Category: ERP

Introduction: 

Fixed assets are long-term tangible properties, such as machinery, buildings, and equipment, that businesses use to generate income. Managing these assets effectively ensures operational stability, cost efficiency, and better financial control. Oracle has introduced significant enhancements in its Fusion Fixed Asset module to improve usability, financial reporting, and integration with other applications. 

Key Transformative Features:

We can discuss some of these remarkable enhancements in detail, as listed below. These updates have significantly improved the Fusion Fixed Asset module, offering businesses greater efficiency and financial reporting capabilities. 

Fixed Asset Approval: 

Business requires certain governance while recording the fixed asset transactions including but not limited to addition, retirement, and transfer, to ensure the accuracy and completeness of it. The approval workflow on the fixed asset transactions also ensures the appropriate level of internal control. 

The approval workflow streamlines the elimination of paperwork by acting as a centralized repository for all asset approval transactions. It ensures compliance, enhances accountability, and meticulously records audit trials.  

Oracle has recently introduced approval on Fixed Asset transactions such as Addition, Adjustment, Transfer and Retirement for single and mass transactions. To enable the approval, select the required transactions such as Additions, Adjustments, Transfers and Retirements in ‘Enable Approval’ field available at the asset book level. 

The system will route the fixed asset transactions for approval using rules configured in asset transactions approval spreadsheet available under manage workflow rules in spreadsheet page. 

The following is the difference between Single Transaction and Mass Transaction Approval. (Source: Oracle Consolidated Document for Assets approval) 

 

Single Transaction	Mass Transaction
Each transaction is approved separately. Approver is notified for each transaction.	Transaction group as whole is approved. Approver gets only one notification for each Mass Transaction group.
Enter single transaction in the following pages to submit for approval.    · Add Assets  · Adjust Assets  · Transfer Assets   · Retire Assets     To create approval rules for the single transaction use the following sheets in “Manage Workflow Rules in Spreadsheet”.     · Addition  · Adjustment  · Transfer   · Retirement	Enter Mass Transactions for group of assets through ADFdi Spreadsheet, or FBDI Spreadsheet and to create approval rules use the “Mass” sheet in “Manage Workflow Rules in Spreadsheet”.
Most of the asset attributes and transaction attributes are available to define the approval rules.	Only Mass Transaction group attributes are available to define the approval rules. Individual asset level attributes are not available.
Approval is initiated when you submit the transaction.	Approval is initiated when you set the status to Post for all lines in the group and post them.
Approval notification shows the details of the assets transactions submitted.	Approval notification shows the summary details of all the asset included. in the mass adjustment transaction group/batch.

The business can consider below factors to decide if Fixed Asset approval should be implemented by the entity which might add the administrative cost but ensures accurate financial reporting. 

 

Decision Point	Explanation	Financial Impact
Asset Materiality and Value	Approval is necessary if the fixed asset addition, retirement, or adjustment exceeds the materiality threshold.	Ensures proper oversight for high-value transactions, preventing material misstatements in financial statements and safeguarding assets.
Risk of Misclassification or Errors	Implement approvals if there’s a history or high likelihood of errors in classification, depreciation, or adjustments.	Reduces the risk of misstating expenses or asset values, which could impact reported profits, tax liabilities, and investor confidence.
Impact on Financial Ratios	Approvals are critical if the decision significantly affects key ratios like ROA, Debt-to-Equity, or Current Ratio.	Prevents unintended consequences on financial ratios, maintaining compliance with loan covenants and supporting informed decision-making by stakeholders.
Regulatory and Audit Requirements	Required if compliance with standards like IFRS/GAAP or audit recommendations demands additional oversight.	Avoids penalties, audit findings, or reputational damage by ensuring adherence to regulatory and reporting standards.
Frequency and Volume of Changes	Approvals should be implemented if the entity frequently adds, retires, or adjusts fixed assets.	Controls prevent fraudulent activities and ensure that frequent changes don’t lead to over- or under-capitalization, safeguarding the accuracy of financial records.

 

The detail of setup is available in Oracle Fusion Cloud Financials Readiness document of release 24C. (Exception-Based Approvals for Fixed Asset Transactions) 

 

Segregation of Asset Transaction Entry and Transaction Posting Duties: 

Segregating asset transaction entry and posting in Oracle Fusion enhances internal controls, reduces errors and fraud, improves data integrity, and strengthens auditability. This structured workflow boosts efficiency, transparency, and compliance with global internal control standards. 

