How Oracle Assets calculates depreciation for assets using the Following Month (FOL MONTH) Prorate convention and Flat Rate..?

 

Asset Information Example:

Cost : 10000

Date Placed In Service : 01-JUN-2007
Method : Flat Rate 12%
Prorate Convention Code : Following Month
Prorate Date : 01-JUL-2007
The following example calculations will result based on these two scenarios utilizing the 'Depreciate when placed in service' flag during asset depreciation.

1. When 'Depreciate when placed in service' flag is Checked:
- The 'Depreciate when placed in service' is checked for the 'Following Month' Prorate convention:

(N>Setup> Assets System> Prorate Convention)

- Then the value of DEPRN_START_DATE in the table FA_BOOKS will be 01-JUN-2007 as you need to start depreciation from date placed in service.
- Through depreciation run for Jul-07, the system should calculate the depreciation as following:
yearly depreciation = cost * flat rate = 10000 * 0.12 = 1200
yearly depreciation for 2007 (Jul to Dec) = 1200/12 * 6 = 600 (because the prorate is 1-Jul-07)
this yearly depreciation should be divided by 7 periods (Jun-Dec) = 600/7 = 85.71
Depreciation in Jul-07 = Jun depreciation + Jul depreciation = 85.71 + 85.71 = 171.42

2. When 'Depreciate when placed in service' flag is Unchecked:

Now, what should be the value if 'depreciate when placed in service' was unchecked before asset
creation:
- The value of DEPRN_START_DATE in the table FA_BOOKS should be 01-JUL-2007 (prorate date)
- When running Jul-2007 depreciation:
yearly depreciation = cost * flat rate = 1000 * 0.12 = 1200
yearly depreciation for 2007 (Jul to Dec) = 1200/12 * 6 = 600 (because the prorate is 1-Jul-07)
this yearly depreciation should be divided by 6 periods (Jul to Dec) = 600/6 = 100
Depreciation in Jul-07 = 100