EDU3AB8Y

16
Asset Capitalization
Copyright 2010, Oracle. All rights reserved.
Objectives
After completing this lesson, you should be able to do the
following:
Describe the purpose of asset capitalization
Explain the processing flow for asset capitalization
Perform asset capitalization implementation steps
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Agenda
16 - 3
Overview of Asset Capitalization

Project Types for Asset Capitalization
Process Asset Capitalization
Adjustments
Implementing Asset Capitalization
Construction of
a new building
Installation of a
wireless
network
Retirement of
an asset
Capture construction-in-process (CIP) costs for assets you

are creating. Capture cost of removal and proceeds of sale
amounts (RWIP) for assets you are retiring.
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You can set up capital projects to capture capital asset
costs, retirement costs, or both.
Capital
Assets
Retirement
Adjustment
Assets
Capital Project
Capture CIP
Costs
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Capture RWIP
Costs
Project-Related Asset Processing Flow

Receipt Accrual Costs
Oracle
Purchasing
Purchasing
Details
Oracle
Payables
Supplier
Costs
Oracle
Project
Costing
Non-CIP Assets*
Post
Cost
Oracle
Assets
CIP and RWIP

Assets and Cost
Post Cost
Post Cost
Oracle
Subledger
Accounting
Transfer to GL
Oracle
General Ledger
16 - 6
Post Cost
*If a non-CIP asset is
associated with a capital
project, then Oracle Project
Costing interfaces the asset
and costs from Oracle
Payables and sends them to
Oracle Assets.
Accounting Example
You set up a project to collect costs to build a new clean room and to install
air quality monitors. You are also removing several air quality monitors from
an existing clean room and retiring them.
Description
Amounts
Supplier Invoice - Architectural drawings
2000.00
Supplier Invoice - Building contractor
5500.00
Supplier Invoice - Building permit penalty

Supplier Invoice - New Air Quality Monitors
2,500.00
Employee labor for project management
1,400.00
Rent allocation for use of office space

Usage for use of company car
Employee labor for removing old air quality monitors
Total Cost
250.00
55.00
500.00
12,405.00
Costs charged to the project

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200.00
Accounting Example
You create subledger accounting entries for the supplier invoice
transactions from Oracle Payables. Oracle Subledger Accounting
transfers the accounting to Oracle General Ledger.
Accounts
Debit
Amount
CIP - Clean Room
7,700.00
CIP - Air Quality Monitors
2.500.00
Credit
Amount
Accounts Payable Trade

Accounts for Supplier Cost Transactions
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10,200.00
Accounting Example
You account for the employee labor and usage transactions you enter in
Oracle Project Costing
Accounts
Debit
Amount
CIP - Clean Room

RWIP - Air Quality Monitors - Cost of
Removal
Credit
Amount
1,705.00
500.00
Payroll Liability
Allocation Clearing
Usage Clearing
1900.00
250.00
55.00
Accounts for Expenditure Items in Oracle Project Costing
16 - 9
Accounting Example
After reviewing the project costs, you determine that you cannot capitalize
the building permit penalty that you recorded as part of the journal entry for
the supplier invoice transactions. To correct this, you change the original
transaction from capitalizable to non-capitalizable. In Oracle Project Costing,
you distribute the supplier cost adjustment, generate cost accounting events,
and create subledger accounting entries for the accounting events. Oracle
Subledger Accounting transfers the accounting entries to Oracle General
Ledger.
Accounts
Debit
Amount
Supplier Invoice Expense
200.00
CIP - Clean Room

Accounts for a Capital Cost Adjustment
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Credit
Amount
200.00
Accounting Example
After the clean room is complete and the new monitors are installed, you
place the assets in service and interface the CIP asset lines to Oracle
Assets. After you post the assets in Oracle Assets, you create accounting
entries.
Accounts
Debit
Amount
Assets - Clean Room
9,205.00
Assets - Air Quality Monitors
2,500.00
CIP - Clean Room
9,205.00
CIP - Air Quality Monitors
2,500.00
Accounts for Capital Assets
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Credit
Amount
Accounting Example
After the existing air quality monitors are removed, you specify a
retirement date for the retirement adjustment asset and interface the
RWIP asset lines to Oracle Assets. After you post the retirement
adjustment asset in Oracle Assets, you create subledger accounting
entries.
Accounts
Debit
Amount
Accumulated Depreciation - Air Quality

Monitors - Cost of Removal
Credit
Amount
500.00
RWIP - Air Quality Monitors - Cost

of Removal
Accounts for Retirement Adjustment Assets
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500.00
Quiz
You capture retirement costs in a capital project by recording
cost of removal and proceeds of sale amounts to a task that is
designated as a retirement cost task.
a. True
b. False
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Quiz
Which of the following programs does Oracle Payables use to
send non-CIP assets to Oracle Assets?
a. Distribute Labor Costs
b. Distribute Costs
c. Mass Additions Create
d. Interface Supplier Invoice for Payables
16 - 14
Agenda
16 - 15

