------
REVAL_AMORT_JE_LINE_NUM REVAL_RESERVE_JE_LINE_NUM JE_HEADER_ID
----------------------- ------------------------- ------------
REVAL_AMORTIZATION REVAL_DEPRN_EXPENSE REVAL_RESERVE YTD_REVAL_DEPRN_EXPENSE
------------------ ------------------- ------------- -----------------------
HALIMCORP 100661 23981 850 B 13-AUG-1999 10:53:11
0 0 0 1000000 0
HALIMCORP 100661 23982 850 D 13-AUG-1999 10:55:15
75000 75000 75000 1000000
37500
0 0 0 0
HALIMCORP 100661 23983 850 D 16-AUG-1999 09:38:13
37500 112500 112500 1000000
0
0 0 0 0
FA_DEPRN_SUMMARY
Oracle Assets inserts one row per depreciable asset.
BOOK_TYPE_CODE ASSET_ID DEPRN_RUN_DATE DEPRN_AMOUNT YTD_DEPRN
--------------- ---------- -------------------- ------------ ----------
DEPRN_RESERVE DEPRN_SOURCE_CO ADJUSTED_COST BONUS_RATE LTD_PRODUCTION
------------- --------------- ------------- ---------- --------------
PERIOD_COUNTER PRODUCTION REVAL_AMORTIZATION REVAL_AMORTIZATION_BASIS
-------------- ---------- ------------------ ------------------------
REVAL_DEPRN_EXPENSE REVAL_RESERVE YTD_PRODUCTION YTD_REVAL_DEPRN_EXPENSE
------------------- ------------- -------------- -----------------------
PRIOR_FY_EXPENSE
----------------
HALIMCORP 100661 13-AUG-1999 10:53:11 0 0
0 BOOKS 900000
23981
HALIMCORP 100661 13-AUG-1999 10:55:15 75000 75000
75000 DEPRN 900000 0
23982 0 0
0 0 0
0
HALIMCORP 100661 16-AUG-1999 09:38:13 37500 112500
112500 DEPRN 900000 0
23983 0 0
0 0 0
0
FA_BOOK_CONTROLS
If DEPRN_STATUS in the FA_BOOK_CONTROLS table is either 'C' (Completed) or
'E' (Error), the form submits the concurrent request and sets the DEPRN_STATUS
= 'S' (Submitted). Oracle Assets now locks this row to prevent you from
entering any transaction when depreciation is running. If DEPRN_STATUS in the
FA_BOOK_CONTROLS table is either 'R' (Running) or 'S' (Submitted), then Oracle
Assets displays the errors message "CHECK_BOOK_STAUS" or "Failed to obtain lock
on FA_BOOK_CONTROLS row for book."
Oracle Assets also checks if the depreciation request is for the current open
period. If the LAST_PERIOD_COUNTER in the FA_BOOK_CONTROLS is that of the last
period, the program proceeds. Oracle Assets updates the LAST_PERIOD_COUNTER,
LAST_DEPRN_RUN_DATE, DEPRN_REQUEST_ID, DEPRN_STATUS, and CURRENT_FISCAL_YEAR
for the book.
FA_DEPRN_PERIODS
Oracle Assets closes the row corresponding to the current period (by entering
a PERIOD_CLOSE_DATE) and inserts a new row for the book and the new period.
FA_FISCAL_YEARS
If the new fiscal year has not been created, Oracle Assets automatically extends
the fiscal year definition.
FA_ADJUSTMENTS
Retroactive transactions and expensed depreciation adjustments.
