2 Replies Latest reply: Feb 1, 2013 3:26 AM by Sadanand Shenoy RSS

    R12 FA: Declining balance method with switch to straight line

    User815809-Oracle
      Hello experts,

      I am struggling with the setup of the declining balance with straight line method.
      There are apparently several ways to define this method in R12:
      - by using the seeded methods DEG_LIN%
      - by creating new methods with a "rate" method type and a Cost basis
      - by creating new methods with a "formula" method type and a Net Book Value basis

      My client wants to generate depreciation accounting every month.

      Here are my questions:
      1- Is there anything wrong with the seeded methods? I don't understand why we don't use them (at least in France)
      2- How can we calculate the rates to be applied? Although I am able to calculate them for the first year, I don't understand how the seeded rates are defined for the following years.
      3- How to setup a DB w/SL method for 6 years and 8 months? Does anyone have examples of asset lives that are not a complete number of years?
      4- If I need a prorata in days, do I have to load a rate per day?
      5- Has anyone got a formula for DB w/SL switch?

      Thanks

      Melanie
        • 1. Re: R12 FA: Declining balance method with switch to straight line
          Ivruksha
          Hi Melanie,

          i did a test case with Flat Rate depreciation ...... below are the facts...

          Switch to your Fixed Asset Responsibility
          Navigate to Setup > Depreciation > Methods
          Method Field = Enter a Depreciation Method Name, it is a free text field you can type any
          Description = Again a freetext field, enter any data
          Method Type = Select as FLAT
          Calculation Basis = Select as NBV
          Depreciation Basis Rule = Select as PERIOD END BALANCE
          Depreciate in Year Retired = Check this option
          Click Rates button
          Enter a desired % which is your rate of depreciation and keep the adjusting % as zero ...
          Save your work
          Now create an asset with the above defined depreication method or select an existing asset and perform what if analysis by changing the depreciation method to the newly defined one ....

          Below is the test results where dep rate is 10%, asset cost is 1,00,000 ......Depreciation computed by system for 12 months is as follows:
          Period 1 = 833.33 i.e. 1,00,000 * 10% = 10,000 / 12 Months = 833.33
          Period 2 = 826.39 i.e. (1,00,000 - 833.33)* 10% = 9916.66 / 12 Months = 826.39
          Period 3 = 819.50
          Period 4 = 812.67
          Period 5 = 805.90
          Period 6 = 799.19
          Period 7 = 792.53
          Period 8 = 785.92
          Period 9 = 779.37
          Period 10 = 772.88
          Period 11 = 766.44
          Period 12 = 760.05

          Is this what you were expecting ....??

          Regards,
          Ivruksha
          • 2. Re: R12 FA: Declining balance method with switch to straight line
            Sadanand Shenoy
            Hi Melanie,

            Please see the answers to your Queries below:

            1- Is there anything wrong with the seeded methods? I don't understand why we don't use them (at least in France)
            Ans) If you are asking about DEG_LIN%, there's nothing wrong with them. May be they aren't wide spread enough...

            2- How can we calculate the rates to be applied? Although I am able to calculate them for the first year, I don't understand how the seeded rates are defined for the following years.
            Ans) DEG_LIN% - "Declining Balance with switch to STL - Annually" is a Table Based Method, with 1 period per year, hence it'll work on the rate based method ONLY for one year, post this it'll switch to STL method and divide cost / life depending on your setup.

            3- How to setup a DB w/SL method for 6 years and 8 months? Does anyone have examples of asset lives that are not a complete number of years?
            Ans) Here I would like to know:
            When will you be switching to STL, post 6 years and 8 months? or In between?
            In any case, to create a 6 years and 8 months DB Method, based on a Table Method, give Life years as 6 and Months as 8. Enter rates for the periods as required.
            I believe you know "How" table based method works, else let me know, It'll take a little explanation.

            4- If I need a prorata in days, do I have to load a rate per day?
            Ans) No. You just have to create a Prorate Calendar / Convention to reflect the same and attach this to the Book.
            Rest application will take care itself.
            Please Know, once a book set up is done, you can't change it. You can only End date it and create a New Book. Runnnin SQL's on Book Controls Base table is "UnSupported" by us (Oracle Support)

            5- Has anyone got a formula for DB w/SL switch?
            Ans) How do you want this configured? based on that we can create one.

            Thanks,
            Sada