Oracle Assets allows you to periodically adjust the value of your capitalized assets due to inflation or deflation, according to rates you enter. This process is known as revaluation. The rules for revaluation often differ from country to country. Oracle Assets has the flexibility to handle your specific requirements.
Oracle Assets multiplies the asset cost by the revaluation rate you enter in the Mass Revaluations window to determine the adjustment to the asset cost.
Revaluations are not processed for:
Fully retired assets
Assets with pending retirements
Suggestion: Since Oracle Assets does not Mass Copy revaluations, when you perform a revaluation in your corporate book, also perform it in each tax book associated with that corporate book.
You must set up the following revaluation accounts before you can perform a revaluation:
Revaluation reserve account and revaluation amortization account for each category in the Asset Categories window
Revaluation reserve retired gain and loss accounts in the Book Controls window
Allow revaluation and specify default revaluation rules for a book in the Book Controls window. If necessary, you can override these rules when creating a revaluation definition in the Mass Revaluations window.
If you decide to revalue accumulated depreciation, Oracle Assets revalues the accumulated depreciation by the same rate by which you revalue your asset cost. Then it determines the change in net book value and transfers the difference to the revaluation reserve account. Oracle Assets calculates current depreciation expense based on the net book value after revaluation, salvage value, and the remaining life.
If you need to revalue depreciation expense, Oracle Assets creates a journal entry including a line crediting or debiting the depreciation expense account. The amount credited or debited results from applying the revaluation rate to the year-to-date depreciation. Assets that are fully reserved will be adjusted for inflation without extending the life of the asset.
Change In Net Book Value = Change In Asset Cost - Change In Accumulated Depreciation
If you decide not to revalue accumulated depreciation, Oracle Assets transfers the current accumulated depreciation to revaluation reserve. In this case, Oracle Assets calculates current depreciation expense based on the recoverable cost after revaluation and the remaining life.
If you do not amortize the revaluation reserve, the amount remains in the revaluation reserve account until you retire the asset.
If you want to retire revaluation reserve, Oracle Assets creates journal entries for the remaining reserve to the revaluation reserve retired gain or loss accounts when you retire assets.
You can revalue fully reserved assets that are depreciating under a life-based method. If you choose to revalue fully reserved assets, Oracle Assets also requires you to enter a life extension factor to extend the asset life.
Oracle Assets does not revalue fully retired assets. So if you retire an asset, revalue its category, and reinstate it, the asset is reinstated without being revalued. You can revalue it individually if necessary.
You can limit the number of times an asset can be revalued as fully reserved. If you allow revaluation of fully reserved assets, Oracle Assets does not revalue a fully reserved asset if the revaluation exceeds the maximum number of times you can revalue an asset as fully reserved.
When you revalue a fully reserved asset, you must extend the asset life so its revalued cost can be depreciated over one or more periods. To determine the new asset life, Oracle Assets multiplies the original asset life by the life extension factor. The new life is calculated from the Date Placed in Service (DPIS). Then the new depreciation starts in the month after the asset has become fully reserved or matured and not on the date the asset was revalued.
Example:
| DPIS | Original Term | Original Maturity Date | Fully Reserved Date | Life Extension Factor | New Term | Revised Maturity Date | New Depreciation Start Date |
|---|---|---|---|---|---|---|---|
| Jan 1, 2010 | 4M | April 30, 2010 | Feb 28, 2010 | 2 | 8M | Aug 30, 2010 | Mar 1, 2010 |
| Mar 1, 2010 | 1M | Mar 30, 2010 | Mar 30, 2010 | 4 | 4M | Jul 30, 2010 | April 1, 2010 |
If you want to include CIP assets in the revaluation of a tax book, Oracle Assets includes all the tax book CIP assets in the revaluation calculation. This rule is only available for tax books. By default, this rule is selected if the tax book allows CIP assets.
The life extension ceiling limits the amount of depreciation you can back out when you revalue fully reserved assets. If your life extension factor is greater than the life extension ceiling, Oracle Assets uses the life extension ceiling to calculate the new accumulated depreciation and the depreciation adjustment. It uses the life extension factor to calculate the new asset life regardless of whether a life extension ceiling exists.
Use the ceiling to prevent revaluation above the fair market value. Enter the revaluation ceiling in the Books window.