tax accouting
TRANSCRIPT
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Copyright © Oracle Corporation, 2002. All rights reserved.
Tax Accounting
11i Asset Management Fundamentals
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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
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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
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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
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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
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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
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Entering Information in Tax Books
Corporate Book
Tax Book Tax Book Tax Book
Initial Mass Copy Periodic Mass Copy Manual Entry
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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
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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
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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
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Updating a Tax Book Manually
Asset in Corporate Book
Manually Add in AssetWorkbench
Asset in Tax Book
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Tax Book Upload Interface
Asset added toCorporate book
Asset copied toTax book
FA_TAX_INTERFACE
Updated data inTax Book
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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)
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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
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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
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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
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Adjusting Accumulated Depreciation
Adjust for all assets
Tax book
Adjust for a single asset
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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
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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
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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
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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?
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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.
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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
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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
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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
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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
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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