1/23/2020 Difference Between Amortized and Expensed Adjustments in Oracle Assets | Oracle E-Business Suite Support Blog

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FINANCIALS PRODUCTS / FIXED ASSETS

January 5, 2017

Difference Between Amortized and

Expensed Adjustments in Oracle Assets
Cindy Bond
TECHNICAL ANALYST

When you perform a financial adjustment on an asset such as a cost adjustment, a

depreciation method change, or a date placed in service change, the effect that
the adjustment will have depends on whether the adjustment is expensed or
amortized.

If the transaction is an Expensed Adjustment, the effect of the adjustment will

be from the Date Placed In Service (DPIS) of the asset.  Oracle Assets recalculates
depreciation using the new information starting from the DPIS and derives the
expected depreciation. The expected depreciation reserve will be compared with
the existing depreciation reserve of the asset and any excess or deficit amount will
be accounted in the period in which the adjustment is done.

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If you want the adjustment to be effective from a specific period and not from the
DPIS, the transaction needs to be an Amortized Adjustment.  For amortized
adjustments, the effect of the adjustment will be from the period in which the
amortization start date falls and the accumulated depreciation prior to the
amortization start date will not be re-validated.  When an amortized adjustment is
performed, Oracle Assets spreads the adjustment amount over the remaining life
or remaining capacity of the asset. 

Note that once an asset has an amortized adjustment, it is no longer possible to

perform an expensed adjustment on that asset.

How do you perform an Expensed or an Amortized adjustment?

While performing the transaction, whether it is expensed or amortized depends

on these selections:

Here is an example of how expensed and amortized adjustments work:

Let's take an asset that has these parameters:

Cost = 12000
DPIS = 01-JAN-2016
Depreciation method and life = STL for 12 months
In the Aug-16 period, the life is changed to 15 months.

If the adjustment is expensed:

The depreciation, with an asset life of 12 months, would be 12000 / 12 = 1000 per
month.
The depreciation, with an asset life of 15 months, would be 12000 / 15 = 800 per

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month.
Until the Aug-16 period, the asset was depreciating based on a life of 12 months. 
The existing depreciation reserve of the asset is 1000 * 7 months = 7000.
Based on the new life, the accumulated depreciation should be 800 * 7 months =
5600.
The depreciation catch-up in Aug-16 is 7000 - 5600 = (1400).
From the Aug-16 period onwards, the monthly depreciation for the asset will 800.

Now, if that adjustment is amortized:

The depreciation, with an asset life of 12 months, would be 12000 / 12 = 1000 per
month.
The depreciation reserve amount charged up to Aug-16 is 1000 * 7 months =
7000.
So, the net book value of the asset as of Aug-16 is 12000 - 7000 = 5000.
The remaining life of the asset as of the Aug-16 period is:  Total life – life already
completed = 15 months – 7 months = 8 months.
From the Aug-16 period onwards, the monthly depreciation for the asset will be
Net Book Value / Remaining Life = 5000 / 8 months = 625.

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