Insurance Calculation Methods in Oracle Assets

ORACLE APPLICATIONS
White Paper Insurance

Calculations in Oracle Assets
Written by Oracle Support Services

Author:
Harriet Reissenberger
Date Created:
23.04.2014
Date Changed:
04.08.2014
Version:
1.0
Content
Introduction.............................................................................................................................................................................4
Goal ......................................................................................................................................................................................4
Definitions ................................................................................................................................................................................5
Base Index Date ................................................................................................................................................................5
(Base) Insurance Value .....................................................................................................................................................5
Calculation Methods .........................................................................................................................................................5
Current Insurance Value ...................................................................................................................................................6
Insured Amount ................................................................................................................................................................6
Insurance Base Value ........................................................................................................................................................6
Insurance Coverage ...........................................................................................................................................................6
Insurance Index .................................................................................................................................................................6
Market Value ....................................................................................................................................................................6
Special Swiss Asset ..........................................................................................................................................................6
General Overview of the setup steps .....................................................................................................................................8
What are the setup steps that need to be made? ................................................................................................................8
Insurance Calculation Methods ...........................................................................................................................................11
Value as New (VAN) ......................................................................................................................................................11
Current Market Value (CMV).........................................................................................................................................12
Insurance Calculations in Oracle Assets

FA_INS.doc
ii
Oracle/Client Confidential - For internal use only
Document Control
Change Record
Date
Author
Version
Change Reference
23-Apr-14
First draft
4-Aug-14
1.0
First published version
Contributors
Name
Organization
Title
Asha Aluru
EBS Financials Development
Fixed Assets Applications Developer
Reviewers
Name
Title
Date Reviewed
Asha Aluru
Irina Danulet
Fixed Assets Applications Developer

Technical Analyst - Support
25-Apr-14
25-Apr-14
Document References
Document Title
Type of Reference
Document Location
Oracle Assets User Guide Release 12.1
Reference Manual
MOS

FA_INS.doc
iii
Introduction
Goal
THE PURPOSE OF THIS DOCUMENT IS TO PROVIDE AN OVERVIEW
on available insurance calculation methods in Fixed Assets. We will
discuss various scenarios and explain the necessary steps. We will not
discuss Swiss special assets in detail.
What does the Insurance feature offer?

The Insurance feature allows checking if the assets are under- or over
insured based on the annual index provided by the insurance company.
Oracle Assets offers 3 calculation methods to obtain the current
insurance value which is then compared with the agreed insurance
coverage for an asset.
Oracle Assets provides a window to enter, view and maintain the
insurance policies as well as the calculation methods. There is no
interface to upload insurance information. A policy can also be removed.
In addition to the Insurance Calculation Routine, Oracle Assets offers
also 2 reports:
Insurance Data Report - Used to review insurance details for assets
and to verify that the assignments for insurance records are correct. The
Insurance Data report prints all insurance details for the selected assets.
(page 9-181) Note: whenever the Oracle Assets User Guide Release
12.1 is quoted the page in the manual is added.
Insurance Value Detail Report - Used to review calculations of
insurance coverage for selected assets. The Insurance Value Detail
Report prints all insurance amounts for the selected assets and displays
totals at Balancing Segment level, Insurance Calculation Method level,
Insurance Company level, and Insurance Policy Number level.
The insurance coverage calculation indicates the differences between
insured amounts and current insurance values. (page 9-181)

FA_INS.doc
4
Definitions
Base Index Date
This is the date used as a basis for the indexation. It must be one of the
following:
For new assets, enter the date the asset was placed in service.
For assets purchased second-hand, enter the original date of
construction of the asset.
For the Manual Value calculation method, you can enter a maintenance
date. This represents the date the optional indexation of the manual value
begins.
For updated Swiss assets, record the date on which automatic
indexation of the insurance value will begin again. Until this date, you
should maintain the insurance value manually (page 9-177)
(Base) Insurance Value

Manually entered amount for the asset as agreed with the insurance
company. It can be one of the following:
For new assets, Oracle Assets displays the current cost of the asset.
For Value as New assets, one can overwrite this default with another
value.
For Current Market Value assets, the value is shown in this field but is
disabled. The value is disabled because the Base Insurance Value is not
used in this asset insurance calculation; instead, the insurance value is
derived from the asset net book value.
For Manual Value assets, the Base Insurance Value field is disabled
because the Base Insurance Value is not used; instead, you can manually
enter a Current Value. (page 9-177)
Calculation Methods
Oracle Assets uses three methods to calculate the insurance value of an
asset:
Value as New (VAN) - This method calculates the base insurance value
of the asset, based on acquisition/production costs. This value can be
indexed annually to give a current insurance value. It can also incorporate
the indexed value of transactions that affect the asset value.
Market Value (CMV) - This method calculates the current market value
of the asset. Oracle Assets automatically calculates the current value
from the net book value of the asset, incorporating indexation factors and
the indexed value of any transactions that affect the asset value.
Manual Value - This method allows you to manually enter an insurance
value for an asset, usually in agreement with the insurer. With this
calculation method you can also manually enter updates to the asset
FA_INS.doc
5
insurance value. Oracle Assets only updates the current insurance value
automatically if you enter an optional maintenance date for the asset.
If an asset is partially retired, the insurance calculation process reduces
the insurance value of the asset in the same proportion as the current
cost is reduced for the partial retirement.
For certain types of assets, such as buildings, the Swiss business
practice is that the insurance value may occasionally be reassessed by
the insurance company, and manually redefined. Indexation of the
insurance value can then recommence from this point. The manual
update of an automatically calculated insurance value will only be allowed
for these special Swiss assets, which must be flagged in the Asset
Insurance window. (page 9-173 ff)
Current Insurance Value

