How to Control Assets Purchases through Budgets Across Company’s Cost Centers?

By Mohammed Ahmad,

https://community.oracle.com/docs/DOC-909669

Disclaimer:

This document is intended solely for information purposes and should be considered as a tool for sharing
information or knowledge related to document’s subject of matter. The document is written based upon
the experience that the author encountered, and, as a result, it is not necessary suitable to reader’s
business processes and requirements. Readers should not interpret or use information in this document
as a solutions or recommendations and IT SHOULD NOT BE RELIED UPON IN MAKING NEW SETUP
OR CHANGES ON PRODUCTION INSTANCE(S).

Introduction:

Enabling budget controls over purchases of assets in Oracle Purchasing and Payables is not a
straightforward task. The complicity of this issue arises because of using asset clearing account(s) as
intermediary between source systems and Oracle Assets; that is, the asset cost clearing account debited
in source system is credited (zero out) at time of importing assets from mass addition interface.

Thinking of budgetary controls at time of raising purchase orders or entering supplier invoices, however,
requires using these asset clearing accounts as expense “charge” accounts for funds check purposes.
Given the fact that at time of posting mass additions – and passing of accounting entries from Oracle
Assets to GL – the balance of clearing accounts will be credited, their funds available will be falsely
brought back and, thus, the next funds check will be irrelevant if it occurred after the completion of mass
additions post and create accounting programs in Oracle Assets.

Accordingly, given the current functionality, relying on asset clearing accounts alone to enable budgetary
controls for capital assets purchasing/payables transactions will not produce the desired results. The
common workaround proposed in this regard is to roll-up both asset cost account and asset clearing
account in a single parent account and then enter budget amounts for asset clearing; this to overcome
the issue of zeroing asset clearing accounts. In fact, this workaround is valid but it is not immune from
limitations. One limitation is the false increase of funds available to parent account (or summary account)
at time of retirement or reclassification. Another limitation is encountered when cost centers come into the
picture of funds available equation; which is the core of this document as the title implies.

Recall from Oracle Assets user guide and Oracle Support document id: 960549.1" SLA Setup: Not
Generate Cost Clearing Account as per Setup” that asset clearing account credited at time of adding
imported assets is the entire account combination from source system. What this means is that even
parent/summary accounts are used to roll-up asset clearing and asset cost accounts, funds available
equation will be distorted for cost centers (or any other segment value) unless the assets cost accounts
are combined with cost centers too.

Accordingly, this document attempts to provide a workaround for enabling budgetary controls on assets
purchases/invoices across company’s cost centers after amending asset clearing account derivation rule
in SLA.

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
 Requirements:

The need is to the controlling purchases of assets based on available funds for each cost center. To
simplify this requirement, let us assume that the company has only three categories of computers assets
on which the control will take place: (1) Laptops, (2) Desktops, and (3) Monitors. On the other hand, the
cost centers that will subject to budget control are: (1) General Management, (2) Finance Dept. and (3)
Human Resources Dept.

At the beginning of each budget year, funds for each asset category are allocated to each cost center
over the year’s periods. To simplify summary accounts building, assume also that budgetary control is
advisory at cost center level and absolute at company level; meaning that, in a particular period, each
cost center can override allocated funds any asset category until the total funds allocated for computers is
reached in that period.

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
 Setup Steps:

(a) Customize the Subledger Accounting Method to Enforce Deriving Asset Cost Clearing
Account from Asset Categories Instead of Source Systems.

This is the cornerstone of this workaround. Making asset clearing accounts always defaulted
from related asset categor
categories (and discarding source system clearing account combinations)
combination
is the way that prevents zeroing out the balance of these account
accounts at cost center (or any
other segments) values level.

To do this,is, please refer to the following Oracle Community’s document “R12:

“ How to
Change Assets Cost Clearing Account Derivation Rule in Fixed Assets? Assets Using of
Subledger Accounting SetupSetup”
https://community.oracle.com/docs/DOC-909668)
(https://community.oracle.com/docs/DOC

(b) Prepare/Update your Accounting Flexfield Based

ased on Your Budget Controls
Requirements

As shown in the print screen below – in line with stated requirements – three child asset
clearing accounts
ccounts were defined and rolled
rolled-up to the parent account of asset clearing –
computers.

