Assets Watchlist

Use watchlists to monitor critical transaction processing progress in real time.

You can view the watchlists by clicking the Watchlist icon on the home page.

Oracle Assets provides four watchlist categories. Two of the categories contain
predefined items. You can also create additional items using the saved search for any of
the four categories.

The following watchlist categories are available:

 Additions
 Retirements
 Financial Transactions
 Tracking

Additions Watchlist
The Additions category contains the following predefined watchlist items. You can
create additional watchlist items for this category.

 Exceptions: Source lines in the Error queue. Selecting this watchlist item takes you
to the list of exceptions in the Additions infotile. You can view the details and
error for each line and make the necessary corrections before posting the
transactions.
 Incomplete: Source lines that aren't yet assigned to any preparer. Selecting this
watchlist item takes you to the list of incomplete transactions in the Additions
infotile. You can view the details for each line and add the missing information
before posting the transactions.
 Ready to post: Source lines in the Post queue. Selecting this watchlist item takes
you to the list of transactions that are ready to post in the Additions infotile. You
can click Post All to post all of the transactions that are ready to post.

Guidelines for Classifying Leases

Leases are either finance leases or operating leases. Oracle Assets recognizes the lease
expense differently, depending on the lease type.

Finance Leases
A lease is classified as a finance lease when the lease meets any of the following criteria
at the commencement of the lease:

 The lease transfers ownership of the underlying asset to the lessee (your
organization) at the end of the lease term.
 The lease grants the lessee an option to purchase the underlying asset that you
as the lessee are reasonably certain to exercise.
 The lease term is for the major part of the remaining economic life of the
underlying asset.
 The present value of the sum of the lease payments and any residual value
guaranteed by the lessee that is not already reflected in the lease equals or
exceeds substantially all of the fair value of the underlying asset.
 The underlying asset is of such a specialized nature that it is expected to have no
alternative use to the lessor at the end of the lease term.

If your lease is a finance lease, you must recognize the following types of expenses
separately:

 Interest on the lease liability.

 Amortization or depreciation of the right-of-use asset.

When you make a lease payment, you are, in effect, making a capital repayment against
the lease obligation, in addition to an interest payment. To show this impact on financial
statements, you must recognize the interest expense on the due date and add it to the
lease liability balance. The lease liability balance is reduced when you make a lease
payment to the lessor.

The amortization schedule calculates and stores the interest amount, principal reduction
amount, and interest due date for each lease payment included in the lease liability
calculation. Interest expense is recognized in the period in which the interest due date
falls.

For leases with payment frequencies that are annual, quarterly, or semiannual, interest
expense is recognized once per year, quarter, or half year, respectively. If your lease
requires monthly provisioning, create a monthly provisioning recurring journal in your
general ledger.

Depreciation for finance lease assets is the same as for owned capitalized assets, using
standard depreciation rules, such as the depreciation method, convention, and prorate
calendar. When you add your leased asset, the depreciation rules, such as the method
and life, are defaulted from the category. You can override the defaulted rules, if
necessary.

Interest Expense
Run the Calculate Lease Interest and Expense process for each period to recognize the
interest expense on the lease liability in your asset books. You can easily run this process
from the Depreciation infotile on the Assets page. Note that you cannot close the period
without calculating the lease interest expense for all finance lease assets in the book.

The following table shows an example of an accounting entry for interest expense of
175 USD and the reduction in liability for a lease payment of 1000 USD:

Account Debit Amount (USD) Credit Amount (USD)

Lease Interest Expense 175

Lease Liability 175

Lease Liability 1,000

Lease Clearing 1,000

For the interest expense account, all segments except for the natural account are
populated by default from the depreciation expense account in the asset assignment.
The natural account is populated from the category default accounts. The liability
account is the active liability account for the asset.

Assets generates lease payment invoices using the lease clearing account as the invoice
distribution account, and transfers the lease payment invoices to Oracle Payables. From
Payables, run the Import Payables Invoices process using the source Assets to import
any lease payment invoices.