Calculated insurance amount based on the calculation method and the
index.
Insured Amount
Manually entered amount for the asset as agreed with the insurance
company.
Insurance Base Value

The base value of the asset, aka asset cost. See also (Base) Insurance
Value.
Insurance Coverage
The value of the current insurance coverage (insured amount less current
insurance value).
Insurance Index
Oracle Assets uses the Price Index page to enter the Insurance Index
which is provided annually by the insurance companies.
Market Value
The current net book value (NBV) of the asset, which is cost minus
depreciation reserve of the last closed period in the book.
Special Swiss Asset

If the asset is a Swiss special-case asset, check the Special Swiss
Asset check box. This field will not be enabled unless you have set the
profile option

FA_INS.doc
6
FA: Allow Swiss Special Assets to Yes.

See: User Profiles in Oracle Assets, page B-1.
If an asset is marked as a Swiss special asset, you will be able to update
the Current Insurance Value, Insurance Index, and Base Index Date for
the asset to reflect the reassessment of the insurance value by the
insurance company. The insurance company may provide a new series
of indexation factors to be applied to the asset. You can record this by
defining a new Price Index and then updating the Insurance Index field.
Record the new insurance value provided by the insurance company, by
updating the Current Value field and recording the effective date for this
new valuation in the Base Index Date field. If the Base Index Date is set
to a date in the future, the insurance value will not be indexed again until
that date is reached. The period up to this date represents a manual
maintenance period for the asset. Any adjustments or retirements
affecting the asset value during this period will not be incorporated into
the new insurance value when the automatic insurance calculations begin
again. (page 9-176 ff)

FA_INS.doc
7
General Overview of the setup steps

What are the setup steps that need to be made?
The insurance companies need to be set up as a supplier in Oracle
Payables with the supplier type Insurance Company in order to be able to
use them when entering the insurance policies.
In the Price Index window the Insurance Index provided by the insurance
companies needs to be set up:

FA_INS.doc
8
And now we are ready to set up the insurance policy for the assets.
Navigate to Assets > Insurance > Insurance Policy Details. Query up the
assets for a book:
The Policy section is of course empty. The default calculation method is

Value as New and the Base Index Date defaults to the Date Placed in
Service (DPIS). The Base Insurance Value defaults to the cost of the
asset.
Enter the insurance policy number, pick the insurance company and its
site. Determine the calculation method and enter the insurance amount.
One will be able to pick an Insurance Index that existed already at the
Base Index Date. Current value and last indexation date will be displayed
after the Insurance Calculation Routine was run.
Continue to enter the insurance data for all assets as required.
Note: All assets under the same insurance policy must use the same
calculation method.
Note: One can attach as many insurance policies to an asset as needed.

FA_INS.doc
9
The steps to be taken in the Fixed Asset Insurance Window are also
described in the Oracle Assets User Guide Release 12.1 starting on page
9-176 ff.
Then the Insurance Calculation Routine can be submitted.
Mandatory parameters are the Asset Book and the indexation year. If
more than one Insurance company is used, then one can run the
calculation per insurance company and one can also restrict the range of
assets to be included.
Once the Insurance Calculation Routine has completed, the Insurance
Values Detail Report can be run to review the results. Or the insurance
value can also be viewed in the form.