The same was made to cost center

centers; the three centers of General Management, Finance
Dept. and Human Resources Dept were rolled-up to a parent cost center of Management.
Management

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
 (c) Define Corresponding Asset Categories

Following table shows the assets categories defined with corresponding asset clearing accounts
in Oracle Assets:

Asset Major-Minor Category Asset Clearing Account Combination

Co-Account-Cost Center-Seg.4-Seg.5- … Seg.9
Computers and Software – Laptops 10-1245110-000-0000-000-000-00-000-000
Computers and Software – Desktops 10-1245120-000-0000-000-000-00-000-000
Computers and Software – Monitors 10-1245130-000-0000-000-000-00-000-000

(d) Define Corresponding items (Optional)

To facilitate the purchasing process, the three assets categories were defined as purchasable
only items (i.e. non-stockable and non-costable) in Oracle Inventory. As shown in next print
screen, the option of “Allow Description Update” was enabled and items were attached to related
asset clearing accounts through expense account and asset category fields.

According to this setup, requestors/buyers can use, for example, Laptops item in their purchase
requisitions/purchase orders and update the description to more accurate one (e.g. laptop dell
latitude e6410).

Although the Requisition/PO charge accounts will be automatically defaulted to related asset
clearing accounts, buyers still required to manually update the cost center in defaulted charge
account to reflect the requesting department; so that funds check can be maintained. To minimize
manual data entry, however, you may use a custom account generator to default cost center from
requestor/buyer employee expense account and then use form personalization to make PO
Charge account non-editable for Asset items.

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
 (e) Define Funding Budget(s) and Budget Organization(s)
Advisory funds check was used to asset clearing accounts
accounts-cost centers range:
range

(f) Build Summary Accounts

Roll-up groups for accounts and cost centers mentioned in step (b) were used to build the
following summary account which has a fund check level of Absolute:

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
 (g) Enter Budget Amounts
A total budget of 33,200 (in functional currency) was allocated over related accounts
combinations as follows:

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
 Testing:
Purchasing
Enter new purchase order for item “Laptops” and update the cost center of defaulted charge account from
“000” to 110 (General Management).

Laptops (1245110)-General Management (110) has available funds of 4000, that is why the funds check
produced a warning message when the order line amount was 12000 in the below print screens:

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
Inquire funds avaliable:
Following print screen shows the encumbrance of funds resulted from previous purchase order:

Enter receipt, AP Invoice and match it to PO,

Create accounting (and post to GL) In Cost Managemnt and Payables,

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
Inquie funds available again to insure the transfer of encumbered funds to actual disbursement:

(1) Run Mass Addition Create program in Payables, (2) Prepare and Post procured assets from Mass
Addition Interface, (3) Create accounting (and Post to GL) in Oracle Assets,

Make sure that posted clearing account combinition was taken from asset category rather than the one
used in receiving; this will gurantee that asset clearing combination is not zeroing out and the funds
avaliable will remain unchanged.

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
 Payables
Under this test, two assets will be acquired through direct Invoice in Payables. One asset will be charged
to cost center of Human Resources Dept (130) and the other will be charged to N/A cost center (000).

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad
Now, Create Accounting (and Post to GL) in Payables, run Mass Addition Create program in Payables,,
Prepare and Post Mass Addition in Oracle Assets, Create Accounting (and Post to GL) in Oracle Assets,
and review the journal imported from Source Assets.
- The journal should credit both assets to same asset category clearing account and discard
the cost center entered in AP invoice; and this is what the below print screen proves:

nd
In total, we have purchase order of 12,000, and a payable invoice of 20,000 (the 2 line of invoice does
not count here since it is charged to N/A cost center) with total of 32000; meaning that the available funds
for our summary account should be now 1,200 (33,200 - 32000):

---End

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How to Control Assets Purchases through Budgets Across Company’s Cost Centers?
By Mohammed Ahmad