The following table shows an example of an accounting entry for an invoice of 10000
USD:
 Account Debit Amount (USD) Credit Amount (USD)

Lease Clearing 10,000

Supplier Liability 10,000

The supplier liability of 10,000 becomes zero when you make a payment for the lease
invoice shown in the example. At the end of the lease term, the net book value of the
leased asset and its lease liability becomes zero.

When you execute an asset inquiry, the results show the lease interest expense balances,
including the periodic interest amount, year-to-date interest amount, interest
adjustment amount, and lease and liability balance.

Operating Leases
Any lease that doesn't meet the criteria to be a finance lease is called an operating lease.
If your lease is an operating lease, you must recognize a single lease expense, which is
calculated to amortize the total cost of the lease over the lease term on a straight-line
basis.

The operating lease expense for each period is calculated as the amortization of the
remaining cost of the lease at the beginning of the period over the remaining lease term
on a straight-line basis. The remaining cost of the lease is calculated as the net book
value of the asset plus the outstanding interest on the lease liability.

Operating leases do not depreciate. When you add an operating lease asset, Assets
automatically deselects the Depreciate check box on the Add Asset or Edit Source Line
pages. When you run the Calculate Depreciation process, no depreciation is calculated
for operating leases.

Interest Expense
Run the Calculate Lease Interest and Expense process to calculate and recognize
operating lease expense. Note that you cannot close the period until you calculate
operating lease expense for all operating lease assets in the book.

The following table shows an example of accounting entries for operating lease expense
and reduction in liability:
 Credit Amount
Account Debit Amount (USD) Comments
(USD)

Operating Lease 1,200 NA

Expense

Lease Liability 900 Interest on lease

liability

Depreciation Reserve 300 300 = 1,200 - 900

Lease Liability 1,000 Lease payment amount

Lease Clearing 1,000 Lease payment amount

At the end of lease term, the net book value of the leased asset and its lease liability are
both zero.

For the operating lease expense account, all segments except the natural account are
populated from the depreciation expense account in the asset assignment. The natural
account is populated from the category default accounts. The liability account is the
active liability account for the asset. The depreciation reserve account is derived using
the same logic used for the depreciation accounting for finance lease assets and owned
assets.

If any transactions occur after the operating lease expense is recognized for the current
period, the recognized lease expense is automatically rolled back. You must rerun the
Calculate Lease Interest and Expense process to include the new transactions.

Note: No catch-up operating lease expense is calculated for backdated operating

leases. You must manually enter the opening depreciation reserve at the time you add
the operating lease right-of-use asset, or later before closing the period in which asset
was added.

How Lease Liability on Terminated Leases

Is Calculated
When you terminate a lease, the Generate Schedules process automatically updates the
lease liability to be retired based on your settings.
Period End Liability Options
The Generate Schedules process calculates the change in lease liability due to
termination based on the Period End Liability option.

Period End Liability Option Setting Description

Yes Termination is effective at the end of the period.

No Termination is effective at the start of the period.

Calculation of Lease Liability on Terminated

Leases
The lease liability to be retired is calculated as follows:

 Period End Liability is set to Yes:

Current liability at the start of the period, minus the principal reduction for
payments with an interest due date in the current period, minus the increase in
the termination penalty.
 Period End Liability is set to No:
Current liability at the start of the period minus the termination penalty, if any,
with the interest due date in the current period.

The gain or loss on termination calculated as follows:

 Cost minus depreciation reserve minus impairment reserve, if any, minus the
lease liability to be retired.
Note: The depreciation reserve balance is calculated using the default retirement
convention of the asset category.

