Though Japan is one of the countries that has not fully adopted IFRS, Japan has incorporated various principles of IFRS to increase visibility and transparency of reporting one of which being Asset Impairment. Oracle Assets now addresses the requirements of impairments for Japan depreciation methods in addition to International Accounting Standards (IAS36). The Oracle Assets Impairment functionality addresses the following business requirements for Asset Impairments for Japan:
For all Japanese depreciation method assets, users are now able to perform impairments on individual assets or as a group of assets within a Cash Generating Unit. Users can assign assets to a Cash Generating Unit within Asset Workbench or through the WedADI Impairment Worksheet. This includes assets being depreciated using guarantee rate depreciation methods such as JP-250DB or JP-STL-EXTND.
Note: You can reverse any asset impairment posted in a prior period by entering a negative impairment, by manually entering the correct amount.
Japanese companies are allowed to impair non-depreciating assets such as Land, Construction in Process, and idle assets. Assets using the Japan depreciation methods, which are fully reserved or have the depreciation flag set to No, can now be included in the Impairment process.
In Japan, depreciation limits are legislated by the tax regulation and are set to 95% of the asset cost for assets with a date place in service (DPIS) before March 31, 2007. Most Japanese companies use the same depreciation limit for accounting purposes and depreciation is calculated up to the depreciation limit. While depreciation is limited to the depreciation limit, assets may be impaired beyond the depreciation limits. For assets using the Japan depreciation methods, are not longer prevented from impairing asset which have reached their depreciation limits.
The formula for calculating net book value varies with the Japan depreciation methods.
The calculations are as follows:
Net book Value
For assets acquired prior to March 31, 2007 and are being depreciated using the seeded depreciation methods of JP-STL XXYR, JP-DB XXYR, and JP-STL-EXTND, the net book value for the impairment calculation, the salvage value is not considered in the calculation.
The net book value is calculated as follows when:
NBVCurrent = Cost - Cost Adjustment + Revaluations - Accumulated Depreciation (including current period depreciation) - Accumulated Impairment - Retirements
When performing impairments on assets using the Japanese depreciation method of JP-250DB, the salvage value is considered in the net book value calculation and is as follows:
The net book value is calculated as follows when deriving the impairment loss account:
NBVCurrent = Cost - Cost Adjustment + Revaluations - Accumulated Depreciation (including current period depreciation) - Accumulated Impairment - Retirements - Salvage Value
After the impairment has been posted to the asset, the depreciation components are recalculated as detailed below for the various depreciation methods.
Depreciable Basis
Once the impairment has been posted to the asset, the asset's depreciable basis after impairment is calculated:
JP-DB, JP-250DB
Depreciable Basis = Net Book Value
JP-STL
Depreciable Basis = Net Book Value - Salvage Value
JP-STL-EXTND
Depreciable Basis = Net Book Value - Depreciation Limit (Memorandum Price)
Guarantee Rate Recalculation
For the JP-250DB depreciation method only, the guarantee rate will not change or be recalculated after the impairment posting. The rate will be recalculated at the beginning of the fiscal year as if the impairment had not taken place.
Impairment losses are accounted for in the organization's general ledger and are reported on the income statement. The journals for recording of impairment loss, additions, depreciation, reclassification, adjustments and retirements for the Japanese depreciation methods is the same as non-Japanese depreciation methods and is addressed using the standard Oracle Assets journal process.