TRANSACTION_HEADER_ID SOURCE_TYPE_COD ADJUSTMENT_TYPE DE CODE_COMBINATION_ID
--------------------- --------------- --------------- -- -------------------
BOOK_TYPE_CODE ASSET_ID ADJUSTMENT_AMOUNT DISTRIBUTION_ID
--------------- ---------- ----------------- ---------------
LAST_UPDATE_DATE LAST_UPDATED_BY LAST_UPDATE_LOGIN ANNUALIZED_ADJUSTMENT
-------------------- --------------- ----------------- ---------------------
JE_HEADER_ID JE_LINE_NUM PERIOD_COUNTER_ADJUSTED PERIOD_COUNTER_CREATED
------------ ----------- ----------------------- ----------------------
ASSET_INVOICE_ID
1335 ADDITION COST DR 12849
HALIMCORP 100661 1000000 850
13-AUG-1999 10:55:15 2849 467341 0
23982 23982
1335 ADDITION COST CLEARING CR 13528
HALIMCORP 100661 1000000 850
13-AUG-1999 10:55:15 2849 467341 0
23982 23982
1335 DEPRECIATION EXPENSE DR 21759
HALIMCORP 100661 37500 850
13-AUG-1999 10:55:15 2849 467341 450000
23982 23982
FA_BOOKS
Look up information needed for depreciation calculation and check the following:
PERIOD_FULLY_RESERVED = NULL
PERIOD_FULLY_RETIRED = NULL
DEPRECIATE_FLAG = YES
ADJUSTMENT_REQUIRED_STATUS is not NONE or TFR (Prior Period Transfer)
DATE_INEFFECTIVE = NULL
BOOK_TYPE_CODE ASSET_ID DATE_PLACED_IN_SERVI DATE_EFFECTIVE
--------------- ---------- -------------------- --------------------
DEPRN_START_DATE DEPRN_METHOD LIFE_IN_MONTHS RATE_ADJUSTMENT_FACTOR
-------------------- ------------ -------------- ----------------------
ADJUSTED_COST COST ORIGINAL_COST SALVAGE_VALUE PRORATE_CO
------------- ---------- ------------- ------------- ----------
PRORATE_DATE COS ADJU CAP RET DEP LAST_UPDATE_DATE LAST_UPDATED_BY
-------------------- --- ---- --- --- --- -------------------- ---------------
DATE_INEFFECTIVE TRANSACTION_HEADER_ID_IN TRANSACTION_HEADER_ID_OUT
-------------------- ------------------------ -------------------------
ITC_AMOUNT_ID ITC_AMOUNT RETIREMENT_ID TAX_REQUEST_ID ITC_BASIS BASIC_RATE
------------- ---------- ------------- -------------- ---------- ----------
ADJUSTED_RATE BONUS_RULE CEILING_NAME
------------- ------------------------------ ------------------------------
RECOVERABLE_COST LAST_UPDATE_LOGIN ADJUSTED_CAPACITY FULLY_RSVD_REVALS_COUNTER
---------------- ----------------- ----------------- -------------------------
IDL PERIOD_COUNTER_CAPITALIZED PERIOD_COUNTER_FULLY_RESERVED
--- -------------------------- -----------------------------
PERIOD_COUNTER_FULLY_RETIRED PRODUCTION_CAPACITY REVAL_AMORTIZATION_BASIS
---------------------------- ------------------- ------------------------
REVAL_CEILING UNIT_OF_MEASURE UNREVALUED_COST ANNUA
------------- ------------------------- --------------- -----
PERCENT_SALVAGE_VALUE ALLOWED_DEPRN_LIMIT ALLOWED_DEPRN_LIMIT_AMOUNT
--------------------- ------------------- --------------------------
PERIOD_COUNTER_LIFE_COMPLETE ADJUSTED_RECOVERABLE_COST ANNUA
---------------------------- ------------------------- -----
HALIMCORP 100661 11-APR-1998 00:00:00 13-AUG-1999 10:53:11
11-APR-1998 00:00:00 STL 24 1
900000 1000000 1000000 100000 FOL-MONTH
01-MAY-1998 00:00:00 NO NONE YES NO YES 13-AUG-1999 10:53:07 2849
1335
900000 466883
1000000
900000
FA_DISTRIBUTION_HISTORY
Look up active distributions.
FA_CEILINGS
Look up ceiling information.
FA_CALENDAR_PERIODS
Look up period information.
FA_CONVENTIONS
Look up prorate convention information.
THE BOTTOM LINE
~~~~~~~~~~~~~~~
Historical depreciation calculations (DEPRN_EXPENSE, ACCUMULATED_DEPRN) can be
found in FA_DEPRN_DETAIL and FA_DEPRN_SUMMARY. The main difference between
these tables is that FA_DEPRN_DETAIL shows depreciation information for each
distribution line (i.e. each active row in FA_DISTRIBUTION_HISTORY), whereas
FA_DEPRN_SUMMARY shows summary depreciation information for an asset.
NOTE: Because referential integrity is not maintained at the RDBMS level, the
depreciation tables do not reference FA_DISTRIBUTION_HISTORY or FA_ADJUSTMENTS.
COMMON DEPRECIATION ERRORS
~~~~~~~~~~~~~~~~~~~~~~~~~~
APP-48260 Module CHECK_BOOK_STATUS ended with error.
Cause: The MASS_REQUEST_ID for this book is NOT NULL.
Resolution: Check to verify that all mass requests for this book have
completed normal. NULL the MASS_REQUEST_ID in the FA_BOOK_CONTROLS table.
APP-00988 ORA-1403 in fadccs.
Cause: fadccs failed due to ORA-01403 no data found.
