Appendix: Oracle Advanced Global Intercompany...

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Appendix: Oracle Advanced Global Intercompany System Chapter 13 -

Appendix: Oracle Advanced Global Intercompany System Chapter 13

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Appendix: Oracle Advanced Global Intercompany System

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Objectives

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Intercompany Transactions


Intercompany transactions are transactions that occur between two or more legal entities belonging to the same corporate enterprise. The legal entities can be assigned to one primary ledger or assigned to different primary ledgers in the same corporate enterprise. Intercompany transactions are normally allocations and charge-back transactions.

For example, Vision Operations (USA) is a corporate enterprise that has legal entities at various places in the world. A transaction that occurs between the Vision France and Vision Germany which are legal entities of Vision Operations is called an intercompany transaction.

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Intracompany Transactions

Intracompany Transactions

Intracompany transactions are transactions that occur between organizations represented by balancing segment values in the same legal entity of a corporate enterprise.

Organizations could be a manufacturing plant, a warehouse, a cost center, or any other organization.

Intracompany transactions often pass through a clearing organization, also represented by a balancing segment value.

For example, Vision France is a legal entity which has Manufacturing and Operations as its organizations or departments. A transaction that occurs between Manufacturing and Operations organizations which are also called as balancing segment values is called an intracompany transaction.

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Importance of Intercompany Transactions

Importance of Intercompany Transactions

Intercompany transactions must be balanced to net to zero so that they can be eliminated or adjusted properly when the enterprise consolidates the financial results. This means that the enterprise cannot show profit (or loss) from trading between different companies or subsidiaries within the enterprise.

Failure to properly eliminate these intercompany transactions can result in erroneous and overstated financial results and can lead to legal repercussions.

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Importance of Intercompany Transactions (continued..)

Importance of Intercompany Transactions (continued…)

To efficiently identify and eliminate intercompany transactions at the close of an accounting period, most organizations use specific accounts to book these transactions. This facilitates the consolidation process by segregating all intercompany accounting into specific accounts.

However, intracompany transactions are not controlled in the same manner as intercompany transactions. Intracompany transactions are eliminated if the transaction occurs between a balancing segment value in the same legal entity. The offset lines must be eliminated if a clearing account is used.

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Intercompany and Intracompany Balancing – Overview

Intercompany and Intracompany Balancing

The intercompany and intracompany balancing feature generates balancing lines for journals with more than one balancing segment value where the debits and credits for each balancing segment do not net to zero.

You can generate the balancing entries when accounting the transactions in the subledgers, before they are posted to general ledger.

To use this feature, you must define the following:

• Intercompany accounts for each legal entity to process transactions between the legal entities in the same corporate enterprise.

• Intracompany balancing rules to balance the balancing segment values on a journal and to automatically create balancing lines for the journal using Balancing API.

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Intercompany and Intracompany Balancing – Benefits

Intercompany and Intracompany Balancing – Benefits

Intercompany and Intracompany Balancing provides a streamlined mechanism for tracking and balancing internal accounting.

Balancing determines whether a journal requires Intercompany accounting or Intracompany balancing or both. Depending on the setup, balancing determines what each balancing segment value represents and chooses the appropriate accounts. For example:

• A journal with balancing segment values representing different legal entities requires intercompany balancing.

• A journal with balancing segment values representing factories within the same legal entity requires intracompany balancing.

• A journal with balancing segment values representing business units belonging to different legal entities may require both types of accounting.

Setup for intracompany balancing rules is centralized. You can define setup in one location, and share the setup across products in the Oracle E-Business Suite.

The centralized setup generates consistent balancing lines when accounting and posting subledger transactions across applications.

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You can view the additional accounting lines in the subledgers. These lines are added to the transactions when the journals are posted to the general ledger. This results in detailed reporting and analysis.

Note: You can create intracompany transactions in General Ledger. You can also create intercompany transactions in General Ledger provided the legal entities belong to the same ledger.

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Intercompany Balancing – Define Intercompany Accounts

Intercompany Balancing – Define Intercompany Accounts

You can define intercompany receivables and payables accounts for each pair of related legal entities.

The accounts between any related legal entities speeds up the reconciliation and elimination of intercompany transaction balances between them during consolidation and are used in intracompany balancing.

You can define different receivables or payables accounts for a legal entity to track the different types of intercompany transactions.

The intercompany accounts setup is flexible in allowing the set up of different accounts for different date ranges, effective end date determines the periods in which intercompany accounts are active.

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Intracompany Balancing Rules

Intracompany Balancing Rules

Intracompany balancing refers to journals that involve different organizations in the same legal entity, represented by balancing segment values.

Intracompany balancing rules allow you to define and use the accounts for balancing journal lines that are automatically generated when unbalanced journals are created between balancing segment values, and also to define the rules for generating the lines.

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Balancing API

Balancing API

The Balancing API is used by Oracle General Ledger and Oracle Subledger Accounting to provide the necessary balancing lines for a given combination of balancing segment values.

