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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
Change Record
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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.
For new assets, enter the date the asset was placed in service.
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 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.
Insured Amount
Manually entered amount for the asset as agreed with the insurance
company.
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.
In the Price Index window the Insurance Index provided by the insurance
companies needs to be set up:
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.
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.
Where:
Insurance Value = Cost
New Price Index = Current Year Index
Policy Price Index = Base Price Index; Index of the year the DPIS falls
into
For assets marked as Swiss Assets the base formula for VAN is the
same. For partial retirements the retirement value is the
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.
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
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:
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:
Else
Insurance Base Value * (New Price Index / Policy Price Index) * (assets
remaining life in months / assets total life in months
All 4 assets use the General index displayed earlier. For this index we
have a value of 112 for 2005 and 113 for 2006.
Asset 113960:
Asset 201106: (Note the Policy Price Index is the same as the New Price
Index as the DPIS is in the same year)
Asset 201107:
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:
Asset 201106: (Note the Policy Price Index is the same as the New Price
Index as the DPIS is in the same year)
Asset 201108:
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.