APP-47670 Unable to validate depreciation periods.
Cause: You ran depreciation for the first time in your book. The problem
is that there is a missing row in FA_DEPRN_PERIODS. FADEPR expects a row in
FA_DEPRN_PERIODS for one period less than the active period.
Resolution: Insert the missing row in FA_DEPRN_PERIODS table. Contact
Oracle Support Services for the datafix script.
APP-47984 in fazccp and ORA-1403 in fazgtcp.
Cause: The depreciation calendar needs to go as far back as the oldest DPIS,
or if you have changed the calendar, there may be gaps or period overlaps.
Resolution: Correct the calendar.
APP-00988 ORACLE error 1403 in fadubc
APP-47649 Error: Unable to set depreciation status in FA_BOOK_CONTROLS table
APP-47640 Error: Unable to update FA_BOOK_CONTROLS table
Cause: You ran depreciation for a book with no assets and you are in the
last period of the fiscal year.
Resolution: You need to apply patch for BUG 605315 or higher.
APP-00988 Oracle error 1555 in faddep
Cause: faddep failed due to ORA-01555: snapshot too old (rollback segment
too small).
Resolution: Increase the rollback segment size.
APP-47191 and ORA-1403 in fazgtbc
Cause: Depreciation is submitted with number of parallel requests set to
more than 1 (FA:Number of Parallel Requests) and the BOOK_TYPE_CODE has a
space in between 2 words. Example: US CORPORATE
Resolution: This is BUG 456936. Apply Patch 605315 or higher. As a
workaround, you need to submit depreciation in single mode.
APP-00988 ORACLE error 1 in faenicp
Cause: faenicp failed due to ORA-00001:unique constraint
(FA.FA_CALENDAR_PERIODS_U3) violated.
Resolution:
1) Make sure that the version of faeofy.lpc in FADEPR is version 70.15
or Higher.
2) Check the calendar periods for gaps or overlap.
3) Check that the Fiscal Start and End Dates match the Start and End Dates
of the first and last periods of the fiscal year respectively.
4) Make sure that there are no gaps or overlap between Fiscal Year Start
and End Dates.
5) Be sure that all of the periods for a Fiscal Year have been created.
ORA-1 in fadaid/fadais
Common causes:
- Updating DEPRN_STATUS in FA_BOOK_CONTROLS to C (Completed).
- Partially committed or incomplete transfers, adjustments, or partial
retirements.
- Transfers that happened after depreciation has errored in a book.
- Orphaned adjustment records.
- Orphaned distributions.
Resolution: Run the provided ORA-1 diagnostic scripts. Contact Oracle
Support Services for any required datafix scripts.
ORA-1 DIAGNOSTIC SCRIPTS
========================
Script to check for adjustment rows with invalid distribution_id:
select aj.asset_id, aj.distribution_id
from fa.fa_distribution_history dh, fa.fa_adjustments aj
where aj.period_counter_created = &PCounter
and aj.book_type_code = '&BOOK'
and NOT exists (select dh.asset_id
from FA.fa_distribution_history dh
where dh.distribution_id = aj.distribution_id
and dh.asset_id = aj.asset_id);
Another script to check for adjustment rows with invalid distribution_id:
select aj.asset_id
from fa.fa_transaction_headers th,
fa.fa_distribution_history dh,
fa.fa_adjustments aj,
fa.fa_deprn_periods dp
where dp.book_type_code = '&BOOK'
and dp.period_close_date is null
and dp.period_counter = aj.period_counter_created
and dp.book_type_code = aj.book_type_code
and aj.transaction_header_id = th.transaction_header_id
and th.transaction_type_code = 'TRANSFER'
and aj.distribution_id = dh.distribution_id(+)
and dh.code_combination_id is null;
The best script to check for adjustment rows with invalid distribution_id:
select distinct aj.asset_id
from fa.fa_adjustments aj, fa.fa_deprn_detail dd
where aj.book_type_code = &book
and aj.distribution_id = dd.distribution_id(+)
and aj.period_counter_created = dd.period_counter(+)
and aj.book_type_code = dd.book_type_code(+)
and dd.deprn_amount is null
and exists (select 'fine' from fa.fa_deprn_detail dd2
where dd2.asset_id = aj.asset_id
and dd2.book_type_code = aj.book_type_code
and dd2.period_counter = aj.period_counter_created);
Script to check for invalid rows in FA_DISTRIBUTION_HISTORY:
select dh.asset_id
from fa.fa_distribution_history dh1,
fa.fa_distribution_history dh
where dh.transaction_header_id_out is not null
and dh.transaction_header_id_out = dh1.transaction_header_id_in(+)
and dh1.code_combination_id is null;
NOTE: Make sure you have the latest faxchk.lpc (fa75win.dll) to prevent ORA-1 issues.