The API processes both intracompany lines (between balancing segment values in the same legal entity) and intercompany lines (between balancing segment values belonging to different legal entities) according to the setup defined in the Intracompany Balancing Rules pages and in the Intercompany Accounts pages. If there are both intercompany and intracompany lines in the same transaction, the Balancing API performs intercompany balancing across legal entities, and then intracompany balancing across balancing segment values within each legal entity. Previously, these balancing lines were not determined until posting to General Ledger.

The Balancing API is used by General Ledger and Oracle Subledger Accounting to build journal lines automatically based on balancing rules that you have defined in the Intracompany Balancing Rules page. The Balancing API is called by General Ledger prior to posting and by Subledger Accounting at the time of subledger journal creation.

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Setting Up Intercompany and Intracompany Balancing

Setting Up Intercompany and Intracompany Balancing

The key set up steps are as follows:

1. Set up legal entities and assign the legal entity to a ledger.

2. Enable intracompany balancing when setting up the ledger

3. Define intercompany accounts for the legal entities.

4. Define intracompany balancing rules to balance the journal entries for balancing segment values that belong to the same legal entity.

Note: You can directly assign a balancing segment value to a ledger as balancing segment values represent organizations with no legal entity context. You can assign balancing segment values to a ledger, if required.

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Intercompany and Intracompany Balancing Process

Intercompany and Intracompany Balancing Process

The Balancing API handles situations when there is a mix of intercompany and intracompany lines in the transaction. The API balances the intercompany accounts first and then the intracompany accounts. Intercompany and intracompany journals then balance depending on the journal mode.

There are differences in intercompany and intracompany balancing:

• Different accounts

Intercompany uses Intercompany Accounts. The legal entity is determined based on the balancing segment value assignment.

On the other hand, intracompany uses Intracompany Balancing Rules.

• Summary of balancing lines

Intercompany lines are always summarized for each legal entity, not just the balancing segment value in the journal.

Intracompany lines are summarized for each balancing segment value in Summary Net mode or are created for each journal in Detail mode. This is defined in the Options tab of the Create Intracompany Balancing Rule page

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• Using a balancing segment value

Intercompany journals never balance through a balancing segment value. This avoids creating intercompany charges that do not represent actual intercompany movements and violate accounting practices.

Intracompany optionally use a balancing segment value to balance against, depending on the setup defined in the Create Intracompany Balancing Rule page.

• Processing many-to-many journals

Intercompany journals balance using the accounts defined for the Trading Partner Legal Entity. Since, it is optional to define a many-to-many Intercompany journal relationship, these accounts are not always defined.

Intracompany journals balance either using the default rule that is defined for Debit Balancing Segment Value and Credit Balancing Segment Value or using a balancing segment value.

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Balancing Rules Precedence

Balancing Rules Precedence

When processing intracompany transactions the balancing rules the following precedence applies:

1. BSV-BSV: A specific relationship is defined between the balancing segment values. For example, balancing segment 01 is debited and balancing segment 02 is credited. This rule takes precedence over the other rules.

2. BSV-All Other: A debit balancing segment is defined and credit balancing segment is not defined.

3. All Other-BSV: A debit balancing segment is not defined and a credit balancing segment is defined

4. All Other-All Other: These are the default debit and credit accounts. This is the default rule.

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Intercompany and Intracompany Balancing Process – Example 1


Here is an example of intercompany and intracompany balancing where the balancing segment values are mapped to a single legal entity. Let’s consider a setup where we define balancing rules for some balancing segment values. The All Other rule is used for balancing segment values for which balancing rules are not defined. So, if the journal mode is one-to-one with a debit to balancing segment 10 and a credit to balancing segment 03, then balancing segment 03 requires a debit to balance against the balancing segment 10 and balancing segment 10 requires a credit to balance against balancing segment 03. The Balancing API uses the All Other-All Other rule and substitutes the values for the balancing and intercompany segments.

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Now, lets understand what happens when a transaction occurs between balancing segments that are mapped to different legal entities. When the Balancing API encounters these journals, it uses the accounts that are defined in the Intercompany Accounts page.

When balancing intercompany, a debit is an Intercompany Receivables account and a credit is an Intercompany Payables Account. To find the correct accounts, the journal mode must be determined, similar to Intracompany Balancing. However, Intercompany Balancing is only performed at the Summary Net level, and the Clearing Balancing Segment Value is not used.

In this case, the API determines that that journal is one-to-one based on the balancing segment 10 and 20 that belong to different legal entities which are debited (10) and credited (20) entry in the journal. The API begins with the debit legal entity and processes based on the balancing and accounting rules in the same order of precedence.

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Setting Up Advanced Global Intercompany System

Setting Up Advanced Global Intercompany System

Intercompany transactions must be processed in a consistent, systematic way across the enterprise. Use the Intercompany Setup tab to define the processing rules at the enterprise level. Setting up intercompany involves the following:

• Defining intercompany accounts

• Creating organizations and assign the organizations to legal entities to process intercompany transactions.