When you post the termination transaction, a retirement transaction is created for each
associated asset. This table shows sample accounting entries for the retirement
transaction:

Account Debit Amount (USD) Credit Amount (USD)

Depreciation Reserve 800

 Account Debit Amount (USD) Credit Amount (USD)

Impairment Reserve 200

Lease Liability 1,100

Asset Cost 2,000

Gain on Leased Asset 100

Example:

Your company enters into a six-year lease of equipment with annual lease payments of
$59,000, payable at the end of each year. Your company classifies the lease as a finance
lease. At the end of Year 5, you have the option to terminate the lease for $5,000. You
decide that your company has a significant economic incentive to exercise the
termination option.

The rate that the lessor charges your company is the rate implicit in the lease, which is
6.33 percent. You measure the lease liability at the commencement date at $250,000
(the present value of five payments of $59,000 plus the present value of the termination
option payment of $5,000).

At the lease commencement date, you recognize lease assets and liabilities as shown in
this table:

Accounts Debit Amount (USD) Credit Amount (USD)

Right-of-Use Asset 250,000

Lease Liability 250,000

Finance Lease:

Your company amortizes the right-of-use asset over the lease term of five years. You
expect your company to consume the asset's future economic benefits evenly over the
five years and you amortize the asset on a straight-line basis.

During the first year of the lease, you recognize interest on the lease liability and
amortization of the right-of-use asset as follows:
 Accounts Debit Amount (USD) Credit Amount (USD)

Interest Expense 15,825 (6.33% x 250,000)

Lease Liability 15,825

Depreciation Expense 50,000 (250,000 / 5)

Depreciation Reserve 50,000

At the end of Year 1, the right-of-use asset is $200,000 ($250,000 - $50,000) and the
lease liability is $206,825 ($250,000 + $15,825 - $59,000).

At the end of Year 5, the right-of-use asset is amortized to $0 ($250,000 - $50,000 x 5)

and has a liability of $60,190 relating to the last lease payment and termination penalty.

You terminate the lease with the Period End Liability option set to Yes and make the
final lease payment. Because the termination occurs at the end of the lease term, there
is no gain or loss on this transaction.

Year 5:

This table shows the accounting entry for interest on liability:

Accounts Debit Amount (USD) Credit Amount (USD)

Lease Interest Expense 3,810 (interest amount)

Lease Liability 3,810

Lease Liability 64,000 (lease payment)

Lease Clearing 64,000

This table shows the retirement accounting entry:

Accounts Debit Amount (USD) Credit Amount (USD)

Depreciation Reserve 250,000

Right-of-Use Asset 250,000

This table shows the lease invoice accounting entry:

 Accounts Debit Amount (USD) Credit Amount (USD)

Lease Clearing 64,000

Supplier Liability 64,000

This table shows the lease invoice payment accounting entry:

Accounts Debit Amount (USD) Credit Amount (USD)

Supplier Liability 64,000

Bank 64,000

If the termination penalty is $6,000, then the increase or decrease in liability is first
calculated and then reflected in the accounting entries.

In year 5, the lease liability to be retired is calculated as the current liability at the start of
the period ($60,190), minus the principal reduction for current period payments
($60,190), plus the increase in the termination penalty ($1,000).

In this example, the increase or decrease in liability is 1,000.

This table shows the accounting entry for interest on liability:

Accounts Debit Amount (USD) Credit Amount (USD)

Lease Interest Expense 3,810 (interest amount)

Lease Liability 3,810

Lease Liability 65,000 (lease payment amount

+ increase or decrease in
liability)

Lease Clearing 65,000

This table shows the retirement accounting entry:

Accounts Debit Amount (USD) Credit Amount (USD)

Depreciation Reserve 250,000

 Accounts Debit Amount (USD) Credit Amount (USD)

Right-of-Use Asset 250,000

Lease Liability 1,000

Gain or Loss 1,000 (increase or decrease in

liability)

This table shows the lease invoice accounting entry:

Accounts Debit Amount (USD) Credit Amount (USD)

Lease Clearing 65,000

Supplier Liability 65,000

This table shows the lease invoice payment accounting entry:

Accounts Debit Amount (USD) Credit Amount (USD)

Supplier Liability 65,000

Bank 65,000