GENERAL INFORMATION
===================
- DEPRECIATION CALENDAR
The depreciation calendar determines the number of
accounting periods in
your fiscal year.
- PRORATE CALENDAR
The prorate calendar determines what rate Oracle
Assets uses to calculate
annual depreciation by mapping each date to a
prorate period, which
corresponds to a set of rates in the rate
table.
- PERIOD CLOSE
Oracle Assets automatically closes the book's
current period and opens the
next when you run the depreciation program. You
cannot have more than one
open period for a given depreciation book.
- YEAR-END PROCESSING
You can close the year independently in each
depreciation book. The
depreciation program automatically resets
year-to-date amounts on a book
the first time the depreciation program is run on
that book in a fiscal year.
For assets added in the first period of the year
with YTD depreciation, the
YTD is NOT reset to zero on the first depreciation
run.
Oracle Assets automatically creates the
depreciation and prorate periods for
your new year when you run depreciation for the
last period of the previous
fiscal year.
- SUSPEND DEPRECIATION
You can suspend depreciation by un-checking
Depreciate flag in the Books
form. If you suspend depreciation of an asset when
you add the asset, Oracle
Assets expenses the missed depreciation in the
period you start depreciating
the asset.
For table and calculated methods, Oracle Assets
calculates depreciation
expense for the asset based on an asset life that
includes the periods you
did not depreciate it. If you suspend depreciation
after an asset has started
depreciating, Oracle Assets catches up the missed
depreciation expense in the
last period of life.
For flat-rate methods, Oracle Assets continues
calculating depreciation expense
for the asset based on the flat-rate. For
flat-rate methods that use net book
value, Oracle Assets uses the asset net book value
at the beginning of the
fiscal year in which you resume depreciation. The
asset continues depreciating
until it becomes fully reserved.
- RECOVERABLE COST
For depreciation methods with a calculation basis
of cost, Oracle Assets
calculates depreciation using the recoverable cost.
The recoverable cost
is calculated as the lesser of either the cost less
the salvage value less
the investment tax credit basis reduction amount,
or the cost ceiling.
Oracle Assets depreciates the asset until the
accumulated depreciation equals
the recoverable cost.
- ADJUSTMENTS
The following are some examples of financial
adjustments you can expense or
amortize:
- Recoverable Cost Adjustments
- Depreciation Method Adjustments
- Life Adjustments
- Rate Adjustments
- Capacity Adjustments
- PRIOR PERIOD TRANSACTIONS
1. Prior Period Additions
If you enter an asset with a date placed in
service before the current
accounting period, Oracle Assets automatically
calculates the missed
depreciation and adjusts the accumulated
depreciation on the next depreciation
run. If you provide accumulated depreciation
when you add the asset, Oracle
Assets does not recalculate the accumulated
depreciation. It accepts the
amount you entered. For table and calculated
methods, even if the entered
accumulated depreciation differs from what Oracle
Assets would have
calculated, Oracle Assets does not depreciate the
asset beyond the
recoverable cost. If the accumulated
depreciation is too low, Oracle Assets
takes additional depreciation in the last period
of the asset's life so that
the asset becomes fully reserved. If the asset's
accumulated depreciation is
too high, Oracle Assets stops depreciating the
asset when it becomes fully
reserved, effectively shortening the asset
life.
2. Prior Period Transfers
If you backdate an asset transfer, Oracle Assets
automatically reallocates
depreciation expense by reversing some of the
depreciation charged to the
from account, and redistributing it
proportionally to the to accounts.
Retroactive transfers do not impact the total
depreciation. You cannot
backdate a transfer to a prior fiscal year.
3. Prior Period Retirements / Reinstatements
If you backdate a retirement, Oracle Assets
automatically adjusts the
depreciation for the year by the appropriate
amount, resulting in a one-time
adjustment in depreciation expense for the
period. Oracle Assets then
computes the gain or loss using the resulting net
book value. You cannot
backdate a retirement to a previous fiscal year,
nor can you reinstate a
retirement performed in a previous fiscal
year.
4. Prior Period Amortized Adjustments
If you backdate an amortized adjustment, Oracle
Assets automatically
calculates depreciation from the retroactive
amortization start date, and
adds the retroactive depreciation to the current
period.
5. Negative Cost (Credit) Assets
You can enter a credit asset as an asset with a
negative cost and Oracle
Assets credits depreciation expense and debits
accumulated depreciation each
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