• Assigning organizations to one or more contacts.

• Defining transaction types to manage intercompany transactions.

• Controlling period statuses independent of Receivables, Payables and General Ledger.

• Setting up Invoicing Options to define customer and supplier associations.

• Setting up system options to manage intercompany transactions.

• Setting up the Oracle Approvals Management System to derive the approvers and users to whom transactions related notifications must be sent.

• Defining the default accounts rules setup in subledger accounting to consistently distribute the expense amounts to the appropriate distribution accounts.

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Define Intercompany Accounts

Define Intercompany Accounts

Defining intercompany accounts involves the following:

• Set up ledgers and legal entities

• Enable intracompany balancing

• Set up intercompany accounts

• Define intracompany balancing rules

Use the Accounting Setup Manager to set up a ledger and a legal entity. Use the Intercompany Accounting page to drill-down and define Intercompany accounts and Intracompany balancing rules for an accounting configuration.

In an exclusive accounting configuration, which refers to a ledger representing a single legal entity, transactions with multiple balancing segment values are Intracompany transactions, they are taking place within the same legal entity. The Balancing API creates balancing lines for these transactions using Intracompany Balancing Rules.

In a shared accounting configuration, which refers to multiple legal entities sharing a single ledger, legal entities are assigned to the ledger. This allows you to set up Balancing Segment Value Assignments and also associate a legal entity to a specific balancing segment value, or

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values, in the ledger. Transactions that happen between legal entities with multiple balancing segment values can be either Intracompany or Intercompany transactions, depending on the balancing segment value assignments. The Balancing API creates balancing lines for both types of transactions, using the following accounting rules:

• Intracompany Balancing Rules for intracompany transactions.

• Intercompany Accounts for intercompany transactions

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Enable Intracompany Balancing

Enable Intracompany Balancing

Navigate to the Update Ledger Options window and select Enable Intracompany Balancing option to enable intracompany balancing.

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Set Up Intercompany Accounts

Set Up Intercompany Accounts

Use the Intercompany Accounting page to set up intercompany accounts.

Click Define Accounts to define Intercompany Receivables Accounts and Intercompany Payables Accounts for the trading partners, transacting legal entity and trading partner legal entity.

Transacting Legal Entity is the legal entity from which the intercompany transaction is initiated.

Trading Partner Legal Entity is the legal entity to which the intercompany transaction is sent by the initiator. In other words, this legal entity is the recipient of the intercompany transaction.

You can choose the transacting balancing segment value intercompany accounts. Choose All Other for this field if you do not want to define accounts for the specific balancing segment value or if no balancing segment values are mapped to the legal entities.

Select Use for Balancing to select an account to be used as the balancing account in subledgers and intercompany General Ledger journals.

Click View Reciprocal Accounts to display the accounts used by the Trading Partner (to) Legal Entity and Trading Partner (to) Balancing Segment Value to book intercompany transactions with the Transacting (from) Legal Entity and Transacting (from) Balancing Segment Value.

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Note: This button is inactive if the Trading Partner Legal Entity or Balancing Segment Value does not have reciprocal intercompany accounts defined, or if the Trading Partner Legal Entity resides on another applications instance, or if the value is All Other.

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Create Intracompany Balancing Rules

Create Intracompany Balancing Rules

Use the Create Intracompany Balancing Rules page to create a new intracompany balancing rule.

Alternatively, you can also click Create Rule in the Balancing Accounts Search page.

Note: Before creating a new rule, query the rule to confirm that the rule does not exist.

You must define at least one rule for the seeded Source and Category All Other. All Other refers to a source or category not explicitly defined in a rule. The Other-Other rule is the default rule that is used for balancing if no rules are defined for a ledger-legal entity-source-category combination. You must define this rule for each ledger-legal entity that is enabled with balancing.

Use the Balancing Details tab to define the accounting rules for the specified ledger-legal entity-source-category combination.

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Create Intracompany Balancing Rules – Options Tab

Create Intracompany Balancing Rules (continued..)

Use the Options tab to specify the following:

• Summary level for balancing

• Clearing balancing segment value

• Default options if the clearing balancing segment value must be used but none can be determined for the journal

• Default clearing balancing segment value (optional)

Choose the options in Level of Summarization as follows:

• Summary Net – The Balancing API should summarize the debits and credits for each balancing segment value on the journal, determine the overall net debit or net credit for each balancing segment value, balance using the net amounts for each BSV and summarize the balancing line for each balancing segment value.

• Detail – Each line must be individually balanced and line must be generated for each line in the journal.

Choose the options in Clearing Balancing Segment Value as follows:

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• Use for All Journals – A clearing balancing segment value is used for all types of journals. You can enter a clearing balancing segment value at the journal header level (only in General Ledger), else the default balancing segment value is used.

