Amortized vs Expensed Adjustments in Fixed Assets

Amortized vs Expensed Adjustments in Fixed Assets

In the period you add an asset or for CIP assets, changing financial information does not adjust depreciation, since no depreciation has been taken. But while changing financial information (adjustment) on asset after you have run depreciation, we have to make important decision as whether to expense or amortize the adjustment.  

So what is expense adjustment and amortize adjustments.

Expensed Adjustment

For expensed adjustments, Oracle Assets recalculates depreciation using the new information and expenses the entire adjustment amount in the current period. Expensing the adjustment results in a one-time adjusting journal entry.

Amortized Adjustment

For amortized adjustments, Oracle Assets spreads the adjustment amount over the remaining life or remaining capacity of the asset.

For flat-rate methods, Oracle Assets starts depreciating the asset using the new information. You can set up your amortized adjustments to have a retroactive start date by changing the default amortization start date (usually the system date) to a date in a previous period. Any adjustment amount missed since the amortization start date is taken in the current period.

If you amortize an adjustment for an asset, you cannot expense any future adjustments for that asset in that book.

You can allow an amortized adjustment for the book in the Book Controls window.

• Method Adjustments: For amortized method changes, Oracle Assets does not recalculate accumulated depreciation, but uses the new information for the remaining time the asset is in service.

• For table and calculated methods, Oracle Assets depreciates the cost less the accumulated depreciation over the remaining life of the asset.

• For diminishing value methods, Oracle Assets calculates depreciation based on the recoverable net book value of the asset as of the period you make the change.

• If, instead, your depreciation method multiplies the flat-rate by the cost, Oracle Assets begins using the new information to calculate depreciation.

• Bonus Adjustments:

• For assets with a cost-based depreciation basis, the bonus rate is applied to the cost.

• For assets with a net book value depreciation method basis, the bonus rate is applied to the cost less total reserve (accumulated depreciation and bonus reserve).

Reference: R12 Fixed Asset User Guide