Tax Accouting

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Copyright © Oracle Corporation, 2002. All rights reserved.

Tax Accounting

11i Asset Management Fundamentals



1-2 Copyright © Oracle Corporation, 2002. All rights reserved.

Objectives

After completing this module, you should be able to dothe 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 thePeriodic Mass Copy function

• Manually add assets to a tax asset book




Objectives

• Discuss populating tax reserves when addingassets to the tax asset book

• Explain how you can use Asset Management to

calculate deferred depreciation and futuredeferred income tax liability

• Explain how Asset Management handles taxcredits




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




Creating a Tax Book

Corporatebook

Tax

book

Monthlycalendar

Quarterlycalendar

Asset 325

Asset 843

Asset 325

Asset 843

FURNITURE.DESKSStraight-line 5 yearsMID-MONTH

VEHICLE.OWNLUXURYStraight-line 4 yearsMID-MONTH

FURNITURE.DESKSMACRS 5 years

HALF-YEAR

VEHICLE.OWNLUXURYMACRS 4 yearsHALF-YEAR

Assets in Independent Asset Books




Asset Books Regions

CalendarAccounting

Rules

Natural

Accounts

Journal

Categories

Define Asset Books

4 Regions


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Prerequisites for Setting Up Tax BookAsset Categories

Setup category flexfield

Setup account segment values and combinations

Setup asset books

Setup QuickCode values

Setup prorate conventions

Setup depreciation methods



Entering Information in Tax Books

Corporate Book

Tax Book Tax Book Tax Book

Initial Mass Copy Periodic Mass Copy Manual Entry



Populating the Tax Bookby Initial Mass Copy

Corporate book

Tax book

Fiscal calendars

Fiscal 2002(Current year)

DEC - 01(Initial period)

Fiscal 2002(Not yet open)

1999 2000 2001

Copy



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 endof the fiscal year

• Assets added after the endof the fiscal year

• Expensed items

• Revaluations



Populating the Tax Bookby Periodic Mass Copy

Tax book

Corporatebook

May 2002 June 2002 July 2002 August 2002(open period)

July 2002(open period)

August 2002(not yet open)

May 2002 June 2002



Updating a Tax Book Manually

Asset in Corporate Book

Manually Add in AssetWorkbench

Asset in Tax Book



Tax Book Upload Interface

Asset added toCorporate book

Asset copied toTax book

FA_TAX_INTERFACE

Updated data inTax Book



Discussing Tax Rules

ITC basis × ITC rate

Current cost – Salvage value – (ITC basis × Basis reduction rate)

ITC amount × ITC recapture rate ×(Cost retired / Current cost)

ITC amount

Recoverable cost

ITC recapture

=

=

=

Calculating Investment Tax Credits (ITC)



Depreciation ceiling: The maximum depreciationtaken for an asset

Capital gain threshold: The minimum time to hold anasset 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 definedby the United States tax law

Discussing Tax Rules



Deferred Depreciation

Asset # 10123Cost $110,000

Corporate Book

STL 5 YearYear 1 Depreciation =

$ 22,000

Tax Book

MACRS 3 YearYear 1 Depreciation =

$ 36,663

Year 1 Deferred Depreciation$ 14,663



Calculating Deferred Depreciation

Calculating Deferred Depreciation for a $ 5,000 asset

Year ofLife

Corporate BookSTL

Depreciation

Tax Book – AcceleratedDepreciation

DeferredDepreciation

1 1,000 3,000 2,000

2 1,000 1,500 500

3 1,000 300 -700

4 1,000 150 -850

5 1,000 50 -950



Adjusting Accumulated Depreciation

Adjust for all assets

Tax book

Adjust for a single asset



Adjusting Depreciation Reservefor a Single Asset

Fiscal Yr

2001(Closed)

Fiscal Yr

2002(Current)

DepreciationReserve

Adjustment

Adjusted Reserve

$ 200,000

($ 20,000)

$ 180,000

Current YTD Depreciation

$ 200,000

$ 50,000

($ 20,000)