• Use for Many-to-Many Journals Only - A clearing balancing segment value should only be used to clear many-to-many journals. You can enter a clearing balancing segment value at the journal header level (only in General Ledger), else the default balancing segment value is used.

Choose the options in Default Options as follows:

• Default Clearing Balancing Segment Value – Use the default clearing company if no clearing company is specified for the journal. Choosing this option displays the Default Clearing Balancing Segment Value list of values restricted to balancing segment values that are mapped to the legal entity.

• Manually Entered Clearing Balancing Segment Value – Choose if a clearing company is not specified for the journal when an error occurs.

Note: Do not use this with the subledger journals as the clearing company may not be specified in subledgers.

• Using Default Rule – Use this option only when you select the Summary Net or Detail Level option under Level of Summarization.

Note: The Default Rule is the rule defined for All Other-All Other. Balancing lines are generated based on this rule ignoring the rules defined in the Balancing Rules tab. You cannot select this option if you select Use for All Journals in Clearing Balancing Segment Value.

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Creating Intercompany Organizations

Creating Intercompany Organizations

Intercompany allows you to define organizations for your diverse business needs. Define organizations and assign them to the legal entities to process intercompany transactions. The Trading Community Architecture (TCA) data model is used to define intercompany organizations. Each organization created in Intercompany is classified as Intercompany in the TCA model. Once defined, intercompany organizations represent the initiators and recipients in Intercompany. An initiator is an organization that initiates a transaction event with another organization. A recipient is an organization that receives a transaction from the initiator.

Use the Intercompany Organizations page to search for an existing organization or create a new organization. You can either create a new organization or assign a legal entity as an intercompany organization. You can disable intercompany organizations by searching for an organization and updating the Enabled field to No.

Note: When you create a new organization, it must be assigned to a legal entity. When you assign a legal entity as an organization, it must be assigned to itself.

You must associate the organizations with an operating unit if invoices are required for the transactions.

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Setting up Intercompany Security

Setting Up Intercompany Security

Intercompany has a flexible security model because users need to enter transactions for different organizations that are assigned to numerous organizations belonging to different legal entities.

Users can access organizations through a single responsibility.

The responsibilities available to intercompany users are the following:

• Intercompany Super User: Full access to intercompany transaction pages and setup pages.

• Intercompany User: Full access to intercompany transaction pages, but only view access to setup pages.

Use the Security tab to assign a user to an organization. In the security tab, use the Intercompany Organization Assignments page to search for and update an organization assignment, or to create new assignments.

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Define Intercompany Transaction Types

Define Intercompany Transaction Types

You can define transaction types to manage intercompany transactions, which are shared across all the intercompany organizations.

Transaction types help you in setting up the processing rules for all transactions, which must be processed in a systematic way following the same rules across the enterprise. Examples of processing rules that can be set for a transaction type are transactions that require invoice and transactions that must be auto approved or manually approved.

Tip: Create a transaction type only if the seeded transaction type is not sufficient for your operations.

Intercompany Periods can be closed by Transaction Type, which gives user more control over the processing of certain type of intercompany transactions and helps with period end processing.

Use the Transaction Types page to search for and update a transaction type or create a new transaction type.

• Select Required to create invoices. If a legal entity requires an invoice, an invoice is created regardless of the option selected for a transaction type. If a legal entity does not require an invoice, an invoice is created only when Required is selected.

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• Select Required to specify transaction types that require recipients' approval.

Note: Recipients cannot reject transactions when Manual Approval is set to Not Required because transactions submitted by the initiator are processed as approved.

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Controlling Intercompany Periods Statuses

Controlling Intercompany Periods Statuses

The period status functionality provides you with a central point to control the timing of intercompany transaction processing independent of the General Ledger, Receivables and Payables through the Intercompany Periods page.

Intercompany transactions are recorded and accounted for in an open period.

You must define the intercompany calendar before changing Intercompany Periods.

Use Periods tab to control the period status per transaction type. Use the Open/Close Intercompany Period Status pages to search for a period and open or close the period for a transaction. Optionally, you can close a period for all transactions.

When you want to close a period with open transactions, you must sweep the transactions to another period. In the Control Period Statuses page, click the number in Open Transactions to navigate to the Review Open Transactions page. Use the Review Open Transactions page to review and sweep the transactions to another period.

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Defining Intercompany Invoicing Options

Defining Intercompany Invoicing Options

It is a legal requirement, in some countries, to create invoices when intercompany transactions are transferred to Payables and Receivables. To create invoices in Payables and Receivables, customers and suppliers must be set up and associated to the transacting organizations.

The Invoicing Options tab is a central point for setting up appropriate customer and supplier information between legal entities, operating units, and organizations.

The Receivables Assignments and Customer and Supplier Associations subtabs in the Invoicing Options tab are prerequisites for setting up intercompany invoicing options.

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Intercompany Invoicing Options – Receivables Assignments Page

Intercompany Invoicing Options – Receivables Assignments Page

If invoices are required for intercompany transactions, you must associate intercompany organizations with operating units and then assign the intercompany transaction types with Receivables transaction types for each operating unit.

