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4/9/2014 Journal Entries for Retirements and Reinstatements (Oracle Assets Help)

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Journal Entries for Retirements and Reinstatements
When you retire an asset and create journal entries for that period, Oracle Assets creates journal entries for your general ledger for each component
of the gain/loss amount. Oracle Assets creates journal entries for either the gain or the loss accounts for the following components: proceeds of sale,
cost of removal, net book value retired, and revaluation reserve retired. Oracle Assets also creates journal entries to clear the proceeds of sale and
cost of removal.
Oracle Assets creates journal entries for the retirement accounts you set up in the Book Controls window. If you enter distinct gain and loss
accounts for each component of the gain/loss amount, Oracle Assets creates multiple journal entries for these accounts. You can enter different sets
of retirement accounts for retirements that result in a gain and retirements that result in a loss.
Depreciation for Retirements
The retirement convention, date retired, and depreciation method control how much depreciation Oracle Assets takes when you retire an asset.
Oracle Assets reverses the year-to-date depreciation if the asset's depreciation method does not depreciate it in the year of retirement. In this case,
when you perform a full retirement, Oracle Assets reverses 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 your retirement convention to determine whether the asset
is eligible for additional depreciation in that year or whether some of that year's 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 asset's cost remaining after a partial retirement. For assets that
use a diminishing value method, Oracle Assets depreciates the remaining fraction of the asset's net book value as of the beginning of the fiscal year.
Depreciation for Reinstatements
The retirement convention, date retired, and period in which you reinstate an asset control 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, and waits until the appropriate accounting periods to take it.
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 take depreciation in the period of retirement. You retire revaluation reserve in this book.
4/9/2014 Journal Entries for Retirements and Reinstatements (Oracle Assets Help)
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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.
Prior Period Retirement
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 discover that the asset was sold in Year 3, Quarter 1, for $2,000. 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.
4/9/2014 Journal Entries for Retirements and Reinstatements (Oracle Assets Help)
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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.
Prior Period Reinstatement
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 2, Quarter 1, you retire the asset. In Year 2, Quarter 4, you realize that you retired the wrong asset so you reinstate it.
4/9/2014 Journal Entries for Retirements and Reinstatements (Oracle Assets Help)
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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 to the retirement prorate date, and does not remove the accumulated depreciation. However, Oracle Assets creates all other
journal entries associated with retiring a capitalized asset.
Reinstatement Transactions
PENDING Asset Retirement
When you reinstate an asset retired in the current accounting period that the calculate gains and losses program has not yet processed, the retirement
transaction is deleted, and the asset is immediately reinstated. No journal entries are created.
PROCESSED Asset Retirement
When you reinstate an asset retired in a previous accounting period or already processed in the current period, the existing retirement transaction
gets a new Status REINSTATE, and the asset is reinstated when you process retirements. Oracle Assets creates journal entries to catch up any
missed depreciation expense.
See Also
About Retirements
Retiring Assets
Correcting Retirement Errors (Reinstatements)
Calculating Gains and Losses for Retirements

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