R11i Depreciation Program (FADEPR) Calculates Wrong Depreciation For Leap Year

(Doc ID 564999.1)

Last updated on NOVEMBER 03, 2016

Applies to:

Oracle Assets - Version 11.5.10.2 and later
Information in this document applies to any platform.
Depreciation Process (FADEPR)


Symptoms

Depreciation based on Flate Rate Method and a Daily Rate Convention is using 366 days in a leap year whereas the depreciation calendar ought to have only 365 periods a year, each year according to the FA user’s guide.

Because depreciation (FADEPR) uses the real number of days in a year (366 Days for 2008, 2012), it is not synchronized with Rate Table and Prorate Calendar which assumes that each year has only 365 days and no more.

In full detail:

Asset Number : XXXXX
Asset Cost : 12.000 EUR
Life Year : 3 years
Book : ABC_CORP
Book Current Period : MAR-2008
Prorate Calendar : FR_DEPRN_DAYS
Depreciation Method : XXFR_LIN_03
DPIS (Date Placed in Service) : 22-FEB-2008
Prorate Convention : FR_LIN
Prorate Date : 22-FEB-2008
Rate from Table : 0,285845


Run depreciation for period (MAR-2008) so that FA calculated depreciation for both FEB-2008 and MAR-2008.

Current Results:
===========================

FADEPR calculated the Asset Cost to be depreciated within the first Year of its life; to do this,
the system just multiplied the Asset Cost by the Rate retrieved from the Rate Table associated with the Depreciation Method = “XXFR_LIN_03” for Prorate Period Num = 53 and Year =1.

The result is 12.000 x 0,285845 (A) = 3.430,14 EUR (B)
The Rate Table was filled in for 365 days per year according to the FA User’s guide recommendations. This means that there are only 28 Days in FEBRUARY whatever the Year.

Then, system calculated a “by_factor” value in dividing the Total Days in the Year (including the 29-FEB-2008), by the Total Days remaining from the DPIS to the end of the year (including the 29-FEB-2008). In our case, the asset is placed in service on FEB 22nd 2008, that means that from 01-JAN-2008 to 21-FEB-2008 there are 31+21 = 52 days.
Assuming that the exact number of days in the current year is 366 days, the difference equals 366-52 = 314 Days.

The “by_factor” result is 366 / 314 = 1,1656051 (C)

Note: The “by_factor” is used to simplify the Depreciation calculation in the first and Last Year of an Asset’s Life.
Indeed, it consider that the total days in the first year of an asset’s Life is always 366 instead of calculating the exact
number of days from the DPIS to the last days of the fiscal years.

After determined (C), the depreciation program calculated a “bp_frac” to know how much depreciation it will take for the current
month, considering that the year contains 366 days. To do that, it divided the total Days in FEBRUARY 2008 from the DPIS to
the last day of FEBRUARY (including the 29-FEB-2008), by the total Days of the year (including the 29-FEB-2008).

From 22-FEB-2008 to 29-FEB-2008 => 8 Days
The “bp_frac” result is 8 / 366 = 0,0218579 (D)

The Final Result of the depreciation for FEB-08 is calculated as it follows :
(B) x (C) x (D) => 3.430,14 EUR x (366 / 314) x (8 / 366) = 87,39 EUR (E)


Expected Results:
=========================
Instead of calculated the exact number of Days per Year, FADEPR should always assume that each Year contains 365 Days without any exception.
With this new consideration, the new value determined for (E) would have been :
(C) => 365 / 313 = 1,1661342
(D) => 7 / 365 = 0,0191781

3.430,14 EUR x 1,1661342 x 0,0191781= 76,71 EUR (E)

 



Cause

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