Use the Receivables Assignments page to search for operating units and update or create assignments for operating units.

You can either select the seeded Receivables Transaction Type “Intercompany” or create a Receivables Transaction Type, or choose existing Receivables Transaction Types.

You can either select the seeded Receivables Memo Line “Global Intercompany” or choose an existing Receivables Standard Memo Line. Memo lines are required for non-inventory transactions.

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Intercompany Invoicing Options – Customer and Supplier Associations Page

Intercompany Invoicing Options – Customer and Supplier Associations Page

Use the Customer and Supplier Association tab in the Legal Entity Customers and Suppliers page to create the following associations:

• Customer association: When a legal entity is represented in another legal entity as a customer, the represented legal entity has a customer association.

• Supplier association: When a legal entity is represented in another legal entity as a supplier, the represented legal entity has a supplier association.

Setting up customer supplier associations between legal entities eliminates the need to create duplicate entities for each organization within a legal entity.

You can set up an association at the legal entity, operating unit and organization levels.

It is better to establish an association at the legal entity level because the association assigned at a legal entity level automatically defaults to the organization in it.

You can create an association by:

• Selecting the trading partners

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• Adding a Customer or Supplier Name and a Bill-to or Pay-to Location to the organization party or selecting an existing Customer or Supplier Account and Bill-to or Pay-to Location

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Intercompany Invoicing Options – Trading Partners Page

Intercompany Invoicing Options – Trading Partners Page

A trading partner is an organization in a corporate enterprise wherein transactions are processed.

Use the Trading Partners tab in the Legal Entity Customers and Suppliers page to determine if an association exists between two organizations.

The Initiator/Recipient Organization can be a legal entity, an operating unit, or an organization.

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Specifying Intercompany System Options

Specifying Intercompany System Options

Intercompany system options help you to manage intercompany transactions across the enterprise. Use the Intercompany System Options page to set enterprise level settings to govern the behavior of the Intercompany system and determine how transactions are processed.

By defining these options at the enterprise level, you can minimize disputes, decrease processing time and cut administrative costs. For example, if the companies in an enterprise use the same currency for all transactions, it ensures that the transactions are posted in the same currency, which in turn, simplifies reconciliation.

Changing system options does not affect transactions already in progress. It affects new transactions only.

Intercompany Batch Numbering: In intercompany, all transactions are numbered sequentially. Use this option to manually or automatically number intercompany transactions.

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Specifying Intercompany System Options (continued…)


Intercompany Transaction Currency: Use this option to specify a default currency on transactions. If you do not specify a currency for this option, you can select a currency while entering a transaction. However, if you specify a currency, it defaults in the Create Batch: Header and Transactions page and cannot be changed.

Minimum Transaction Amount: Use this option to set the minimum intercompany transaction amount. The minimum transaction amount affects all intercompany transactions. The minimum transaction amount is validated against the amount in the transaction line. Before setting the minimum transaction amount, you must first set the transaction currency.

Minimum Transaction Amount Currency: This option is required if you enter a minimum transaction amount but do not define the intercompany transaction currency.

Intercompany Conversion Rate Type: Use this option to specify the conversion rate type for converting foreign currency transactions to the equivalent functional currency. You cannot have user defined conversion rates in intercompany transactions.

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Allow Recipients to Reject Transactions: Use this option to specify whether the recipients of intercompany transactions can reject transactions.

Transfer Transactions to General Ledger: You can transfer transactions to General Ledger online (when they reach Approved status) or in batch mode. If batch mode is selected, you must run the concurrent program.

Transferring Transactions to Payables and Receivables: You can transfer transactions to Payables and Receivables online (when they reach Approved status) or in batch mode. If batch mode is selected, you must run the concurrent program.

Intercompany Calendar: Use this option to define an intercompany calendar to control intercompany periods.

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Quiz

Answers: 1 Quiz Specifications

This quiz should be polled after slide 33. The correct answer is you must define the intercompany calendar before changing Intercompany Periods.

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Setting up Approvals Management

Setting up Approvals Management

To derive approvers and users to whom transactions related notifications must be sent, Intercompany uses Oracle Approvals Management System (AME).

There are two default rules seeded in AME that builds the list of approvers and users based on the contacts defined for the intercompany organization. The default rules are:

• Default rule for Initiator Intercompany Transaction: Users who receive FYI notifications.

• Default rule for Recipient Intercompany Transaction: Users who are approvers.

You can use the default rules as is or change the setup by identifying the business rules that are used to derive the approvers list and then implement the business rules using AME user interfaces.

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Setting Up the Default Accounts Rules in Subledger Accounting

Setting Up the Default Accounts Rules in Subledger Accounting

AGIS transactions must be consistent in distributing the expense amounts to the appropriate distribution accounts.

Distribution accounts are account combination that appears in the transaction entry pages when you create an intercompany batch.