$ 230,000



Adjusting Depreciation Reservefor All Assets

All assets in aTax book

Adjustments madeby comparing values

in all three books

Corporatebook

Tax book

ControlTax book

Enteradjustment

factor



Controlling MassDepreciation Adjustment

Status

New

Preview

Previewed

Updated

Running

Error

Completed

Definition

New adjustment

Report running

Report successful

Adjustment updated

Adjustment running

Report or adjustmentended in error

Adjustment successful

Possible Action

Preview

None

Run adjustment

Modify adjustmentdefinition

Preview

Preview

None

Preview

Review



Calculating MassDepreciation Adjustment

Minimum MaximumAccumulated Depreciation Accumulated Depreciation

Is the greatest of the accumulated depreciation in

1. The adjusted tax book 1. The adjusted tax book

at the beginning of the at the end of thefiscal year? 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?



Automatically Adding CIP Assetsto Tax Books

Corporate Book

CIP Assets

Mass Additions

Tax Book

You have the option of adding and maintainingCIP assets in your tax book and corporate booksimultaneously. To enable this function, select

the Allow CIP Assets check box in the Book

Controls window for the tax book.



General Tax ReportsName Description

Annual Additions Report Shows additions by date placed in service

Capital Spending Report Shows assets added before cutoff date for afiscal year

Property Tax Report Shows assets by location

Tax Preference Report Compares corporate and tax bookdepreciation

Revalued Asset

Retirements Report

Shows gain or loss calculated using price

index to revalue asset cost

Recoverable Cost Report Shows the recoverable cost for each asset inthe corporate book and the tax book for aspecific accounting period

Reserve AdjustmentsReport

Provides an audit trail of depreciationreserve adjustment

Tax Additions Report Shows the asset additions andcapitalizations for the period range youselect

Tax Reserve LedgerReport

Shows depreciation expense for thespecified period

Tax Retirements Report Shows gain or loss and any ITC recapturedfor asset retirements




Special Tax Reports

Tax Feature Reports

Investment Tax CreditReport

Shows the amount of investment tax credit(ITC) you can claim on the assets you add

Revalued Asset Report Shows asset retirements revalued accordingto a price index

US Tax Form Reports Form 4562: Depreciationand Amortization Report

Review the depreciation taken for the fiscalyear you specify

Form 4626: AMT Reports Review the difference in year –

to –

datedepreciation between any tax book and analternative minimum tax (AMT)

Form 4684: Casualtiesand Theft Reports

Shows asset retirements which have theretirement type you request, and whetheryou held this asset as a long or short term

Form 4797: Gain from

Disposition of 1245/1250Reports

Calculate gain or loss amounts for sales of

1245 or 1250 property held longer than thecapital gain threshold

Retired Assets withoutProperty Classes

Shows retired assets without a 1245 or 1250property class

Retired Assets withoutRetirement Type

Shows retired assets to which you did notassign retirement types




Depreciation Adjustment Reports

Adjusted Form 4562:Depreciation and AmortizationReport

Includes the effects of any taxreserve adjustments you made forthe fiscal year you specify

Adjusted Form 4626: AMTDetail and Summary Reports

See the effects of reserveadjustments of the period youselect if you adjusted the

accumulated depreciation for thefiscal year

Mass Depreciation AdjustmentPreview Report

Shows you the effect theadjustment you specified will haveon the year –to –date depreciationfor assets in your adjusted tax book

Mass Depreciation AdjustmentReview Report

Review the effect of a mass

depreciation adjustment after yourun it




Summary

Upon completing this module, you should now be ableto:

• Discuss the key options and decisions requiredwhen creating a tax asset book

• Add assets into a tax asset book using the InitialMass Copy function

• Add assets into a tax asset book using thePeriodic Mass Copy function

• Manually add assets to a tax asset book



Summary

• Discuss populating tax reserves when addingassets to the tax asset book

• Explain how you can use Asset Management tocalculate deferred depreciation and futuredeferred income tax liability

• Explain how Asset Management handles taxcredits

Tax Accouting

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