To set up this in the system, navigate to Setup and Maintenance -> Financials -> Change Feature opt in -> Fixed Assets -> Edit Feature -> Segregation of Asset Transaction Entry and Transaction Posting Duties.
 

The separate custom role needs to be created for the preparer by removing the posting-related privileges and for the reviewer by adding privileges related to transaction viewing after copying the ‘Asset Accounting Manager’ seeded role.
 

Below is a table list down the nature of transactions which can be performed by the preparer and reviewer (Source: Oracle Docs: Implementing Assets 24A) 

User Type	Duties
Transaction Preparer	Create all types of asset transactions in draft mode, including additions, adjustments, transfers, and retirements.  Set the status to Review.  Create impairment and revaluation transactions and set the posting status to Review after the transactions have been previewed.  Note: The Submit button is disabled for the transaction preparer.
Transaction Reviewer	Review transactions in Read Only mode.  Post all types of asset transactions, including additions, adjustments, transfers, retirements, impairments, and revaluations.  Review and post suspend or resume depreciation transactions only through an ADFdi spreadsheet.  Send a transaction back to the preparer if it requires corrections by changing the queue status to New.  Note: Transaction reviewers can’t create or edit transactions.

The details of setup is available in Oracle Fusion Cloud Financials readiness under Asset and Lease Management > Assets (Oracle Fusion Cloud Financials 24A What’s New) 

The separate of asset transactions and posting duties is also in line with principle of lease privilege and best practice of internal control which should aim to achieve. Business can consider below pointers to decide if entity should segregate asset transaction entry and posting duties when recording fixed assets in the books.
 

Decision Point	Explanation	Financial Impact
Risk of Fraud or Misappropriation	Segregation is essential if there’s a risk of asset-related fraud or unauthorized postings.	Mitigates potential financial losses and improves internal control, safeguarding assets and reducing the risk of fraudulent financial reporting.
Complexity and Volume of Transactions	High transaction volumes or complex entries may require segregation for accuracy.	Reduces the likelihood of errors, ensuring accurate asset values, depreciation schedules, and financial statements.
Regulatory and Audit Requirements	Required if accounting standards (e.g., SOX, IFRS/GAAP) or auditors recommend stronger controls.	Enhances compliance with regulations, avoids penalties, and builds stakeholder confidence in the integrity of financial reporting.
Expertise and Accountability	Segregation ensures that specialized personnel handle entry and posting responsibilities.	Reduces errors caused by a lack of expertise, preventing misstated asset values and incorrect depreciation charges.
Cost of Implementation vs. Benefits	Consider whether the financial benefits of segregation (e.g., reduced errors and fraud) outweigh the costs (e.g., hiring additional personnel).	Balanced controls improve reporting accuracy and reduce costly mistakes, but excessive controls could increase operational expenses unnecessarily.

  

Capitalization of Fixed Assets for Expense Destination Receipts in the Procurement Process 

Capitalizing fixed assets for expense destination receipts improves financial accuracy, transparency, and compliance by ensuring timely recording of asset-related transactions. This approach enhances asset tracking, reduces manual errors, and provides a clear audit trail for regulatory and internal audits. Automating capitalization streamlines financial operations, enabling businesses to allocate resources efficiently and plan future investments effectively. Even when invoices are delayed due to vendor or internal approval issues, this method ensures that assets in use are properly recorded, preventing financial misstatements and improving overall reporting accuracy.

There are ample of cases where the entity has received the asset and started using it but the invoice for the same is not booked in the system due to variety of reasons such as delay in invoice submission by the vendor or internal delay due to approval or similar issues. 

The system will also create a maintenance asset for such receipts automatically to establish a relationship with the corresponding fixed asset without any manual intervention. It will create a single fixed and maintenance asset for non-serialized items and multiple assets will be created for serialized items. 

After accounting for the receipt of the asset, transfer the estimated costs and non-recoverable taxes from the receipt to Assets using the Transfer Receipts to Mass Additions process. This process transfers the assets to the corporate book associated with the purchase order’s inventory organization, using the receipt date of the goods as the in-service date. Once the invoice is created and accounted any price variance between invoice and purchase order will be posted to the Fixed Assets. 

The business can consider below pointers to decide if asset can be capitalized while receiving or at invoice. 