The distributed accounts must be defined for each ledger and are generated as defined in the Subledger Accounting Transaction Account Builder (SLA TAB).

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Setting Up the Default Accounts Rules in Subledger Accounting (continued…)

Setting Up the Default Accounts Rules in Subledger Accounting (continued…)

The following must be setup in the SLA TAB to generate the default distribution account combination:

• Transaction Account Type: This classifies the distribution accounts that are generated for intercompany transactions. The following are the seeded intercompany transaction account types:

• AGIS Initiator Intercompany Distribution Account: For defaulting initiator distribution accounts

• AGIS Recipient Distribution Account: For defaulting recipient distribution accounts

• Account Derivation Rules: Allows you to derive accounting flexfield combinations or individual transactions, based on source, constants, mapping sets, and conditions.

• Transaction Account Definition: Allows you to assign the account derivation rules to the transaction account types. For intercompany transactions the Transaction Account Definition (TAD) is assigned to a ledger.

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You cannot create a new transaction account type. You can only create a new Transaction Account Definition in AGIS.

Before creating a new Transaction Account Definition, ensure that the following are defined:

• Legal entities and primary ledger

• Trading partners

• Intercompany accounts

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Quiz


This quiz should be polled after slide 37. The correct answer is there are two default rules seeded in AME that build the list of approvers and users based on the contacts defined for the intercompany organization. The default rules are: •Default rule for Initiator Intercompany Transaction: Users who receive FYI notifications. •Default rule for Recipient Intercompany Transaction: Users who are approvers.

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Intercompany transactions

Intercompany transactions can be entered through web-based user interface, imported from Excel using WebADI, open interface or public API.

In Oracle Advanced Global Intercompany System the initiator creates an outbound batch with one or more recipient lines, enters the initiator accounting information and submits the batch. Each recipient receives the inbound transaction, enters the recipient accounting information and approves transaction. Accounting is also created automatically in the outbound or inbound batch in the transaction per the rules that are defined in Subledger Accounting’s Transaction Account Builder.

The recipient approves or rejects the transaction in the Oracle Advanced Global Intercompany System user interface or from the workflow notification or through e-mail. Rules are also set to approve the transaction automatically. The transaction status is updated for the initiator and recipient when the transaction is approved or rejected.

When the transaction is approved, Oracle Advanced Global Intercompany System determines whether an invoice is required for the transaction or not. If the legal rules and transaction type options determine an invoice is required, receivables and payables invoices are created else, the transaction is transferred to initiator’s and recipient’s general ledger.

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Intercompany Home Page

Intercompany Home Page

The Intercompany Home displays the most recent transactions that require your intervention. This page displays a summary of your open notifications, and a list of five most recently received transactions.

On the Home page, you can search transactions by Inbound or Outbound Batch Number, or navigate to the Create Batch page to create an intercompany transaction.

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Intercompany Transactions Page

Intercompany Transactions Page

Use the Intercompany Transactions page to receive, respond to, and initiate intercompany transactions for multiple recipients. The transactions that you receive are inbound transactions and the transactions that you initiate are outbound transactions.

The Intercompany Transactions pages enables you to enter transactions addressed to multiple recipients thereby speeding up data entry and simplifying management of intercompany allocations.

There are two distinct flows for the Intercompany transaction entry and processing: an outbound transaction flow, and an inbound transaction flow. These flows are implemented in the Transactions pages as tabs: Outbound and Inbound. The Outbound tab provides all the functions an initiator of an intercompany transaction can perform. The inbound tab provides all the functions a recipient of the transaction can perform.

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Intercompany Transactions – Outbound

Intercompany Transactions – Outbound

Use the Outbound page to create intercompany transactions in batch mode and send them to the recipients for approval.

You can also search, personalize views, create, and update batches. You can personalize and create new views. You can create a batch for organizations you can access and include any number of recipients in the batch. Creating a batch is a two-step process:

• Enter the batch header and transactions.

• Enter the batch expense or revenue distributions.

The batch number is automatically generated if automatic numbering option is selected in the System Option tab of the Setup tab else, enter a unique batch number. The batch status reads New if a new batch is created.

Create an intercompany batch for an initiator by selecting an organization from the list of values. The list of values depend on the user security. When you select an organization as initiator, the organization's legal entity is automatically displayed.

If there is an intercompany transaction currency defined in the System Options subtab of the Setup tab, then the batch currency is displayed else, the currency defined in the primary ledger of the initiator's legal entity is displayed. However, you can override the currency for the batch.

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The distribution lines are entered depending on the option selected. You can manually enter the distribution amounts or automatically generate the distributions amounts.

If you selected the Automatic distribution mode while entering the batch header and transactions, then the distributions that you enter are prorated later across all transactions. When submitting the batch, these distributions are prorated based on the number of recipient transactions.

If Manual distribution mode is selected, then the initiator can enter the distributions manually using the Initiator Accounting tab. Optionally, the initiator can also enter the recipient accounting using the Recipient Accounting tab. The recipient accounting need not balance since the recipients may make adjustments.