FA_INS.doc
10
Insurance Calculation Methods

Value as New (VAN)
The formula for the VAN calculation is as follows:
Insurance Value * (New Price Index / Policy Price Index)
Where:
Insurance Value = Cost
New Price Index = Current Year Index
Policy Price Index = Base Price Index; Index of the year the DPIS falls
into
As quoted already earlier from the User Guide If an asset is partially
retired, the insurance calculation process reduces the insurance
value of the asset in the same proportion as the current cost is reduced
for the partial retirement. (page 9-174) The formula in this case is:
Insurance Value / Policy Price Index
For assets marked as Swiss Assets the base formula for VAN is the
same. For partial retirements the retirement value is the
Policy Insurance Value / Base Price Index
Now let us see the calculation on our example asset for the VAN method.
We will start with the indexation in December 2006 which includes the
November 2006 depreciation, so note that the last date indexed is
30-NOV-2006.
All 4 assets use the General index displayed earlier. For this index we
have a value of 112 for 2005 and 113 for 2006.
Insurance Value = Insurance Base Value * (New Price Index / Policy
Price Index)
Insurance Coverage = Insured Amount Insurance Value
Asset 113960:
Insurance Value: 50,000,000 * (113 / 112) = 50,446,428.57
Insurance Coverage: 45,000,000 50,446,428.57 = -5,446,428.57
FA_INS.doc
11
Asset 201106: (Note the Policy Price Index is the same as the New Price
Index as the DPIS is in the same year)
Insurance Value: 10,000 * (113 / 113) = 10,000
Insurance Coverage: 10,000 10,000 = 0
Asset 201107/201108:
Insurance Value: 10,000 * (113 / 112) = 10,089.29
Insurance Coverage: 10,000 10,089.29 = -89.29
In December asset 201107 was partially retired with cost retired 5000
and remaining current cost 5000. Then depreciation was run closing the
December 2006 period. Let us review the result after indexation for year
2006:
No changes for the other 3 assets let us calculate asset 201107:

Insurance Value = Insurance Base Value * (New Price Index / Policy
Price Index)
Insurance Value: 5,000 * (113 / 112) = 5,044.65
Insurance Coverage: 10,000 5,044.65 = 4,955.35
We may want to adjust the insured amount.
Current Market Value (CMV)

The formula for the CMV calculation is as follows:
Insurance Value = Market Value * (New Price Index / Base Price
Index)
Where:
Market Value = NBV as of the last closed period
New Price Index = Current Year Index
Base Price Index = Index of the year the DPIS falls into
For assets marked as Swiss Assets that are retired the formula is as
follows:
If last period close date > policy base index date
and
policy base index date > policy indexation date
If retired then
Retirement Value = Insurance Value / Base Price Index * assets total life
in months
Else
Insurance Base Value * (New Price Index / Policy Price Index) * (assets
remaining life in months / assets total life in months

FA_INS.doc
12
Now let us see the calculation on our example asset for the CMV method.
We will start with the indexation in December 2006 which includes the
November 2006 depreciation, so note that the last date indexed is
30-NOV-2006.
All 4 assets use the General index displayed earlier. For this index we
have a value of 112 for 2005 and 113 for 2006.
Insurance Value = Market Value * (New Price Index / Base Price
Index)
Asset 113960:
Insurance Value: Market Value 34,465,750.70 * (113 / 112) =

34,773,480.62
Insurance Coverage: 45,000,000 34,773,480.62 = 10,226,519.38
Insurance Value: Market Value 8,166.66 * (113 / 113) = 8,166.66

Asset 201107:

FA_INS.doc
13
Asset 201108:

In December asset 201107 was partially retired with cost retired 5000
and remaining current cost 5000. Then depreciation was run closing the
December 2006 period. Let us review the result after indexation for year
2006 under the CMV method:
Note: The market value has changed as it includes also the December
depreciation thus reduced the NBV (Market Value).
Asset 113960:
Insurance Value: Market Value 33,632,417.36 * (113 / 112) =

33,932,706.80
Insurance Coverage: 45,000,000 33,932,706.80 = 11,067,293.20

Asset 201108:


FA_INS.doc
14
Let us now see the result of the partial retirement for asset 201107 under
the CMV method:
Asset 201107:

With the CMV method the Date Last Indexed plays a bigger role then with
the VAN method as the market value changes every period with every
depreciation run.
However, comparing the same assets using the same insurance index it
becomes clear that with the VAN method the assets would be under
insured exception after the partial retirement - while with the CMV
method they are over insured with the same insured amount set for these
example cases.

FA_INS.doc
15

Insurance Calculation Methods in Oracle Assets

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Insurance Calculation Methods in Oracle Assets

Hochgeladen von

Copyright:

Verfügbare Formate

ORACLE APPLICATIONS

White Paper Insurance

Written by Oracle Support Services

Insurance Calculations in Oracle Assets

First published version

EBS Financials Development

Fixed Assets Applications Developer

Fixed Assets Applications Developer

Oracle Assets User Guide Release 12.1

Insurance Calculations in Oracle Assets

What does the Insurance feature offer?

Insurance Calculations in Oracle Assets

(Base) Insurance Value

Current Insurance Value

Insurance Base Value

Special Swiss Asset

Insurance Calculations in Oracle Assets

FA: Allow Swiss Special Assets to Yes.

Insurance Calculations in Oracle Assets

General Overview of the setup steps

Insurance Calculations in Oracle Assets

The Policy section is of course empty. The default calculation method is

Insurance Calculations in Oracle Assets

Insurance Calculations in Oracle Assets