 

Decision Point	At Asset Receipt	Financial Impact (At Receipt)	At Payables Invoice Creation	Financial Impact (At Invoice)
Ownership and Risk Transfer	Capitalize if ownership and risks are transferred upon receipt of the asset.	Increases fixed assets and liabilities simultaneously; aligns timing of capitalization with control transfer.	Capitalize when ownership is confirmed through the invoice.	Delays asset recognition, potentially underreporting assets in interim periods.
Cost Certainty	Estimate and capitalize based on expected costs if all relevant costs (e.g., freight, installation) are known.	Risk of estimation inaccuracies; may require future adjustments, creating complexity in reporting.	Capitalize based on the final confirmed invoice value.	Ensures accurate asset valuation and avoids retroactive adjustments.
Asset Readiness for Use	Capitalize if the asset is in the location and condition necessary for its intended use.	Accurately reflects asset usage timeline and depreciation commencement.	Delay capitalization until the invoice confirms readiness.	May defer asset recognition and delay depreciation start, impacting reported earnings.
Supplier Invoice Discrepancies	Ignore minor discrepancies and capitalize based on receipt records.	Risk of mismatched liability and asset values if invoice adjustments occur later.	Capitalize after resolving discrepancies in the invoice.	Ensures accurate recording of asset value, minimizing reconciliation challenges.
Materiality Threshold Compliance	Capitalize immediately if the value exceeds the business’s materiality threshold.	Aligns with policy thresholds but may result in premature recognition if costs are uncertain or incomplete.	Capitalize after invoice verification of materiality.	Avoids capitalizing items incorrectly, ensuring compliance with accounting standards like GAAP or IFRS.

 

The detail of setup is available in Oracle Fusion Cloud Financials Readiness document of release 23B under Assets. (Oracle Fusion Cloud Financials 23B What’s New) 

Conclusion: 

In conclusion, the features outlined in this blog provide significant enhancements that will undoubtedly benefit businesses in the tracking and reporting of fixed assets. These innovations ensure greater accuracy, compliance, and efficiency, thereby facilitating more effective asset management and informed decision-making. Implementing these features will empower organizations to streamline their financial operations and achieve better transparency and control over their fixed assets.

A key policy decision during implementing Oracle Fusion for Receipt Accounting for Expense category PO lines is choosing between “Accrue at Receipt” or “Accrue at Period End”. In our Managed Service journey, we have seen many clients facing issues because of uninformed decisions regarding Accrue at Receipt or Period end resulting in piling up of expense accruals, inaccurate expense booking etc.

Making well-informed decisions is essential and relies on a thorough understanding of the business and expert guidance. A wrong decision here can impact the functioning of the business process and result in inaccurate financial reporting. For instance, a company misreporting just 3% on a $10 million expense budget could be presenting $300,000 in errors in a financial statement.

A wrong decision can impact the organization in following ways –

The key differences of these two Accrual concepts are as below –

• Accrue at receipt (also known as perpetual accrual) – The Accounting entry for expense and accrual is recorded when you create Receipt in Oracle. When you create accounting for the invoice, the accrual is reversed, and the accounts payable liability is recorded.

For Inventory category PO Lines, “Accrue at Receipt” option is selected by default.

• Accrue at period end – No accounting entry is made when a Receipt is created in Oracle for items or services and the expense is recorded only when the invoice is booked. There is no major dependency on receipt creation for booking the expense. We need to run the “Create Period End Accruals” process to create accrual journal entries for all uninvoiced receipts. The entries are automatically reversed in the next period.

Accounting entries in different scenarios:

 

Events	Accrue at Receipt	Accrue at Period End
PO Creation	No Entry	No Entry
Receipt Creation	Receiving (Dr) Accrual (Cr)	No Entry
Expense booking (Put Away)	Expense (Dr) Receiving (Cr)	No Entry
Invoice booking	Accrual (Dr) Liability (Cr)	Expense (Dr) Liability (Cr)
Period End Accrual (For Uninvoiced Receipts)	No Entry	Expense (Dr) Accrual (Cr)

 

Difference between Accrue at Receipt vs Period End:

 