User can attach documents at the batch level and for each recipient transactions. When the batch is submitted, the documents are transferred to individual recipients. You can select a descriptive flexfield context to enter additional Information. Based on the context selected, the descriptive flexfield segments are added as columns in the transactions table to enter additional information for each transaction. Navigate to the next page to enter the initiator accounting by clicking Continue.

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Intercompany Transactions – Outbound (continued…)

Intercompany Transactions – Outbound (continued…)

Use the Initiator Accounting tab to enter expense accounts or revenue accounts that are debited or credited in this intercompany transaction.

You can enter the distribution accounts manually in the Outbound Distribution page if these rules are not set up in Subledger Accounting else, the accounting lines are automatically created if the accounting rules are defined in Subledger Accounting.

The Transaction Account Builder in Subledger Accounting is called to default initiator and recipient distribution accounts for each transaction when you navigate to the Create Batch: Distributions page. Depending on the Subledger Accounting rules, you update the segments of the accounting flexfield. You cannot update segments that are derived automatically such as the balancing segment and natural account segments.

The amount entered for the recipients in the Create Batch: Header and Transactions page is charged to intercompany accounts.

The initiator may optionally enter recipient accounting, subject to accounting rules defined in Subledger Accounting. Even though the initiator enters the accounting lines for the recipient, the recipient can later edit, delete, or add accounting lines before approving the transaction.

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The Recipient Accounting tab is only be visible if the initiator also has access for that recipient organization and to enter the recipient distributions.

Click Submit to submit the batch to the recipient for approval. The initiator receivables account and the recipient payables account are generated automatically after the recipient approves the batch.

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Intercompany Transactions – Inbound

Intercompany Transactions – Inbound

Use the Inbound tab to view the initiator and recipient accounting, update recipient accounting, and view or add attachments.

To approve the transaction, ensure that the accounting for inbound transaction is complete. A confirmation message is displayed when the approval is successful, else an error message appears explaining why the transaction failed.

Whether the recipient accounting is complete or not, you can reject the transaction by clicking Reject. The transaction cannot be rejected if the Allow Recipient to Reject Transactions? option is set to No in the Intercompany System Options page of the Intercompany Setup tab .

Transaction are approved or rejected from the notification page. Reassign and Request information buttons are the standard workflow buttons. An e-mail is also sent to the initiator and the initiator can also approve or reject transaction through e-mail.

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Intercompany Transactions – Workflow Notifications

Intercompany Transactions – Workflow Notifications

The initiator and recipient workflow automate transaction processing by performing validations and notifying the status of the transactions at intervals to the initiator and the recipient.

When transactions do not pass the validations in the initiator and recipient workflow, the application sends notifications to the appropriate users. You respond to the notification in the Notification Details page.

A user must be set up as a contact of the Initiator or Recipient organization to receive notifications.

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Intercompany Transactions – Transfer Transactions

Intercompany Transactions – Transfer Transactions

Whether an intercompany transaction is transferred to the subledger or general ledger depends on the invoicing requirements, which is defined when setting up in intercompany transaction types.

You set the transfer options to Online or Batch in the System Options page of the Intercompany Setup tab. The workflow process transfers the intercompany transactions depending on the options set in the System Options page of the Intercompany Setup tab. If you select Online mode, then no intervention is necessary, the initiator and recipient workflow transfers transactions on approval. If you select Batch mode, then you must run the concurrent request to transfer the transactions or schedule the concurrent request.

The transactions status changes after the transactions are transferred to the general ledger or subledger.

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Quiz


This quiz should be polled after slide 46. The correct answer is Use the Initiator Accounting tab to enter expense accounts or revenue accounts that are debited or credited in this intercompany transaction.

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Transferring Transactions to General Ledger

Intercompany Transactions – Transfer Transactions to General Ledger

Intercompany transactions that do not need invoices are transferred directly to General Ledger once approved.

If the transfer mode is Online mode, then no intervention is necessary.

If the transfer mode is Batch mode, then use the Transfer Intercompany Transactions To General Ledger program in the Schedule Request page to transfer or schedule and transfer the transactions to General Ledger in batch mode. The program transfers all transactions irrespective of the intercompany organizations assigned to the user who schedules the request.

On successful transfer, the transaction status changes to Transferred to Initiator GL or Transferred to Recipient GL respectively for the initiator and recipient workflows.

The Batch and Transaction status is set to Complete once the transactions are transferred to both initiator and recipient ledgers. Intercompany only populates an interface table in General Ledger for intercompany transactions.

After Intercompany transfers the transactions to the GL Interface tables, you must run the GL Journal Import concurrent program to import these journals into General Ledger for both the Online and Batch mode. The actual posting of the transactions into the appropriate General

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Ledger accounting tables is performed separately by the GL Posting process after the journals are imported into General Ledger.

After transferring the transactions, Intercompany generates a report displaying the transactions that were transferred to General Ledger and their status.