Adjustments
Project Types for

Capital Projects
Capitalization Information Tab

CIP
Project Class = Capital
Interface Supplier Invoices

Capitalized Interest
Define capitalization information on the Capitalization

Information tab for capital class project types.
16 - 16
Quiz
Which of the following is not a grouping method to summarize
asset lines?
a. Project Functional Currency
b. CIP Grouped by Client Extension
c. Expenditure Category
d. Expenditure Type
16 - 17
Agenda
16 - 18

Adjustments
Asset Processing Flow

Create project
Define assets
Specify actual
date in service or
retirement date
Generate asset
lines
Collect costs
Review costs
and make
adjustments
16 - 19
Review asset cost

lines and make
adjustments
Interface assets
to Oracle Assets
Tieback asset
lines
Specifying Costs
Capital Assets
Retirement Adjustment Assets
Specify whether to capitalize

or expense each transaction
Classify retirement costs as

costs of removal or proceeds
of sale amounts
Specify how to classify costs
16 - 20
Defining Assets for Capital Projects

OK!
Project 1
NO!
Project 2
Capital
Asset A
Capital
Asset B
Capital
Asset C
Capital
Asset A
Project 1
Project 2
Retirement
Adjustment
Asset D
You can define multiple assets on a single capital project. You cannot
create a single asset for multiple projects.
16 - 21
Streamlining Asset Creation

Assets (external source)
Asset A
Asset B
Copy
Assets
Project
Asset
APIs
Create, update, and delete

assets and asset assignments
Copy assets within a project
Streamline the creation of assets on projects

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Asset Grouping Levels

Grouping Levels:
Assets
Project
Top Task Only
Lowest Task Only
Mixed Task Level
Grouping Level
Types:
Specific Assets
Common Costs
Assign assets
Grouping levels control how Oracle Project Costing summarizes

expenditure items into asset lines.
16 - 23
Asset Cost Allocation Methods
Asset Cost Allocation

Methods
Actual Units
Client Extension
Current Cost
Capital Project
Specify a default asset
allocation method for a capital
project type and override it at
the project level.
16 - 24
Estimated Cost
Standard Unit Cost
Spread Evenly
Specifying an Actual Date in Service or a

Retirement Date
Meadow Office Park Project
Capital Asset A
Capital Asset B
Actual date in
service: None
Actual date in service:

18-APR-2010
Retirement
Adjustment Asset C
Retirement date:
01-JUN-2010
Record an actual date in service to place each capital asset in

service as it is completed. Specify a retirement date to signify
the retirement of a retirement adjustment asset.
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Capital Events
Capital Event
Event Number: 1
Event Name: JUL-10
Asset Cost Allocation
Method: Standard Cost
Event Assets
Elevators
Roof
Event Costs
Task 2.1
Professional Labor
Task 3.2
Materials
Optionally, use capital events to group assets and costs on a

project before generating asset lines for capitalization and
retirement cost processing.
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Generating Summary Asset Lines

Run programs to distribute
costs
Interface supplier costs from

Oracle Purchasing and Oracle
Payables to Oracle Project
Costing
Run programs to generate cost

accounting events and create
subledger accounting
Update project summary amounts

Generate asset lines
Processing flow to generate summary asset lines
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Assigning Asset Lines
Asset Name
Description
Task
Amount
Asset A
ADMINISTRATIVE
1.1
1552.15
Asset A
AIRFARE
1.1
565.23
Asset B
COMPUTERS
1.2
899.23
Asset B
PROFESSIONAL
1.2
2566.25
Unassigned
ADMINISTRATIVE
2.0
8753.87
Unassigned
DUPLICATION
2.0
42.50
Example: The administrative and duplication

asset lines on task 2.0 are unassigned.
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Sending Asset Lines to Oracle Assets
Tieback asset lines
Interface assets
Oracle
Project
Costing
Oracle
Assets
Interface capital asset lines and retirement adjustment asset

lines to Oracle Assets and tieback asset lines.
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Quiz
You can create a single asset for multiple projects?
a. True
b. False
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Agenda
16 - 31

Adjustments
Adjusting Capital Project Costs

Tieback asset lines
Interface assets
Oracle
Project
Costing
Create Adjustments
Oracle
Assets
Interface positive and
negative cost
adjustments to Oracle
Assets
You can continue to adjust costs for an asset even after

you interface the asset to Oracle Assets.
16 - 32
Reversing Capitalization of Assets in Oracle

Project Costing
Reverse capitalization in
Oracle Project Costing
and send reversing lines
to Oracle Assets
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Do not reverse capitalization

of a project asset in Oracle
Assets
Abandoning a Capital Asset in Oracle Project

Costing
Accounts
Debit
Amount
Supplier Invoice Expense
7500.00
Payroll Expense
1400.00
Rent Allocation Expense

