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Tax Accounting

Release 12 Oracle Asset Management Fundamentals

Copyright 2007, Oracle. All


All rights
rights reserved.
reserved.

Objectives

After completing this module, you should be able to do


the following:
Discuss the key options and decisions required
when creating a tax asset book
Add assets into a tax asset book using the Initial
Mass Copy function
Add assets into a tax asset book using the Periodic
Mass Copy function
Manually add assets to a tax asset book

Copyright 2007, Oracle. All rights reserved.

Objectives

Discuss populating tax reserves when adding


assets to the tax asset book
Explain how you can use Asset Management to
calculate deferred depreciation and future deferred
income tax liability
Explain how Asset Management handles tax credits

Copyright 2007, Oracle. All rights reserved.

Agenda

Creating a Tax Asset Book


Entering Information in Tax Books
Tax Rules
Deferred Taxes
Adjusting Depreciation Reserves
CIP Assets in Tax Books
Tax Reports

Copyright 2007, Oracle. All rights reserved.

Creating a Tax Book


Assets in Independent Asset Books
Corporate
book
Monthly
calendar

Tax
book

Quarterly
calendar

FURNITURE.DESKS
Straight-line 5 years
MIDAsset 325
MONTH
VEHICLE.OWNLUXURY
Straight-line 4 years
MID-MONTH
Asset 843
FURNITURE.DESKS
MACRS 5 years
HALF-YEAR
VEHICLE.OWNLUXURY
MACRS 4 years
HALF-YEAR
Copyright 2007, Oracle. All rights reserved.

Asset 325

Asset 843

Asset Books Regions

Define Asset Books

Calendar

Accounting
Rules

Natural
Accounts

4 Regions

Copyright 2007, Oracle. All rights reserved.

Journal
Categories

Prerequisites for Setting Up Tax Book Asset


Categories

Setup category flexfield


Setup account segment values and combinations
Setup asset books
Setup QuickCode values
Setup prorate conventions
Setup depreciation methods

Copyright 2007, Oracle. All rights reserved.

Entering Information in Tax Books


Corporate Book

Initial Mass Copy

Periodic Mass Copy

Manual Entry

Tax Book

Tax Book

Tax Book

Copyright 2007, Oracle. All rights reserved.

Populating the Tax Book


by Initial Mass Copy

Corporate book

Fiscal calendars

Copy
1999

Tax book

2000

2001

DEC - 01
(Initial period)
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Fiscal 2002
(Current year)

Fiscal 2002
(Not yet open)

Populating the Tax Book


Data Copied During Initial Mass Copy
Information Copied

Cost
Original cost
Units
Date placed in service
Capacity and unit of measure
Salvage value

Information Not Copied

Assets retired before the end


of the fiscal year

Assets added after the end


of the fiscal year

Expensed items
Revaluations

Copyright 2007, Oracle. All rights reserved.

Populating the Tax Book


by Periodic Mass Copy

Corporate
book

Tax book

May 2002

June 2002

July 2002

August 2002
(open period)

May 2002

June 2002

July 2002
(open period)

August 2002
(not yet open)

Copyright 2007, Oracle. All rights reserved.

Updating a Tax Book Manually

Asset in Corporate Book

Manually Add in Asset


Workbench

Asset in Tax Book

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Tax Book Upload Interface

Asset added to
Corporate book

Asset copied to
Tax book
FA_TAX_INTERFACE
Updated data in
Tax Book

Copyright 2007, Oracle. All rights reserved.

Discussing Tax Rules


Calculating Investment Tax Credits (ITC)

ITC amount

Recoverable cost

ITC recapture

ITC basis ITC rate

Current cost Salvage value


(ITC basis Basis reduction rate)

ITC amount ITC recapture rate


(Cost retired / Current cost)

Copyright 2007, Oracle. All rights reserved.

Discussing Tax Rules


Depreciation ceiling:

The maximum depreciation


taken for an asset

Capital gain threshold:

The minimum time to hold an


asset before reporting a
capital gain upon retirement

Capital gain = Asset holding time > threshold


Ordinary income = Asset holding time < threshold
Adjusted current earnings: A depreciation rule defined
by the United States tax law

Copyright 2007, Oracle. All rights reserved.

Deferred Depreciation
Asset # 10123
Cost $110,000

Corporate Book
STL 5 Year
Year 1 Depreciation =
$ 22,000

Tax Book
MACRS 3 Year
Year 1 Depreciation =
$ 36,663

$ 14,663
Year 1 Deferred Depreciation
Copyright 2007, Oracle. All rights reserved.

Calculating Deferred Depreciation


Calculating Deferred Depreciation for a $ 5,000 asset
Year of
Life

Corporate Book Tax Book


Deferred
STL
Accelerated
Depreciation
Depreciation Depreciation

1,000

3,000

2,000

1,000

1,500

500

1,000

300

-700

1,000

150

-850

1,000

50

-950

Copyright 2007, Oracle. All rights reserved.

Adjusting Accumulated Depreciation

Adjust for a single asset

Adjust for all assets

Tax book
Copyright 2007, Oracle. All rights reserved.