Metrics	Accrue at Receipt	Accrue at Period End
Expense Accrual	On Receipt Creation	On Invoice Booking
Separate Accrual at month end	Not Required	At Month End for Uninvoiced Receipt
Inflow of Expense to Project	On Receipt Accounting	On Invoice Accounting
Inflow of Expense to Fixed Assets	Possible on Receipt Accounting	Only on Invoice Accounting
Accrual Write Off	Required	Not Required
Invoice Price Variance (Difference between Purchase & Invoice)	Invoice Price Variance generated during invoice processing	Charged directly to expense instead of Invoice Price Variance
Non-Recoverable Tax variance tracking in case of rate change	Tax Variance generated during invoice processing	Charged directly to tax instead of Tax Variance
Using Multi-Period Accounting (MPA)	MPA not possible to be used	MPA can be used for these lines
Reconciliation Report for Uninvoiced Receipt	Accrual Reconciliation Report	Uninvoiced Receipt Accrual Report
Budget release in case of Encumbrance accounting	Funds released on Receipt creation	Funds released on Invoice creation

 

In the Accrue at Receipt method, timely booking of receipts is crucial for recognizing expenses. If the organization lacks personnel to perform real-time receiving, it can disrupt the expense booking process. We have observed that organizations choosing the Accrue at Receipt option for expense items often face delays in expense recognition due to delays in creating receipts.

For example, one of the entities was following a Cost-Plus model for raising the invoices to customer from Projects Contract. But there was no dedicated user who would record the receipts resulting in inadequate costs being reported.

Key factors to consider before deciding Accrue at Receipt vs Accrue at Period End Option:

The decision needs to be taken based on the nature of the business processes and the different types of expenses. The following are the key parameters to be considered –

 

Metrics	Accrue at Receipt	Accrue at Period End
Company has requirement to book the expenses once goods/services are received in Oracle.	√	X
Company has business SOP in place for doing the receiving for all different type of goods/services.	√	X
Company has decentralized operations and services are received at different places. It is difficult to have users perform the receiving at different places.	X	√
Company does not have designated team/reasonable team size to perform the receiving within the system.	X	√
Company has requirement to accurately update Project Forecasts on monthly basis based on Project Cost.	√	X
Company has requirement of Fixed Assets to be capitalised based on accurate date placed in service i.e. receipt date.	√	X

 

Based on above considerations, the client should determine the business process that they need to follow considering available resources and then take a decision whether they want to go for Accrue at Receipt or Accrue at Period End.

Accrual Flexibility in Oracle – Receipt or Period End:

1. For Expense category PO Lines, the client will have an option on the Manage Common Options for Payables and Procurement page to be set as Accrue at receipt or period end.
2. However, the default value of Accrue at Receipt or Period end can be changed at the PO Line Schedule level based on specific requirement for that PO Line.

For example, if client has selected Accrue at receipt at the setup level but for a PO Line of Insurance expense, the user needs to have the multiperiod accounting to be created, then the user can change to Accrue at Period end for this PO Line.

Best Practices when using Period end accrual:

1. At the end of accounting period, you must run “Create Uninvoiced Receipt Accrual” process after closing the Accounts Payable period and transferring all the Accounts Payable invoices to Cost Management, and before you close the General Ledger period.
2. Run the Create Un invoiced Receipts Accruals process in the Report accrual run mode to review the entries before it gets posted. The report helps you to understand the details about the Uninvoiced purchase order receipts for which accruals will be created. After analysis of the report and making required updates, the process should be run in final mode.
3. Auto Reversal of the receipt accrual entries should be set.

Best Practices when using Accrue at Receipt:

1. In case of Accrue at Receipt, PO line should not have Invoice Match option as “Order” and Match Approval level as “2-way”. As in such case, the receipt creation might be missed and expense would be charged only if the receipt is booked, resulting in under-reporting of expenses.
2. Accrual Reconciliation Report should be run on periodic basis and open entries should be analysed.
3. Accrual Aging and Receiving Inspection account should be reconciled and analysed at regular intervals. Timely Accrual write-off should be done for the open Purchase orders where the Invoices are not received for the Receipts created or vice versa.

Digital transformation is a pivotal change reshaping how businesses operate, utilizing digital tools to revolutionize strategies, processes, and customer experiences. It goes beyond technology adoption, fundamentally altering traditional approaches to drive innovation, efficiency, and competitiveness.

Digital Transformation activity sometimes might feel exhausting because tt involves too many people, takes far too long and by the time the project is over, users are too exhausted to celebrate the benefits.

While all this is not untrue, seldom do organizations remember why they chose to undertake this massive activity in the first place. Digital Transformations are organization’s door to the future, and users get to decide on the architectural style of it.

We tell our clients that this activity requires a mindset shift and this is why we say so –

Sweeping Away the Cobwebs of Obsolete Systems: In the world of business, some processes feel as ancient as dial-up internet. Digital transformation is the ultimate broom, sweeping away those cobweb-covered relics and introducing a fresh, streamlined approach.