Usage Expense
Credit
Amount
250.00
55.00
CIP - Clean Room

Accounting example: The CIP account is
credited and expense accounts debited
after processing the abandonment
16 - 34
9205.00
Agenda
16 - 35

Adjustments
Asset Capitalization Implementation Steps
Step
Required?
Setup Level
Implement Asset Extensions

Define Standard Unit Costs for Asset Cost
Allocations
No
No
Site
Operating Unit
Enable Retirement Cost Processing

No
Define Proceeds of Sale Expenditure Types No
Site
Site
Asset Capitalization Implementation Steps
16 - 36
Implement Asset Extensions

Client Extensions for Asset Processing
Asset Assignment Extension
Asset Cost Allocation Basis Extension
Asset Lines Processing Extension
Capital Event Processing Extension
CIP Account Override Extension
CIP Grouping Extension
Depreciation Account Override Extension
Client extensions you can implement for asset
processing in Oracle Project Costing
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Define Standard Unit Costs for Asset Cost

Allocations
Asset Book
Asset Category
Cost Per Unit
SVCS CORP
BUILDING-MANUFACTURING
SVCS CORP
FURNITURE-DESKS
SVCS CORP
MACHINE-FABRICATE
20,000.00
SVCS CORP
COMPUTER-SOFTWARE
15,000.00
25,000.00
1,500.00
Example: Project Asset Standard Unit Costs
Define a standard unit cost for each asset book and asset
category combination for which you want to allocate costs.
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Enable Retirement Cost Processing
Profile Option
PA: Retirement Cost Processing Enabled
Yes
No (Default Value)
You can access retirement

cost processing windows
and features
You cannot access

retirement cost processing
windows and features
Enable retirement cost processing at the site-level
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Define Proceeds of Sale Expenditure Types
Transaction
Project:
Construction
Task:
1.1 Retirement Costs
Expenditure Type:
Proceeds of Sales
Expenditure Organization:
Services-East
Define expenditure types to classify and account for proceeds of
sale amounts for retirement cost processing.
16 - 40
Summary
In this lesson, you should have learned how to:
Explain the asset capitalization flow
Define and capitalize assets
Set up asset capitalization in Oracle Project Costing
16 - 41

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16

Copyright 2010, Oracle. All rights reserved.

Copyright 2010, Oracle. All rights reserved.

Overview of Asset Capitalization

Copyright 2010, Oracle. All rights reserved.

Overview of Asset Capitalization

Capture construction-in-process (CIP) costs for assets you

Copyright 2010, Oracle. All rights reserved.

Overview of Asset Capitalization

Copyright 2010, Oracle. All rights reserved.

Project-Related Asset Processing Flow

CIP and RWIP

Copyright 2010, Oracle. All rights reserved.

Supplier Invoice - Architectural drawings

Supplier Invoice - Building contractor

Supplier Invoice - Building permit penalty

Employee labor for project management

Rent allocation for use of office space

Costs charged to the project

Copyright 2010, Oracle. All rights reserved.

CIP - Clean Room

CIP - Air Quality Monitors

Accounts Payable Trade

Copyright 2010, Oracle. All rights reserved.

CIP - Clean Room

Accounts for Expenditure Items in Oracle Project Costing

Copyright 2010, Oracle. All rights reserved.

Supplier Invoice Expense

CIP - Clean Room

Copyright 2010, Oracle. All rights reserved.

Assets - Clean Room

Assets - Air Quality Monitors

CIP - Clean Room

CIP - Air Quality Monitors

Accounts for Capital Assets

Copyright 2010, Oracle. All rights reserved.

Accumulated Depreciation - Air Quality

RWIP - Air Quality Monitors - Cost

Copyright 2010, Oracle. All rights reserved.

Copyright 2010, Oracle. All rights reserved.

Copyright 2010, Oracle. All rights reserved.

Overview of Asset Capitalization

Copyright 2010, Oracle. All rights reserved.

Project Types for Asset Capitalization

Project Types for

Capitalization Information Tab

Project Class = Capital

Interface Supplier Invoices

Define capitalization information on the Capitalization

Copyright 2010, Oracle. All rights reserved.

Copyright 2010, Oracle. All rights reserved.

Overview of Asset Capitalization

Copyright 2010, Oracle. All rights reserved.

Asset Processing Flow

Review asset cost

Copyright 2010, Oracle. All rights reserved.

Retirement Adjustment Assets

Specify whether to capitalize

Classify retirement costs as

Specify how to classify costs

Copyright 2010, Oracle. All rights reserved.

Defining Assets for Capital Projects

Copyright 2010, Oracle. All rights reserved.

Streamlining Asset Creation