Adjusting Depreciation Reserve


for a Single Asset

Depreciation
Reserve

Fiscal Yr
2001
(Closed)

Fiscal Yr
2002
(Current)

$ 200,000

$ 200,000
$ 50,000

Current YTD Depreciation


Adjustment

($ 20,000)

($ 20,000)

Adjusted Reserve

$ 180,000

$ 230,000

Copyright 2007, Oracle. All rights reserved.

Adjusting Depreciation Reserve


for All Assets
Enter
adjustment
factor

All assets in a
Tax book

Adjustments made
by comparing values
in all three books

Corporate
book

Control
Tax book

Tax book

Copyright 2007, Oracle. All rights reserved.

Controlling Mass
Depreciation Adjustment
Status
New
Preview
Previewed

Definition
New adjustment
Report running
Report successful

Updated
Running
Error

Adjustment updated
Adjustment running
Report or adjustment
ended in error
Adjustment successful

Completed

Possible Action
Preview
None
Run adjustment
Modify adjustment
definition
Preview
Preview
None
Preview
Review

Copyright 2007, Oracle. All rights reserved.

Calculating Mass
Depreciation Adjustment
Minimum
Accumulated Depreciation

Maximum
Accumulated Depreciation

Is the greatest of the accumulated depreciation in


1. The adjusted tax book
at the beginning of the
fiscal year?

1. The adjusted tax book


at the end of the
fiscal year?

2. The control tax book at the end of the fiscal year?


3. The corporate book at the end of the fiscal year?

Copyright 2007, Oracle. All rights reserved.

Automatically Adding CIP Assets


to Tax Books
You have the option of adding and maintaining
CIP assets in your tax book and corporate book
simultaneously. To enable this function, select
the Allow CIP Assets check box in the Book
Controls window for the tax book.
Mass Additions

CIP Assets
Corporate Book
Copyright 2007, Oracle. All rights reserved.

Tax Book

General Tax Reports


Name

Description

Annual Additions Report

Shows additions by date placed in service

Capital Spending Report

Shows assets added before cutoff date for a


fiscal year
Shows assets by location

Property Tax Report


Tax Preference Report
Revalued Asset
Retirements Report
Recoverable Cost Report
Reserve Adjustments
Report
Tax Additions Report
Tax Reserve Ledger
Report
Tax Retirements Report

Compares corporate and tax book


depreciation
Shows gain or loss calculated using price
index to revalue asset cost
Shows the recoverable cost for each asset in
the corporate book and the tax book for a
specific accounting period
Provides an audit trail of depreciation
reserve adjustment
Shows the asset additions and
capitalizations for the period range you
select
Shows depreciation expense for the
specified period
Shows gain or loss and any ITC recaptured
for asset retirements

Copyright 2007, Oracle. All rights reserved.

Special Tax Reports


Tax Feature Reports
Investment Tax Credit
Report
Revalued Asset Report

Shows the amount of investment tax credit


(ITC) you can claim on the assets you add
Shows asset retirements revalued according
to a price index

US Tax Form Reports


Form 4562: Depreciation
and Amortization Report
Form 4626: AMT Reports
Form 4684: Casualties
and Theft Reports
Form 4797: Gain from
Disposition of 1245/1250
Reports
Retired Assets without
Property Classes
Retired Assets without
Retirement Type

Review the depreciation taken for the fiscal


year you specify
Review the difference in yeartodate
depreciation between any tax book and an
alternative minimum tax (AMT)
Shows asset retirements which have the
retirement type you request, and whether
you held this asset as a long or short term
Calculate gain or loss amounts for sales of
1245 or 1250 property held longer than the
capital gain threshold
Shows retired assets without a 1245 or 1250
property class
Shows retired assets to which you did not
assign retirement types

Copyright 2007, Oracle. All rights reserved.

Depreciation Adjustment Reports


Includes the effects of any tax
Adjusted Form 4562:
Depreciation and Amortization reserve adjustments you made for
the fiscal year you specify
Report
See the effects of reserve
adjustments of the period you
Adjusted Form 4626: AMT
select if you adjusted the
Detail and Summary Reports
accumulated depreciation for the
fiscal year
Shows you the effect the
Mass Depreciation Adjustment adjustment you specified will have
Preview Report
on the yeartodate depreciation
for assets in your adjusted tax book
Review the effect of a mass
Mass Depreciation Adjustment depreciation adjustment after you
Review Report
run it

Copyright 2007, Oracle. All rights reserved.

Summary

Upon completing this module, you should now be able to:


Discuss the key options and decisions required when
creating a tax asset book
Add assets into a tax asset book using the Initial Mass
Copy function
Add assets into a tax asset book using the Periodic
Mass Copy function
Manually add assets to a tax asset book

Copyright 2007, Oracle. All rights reserved.

Summary

Discuss populating tax reserves when adding


assets to the tax asset book
Explain how you can use Asset Management to
calculate deferred depreciation and future deferred
income tax liability
Explain how Asset Management handles tax credits

Copyright 2007, Oracle. All rights reserved.