Letting Go of Technological Antiques: Remember the days of floppy disks and fax machines? It’s time for them to retire to the museum of nostalgia. Embracing digital transformation means bidding adieu to these relics and welcoming cutting-edge technologies.

Revamping Business Processes: The Marie Kondo Way: Just as Marie Kondo revolutionized decluttering, digital transformation revamps business processes. It’s about discarding what doesn’t spark joy in operations and embracing tools and systems that do.

Smooth Collaboration & Heightened Efficiency: Digital tools eliminate the chaos of sticky notes and endless email threads, fostering seamless teamwork. And, with automation taking the reins, tasks are completed faster than a birthday cake vanishes at an office party.

Thriving, Not Just Surviving: Digital transformation isn’t a mere upgrade; it’s a leap toward flourishing. It’s about seizing opportunities, innovating, and staying ahead in a landscape that changes as swiftly as fashion trends.

So, let’s toast to a tech savvy, personalized future. Here’s to shedding the old skin, refining the outdated, and diving headfirst into a world of possibilities. The digital transformation journey promises a buffet of opportunities as vast as an endless brunch menu. Cheers to a fresh start in the digital realm!

Orbrick wishes you a very happy new year!

As Gandhi Jayanti comes to a close, we reflect upon the teachings of the Mahatma.

Mahatma Gandhi has taught the world a lot. His Experiments with Truth resulted in many learnings which he shared with the world and led by example. His life and his legacy are a rich source of lessons. Gandhi asked us to be slow in forming our convictions, but once formed defend them against all odds. Here are 3 of his quotes that reinforce our convictions about doing better Digital Transformations.

“Be the change you are trying to create.”

Probably the most famous Gandhi quote. It’s been plastered on graffitied walls, countless internet articles and motivational posters – but repetition doesn’t make anything untrue.

Many projects start with the leadership wanting to change things in their organizations. They sponsor the projects, hire a vendor, select a product, get the teams together, and then somehow leave the implementation and operation of their new tool to the teams that are key users but may or may not share their overall vision. True transformation needs both – the view that keeps the North Star or the purpose of the project in sight, and the view that keeps practical realities and details in sight. A project without active sponsorship will not usually result in the kind of change that the project sponsors hope for unless that are hands-on and participate in steering committee meetings, decision making and keep a finger on the overall pulse of the project. They have to not only be involved during the development, but perhaps even more importantly during deployment and adoption. They have to “be” the change and be the first brand ambassadors of the new tool. They should be seen using it, and involved in the process of rolling it out. They should be talking about it to their people right from the get go. This causes a lot of people to see it as a more organic change and not something sudden and unwelcome.

“There is more to life than increasing its speed.”

Speed is typically one of the main things we want from any digital transformation, right besides cost savings. This, while understandable, sometimes becomes a hindrance to getting something better. We must decide on other, and better metrics besides just speed of execution. Afterall, we are what we measure.

If we take bad business processes and digitize them to make them a whole lot faster – we have created ways to be terrible, faster. We have to descend into the details of each project, understand how we can re-engineer our processes to make them better processes, and then make the execution of those processes faster!

“My aim is not to be consistent with my previous statements on a given question, but to be consistent with truth as it may present itself to me at a given moment. The result has been that I have grown from truth to truth.”

He believed that truth is self-evident. He said truth emerges when we remove the cobwebs of Ignorance. His famous Satyagraha is simply the insistence of truth. His autobiography isn’t called “The Truth” or “My Truth”, but rather consistently with his overall believe – is called “My Experiments with Truth”.

All ERP/EPM implementations are done, at their very core, to collect data that can be reported on. The entire point of large, cross-functional systems like Oracle Fusion is that a single environment helps with cross-functional reporting. But all too often we using reporting as just that – a report to be read. What’s worse – sometimes we use it to feed our Confirmation bias. The aim of these transformations is often to support great reporting. But that reporting will only turn into value when we design for truth-prompted and data-guided actions. We at Orbrick build solutions that represent the truth of the organization we work with. Analysis, KPIs and KRAs that accurately show the reality of businesses and organizations, and not just an aggregation of data left to be interpret. We don’t lie with statistics. And we make our analytics actionable. We want our partners and customers to be able to spring into action when the truth changes from what it was a while ago.

We want to grow with them, from truth to truth!