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Intercompany Transactions – Transfer Transactions to Subledgers (Online Mode)

Intercompany Transactions – Transfer Transactions to Subledgers (Online Mode)

The initiator workflow transfers the intercompany transactions to Receivables to create invoices as required by legal or business requirements. After creating the invoices, Receivables updates the intercompany transactions with the invoice numbers and passes the number to the recipient workflow, which updates and transfers the transaction to Payables.

To transfer transactions online:

1. Approve the transaction.

The initiator workflow transfers the intercompany transaction details to the Receivables Interface tables and the transaction status changes to Transferred to Receivables.

2. Run the Receivables AutoInvoice Program.

On successful completion of the Receivables AutoInvoice Program, the invoice number is updated on the Intercompany transaction and the recipient workflow transfers the intercompany transaction details to Payables Interface tables and the transaction status changes to Complete.

4. Run the Payables Open Interface Program.

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After transferring the transactions, Intercompany generates a report displaying the transactions that were transferred to Receivables and Payables and their status.

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Intercompany Transactions – Transfer Transactions to Subledgers (Batch Mode)

Intercompany Transactions – Transfer Transactions to Subledgers (Batch Mode)

To transfer transactions in a batch:

1. Approve the transaction.

2. Run the Transfer Intercompany Transactions to Receivables.

The transaction status changes to Transferred to Receivables

3. Run the Receivables AutoInvoice Program.

On successful completion of the Receivables AutoInvoice Program, the invoice number is updated on the intercompany transaction.

4. Run the Transfer Intercompany Transactions to Payables

The transaction status changes to Complete.

5. Run the Payables Open Interface Program.

Use the Transfer Intercompany Transactions To Receivables and Transfer Intercompany Transactions To Payables programs to transfer the transactions. The program transfers all transactions irrespective of the intercompany organizations assigned to the user who schedules

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the request. The value Yes in the Submit AR Auto Invoice and the Submit Payables Import automatically runs the respective import processes.

After transferring the transactions, the application generates a report displaying the transactions that were transferred to Receivables and Payables and their status.

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Intercompany Transactions – Reverse Transactions

Intercompany Transactions – Reverse Transactions

The user can reverse a batch only when the status is Complete. When a batch is reversed, a new batch is created, and the batch is cross-referenced using a number in the batch header. This number defaults to all its transactions. You can reverse a batch only if you can access the initiator organization.

When a batch is reversed, all the transactions in that batch are reversed.

In the Outbound transactions page, select Reverse to reverse a batch. In the Reverse Batch Page, you can select the following reversal methods which are Switch Debit/Credit or Change Sign.

In the Switch Debit/Credit method, the debit amounts are credited and vice versa, when reversed. In the Change Sign method, the positive debit amounts are displayed as negative debit amounts and positive credit amounts are displayed as negative credit amounts in the reversal transaction.

If automatic batch numbering is selected, then Intercompany assigns a new batch number for the reversal batch else, you must enter a unique batch number. In the reversal batch, the original batch information is displayed in the Reversal Reference field.

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The new batch is submitted automatically to the recipients after it is created and the status of the transaction changes to Submitted.

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Importing Intercompany Transactions Using Open Interface

Importing Intercompany Transactions Using Open Interface

You can import intercompany transactions from third party software or Oracle SQL Loaders into Intercompany. Before you import, ensure the data format in the external source and the Intercompany Interface tables are the same. The process is as follows:

1. Upload transactions into the Intercompany Interface tables.

2. Run the Intercompany Import Program.

Run the Intercompany Import Program in the Schedule Requests page to import the Intercompany transactions from Interface tables to Intercompany tables. Before importing, the transactions are validated by the Transaction API. On successful completion of the import program, an import execution report is printed which lists the status of the transactions being imported.

While uploading the transactions to the Intercompany Interface tables, ensure that:

• Columns specified Not Null contain data.

• Columns specified Required must contain data when importing the transactions to AGIS.

• Columns specified Conditionally Required must contain a value if a dependent column has values.

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• Columns specified Optional need not contain data. However, the transactions are rejected if the data fails the validation.

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Importing Intercompany Transactions Using WebADI

Importing Intercompany Transactions Using WebADI

WebADI enables you to enter transactions in a spreadsheet application and upload them into Intercompany. To run WebADI, you only need a browser and spreadsheet application such as Excel in your desktop. WebADI allows you to:

• Enter transactions in a transaction entry worksheet in a spreadsheet that is similar to the transaction entry page in Intercompany.

• Define a spreadsheet specific to intercompany transactions and use powerful spreadsheet features.

• Enter intercompany journal lines by copying and pasting journal lines, then performing incremental modifications in the spreadsheet worksheet.

• Validate accounts by enforcing security and cross validation rules

• Use the Upload Journal and List of Values items in the WebADI menu in the spreadsheet.

To import transactions, you must first create the spreadsheet document in Oracle WebADI: Create Document page and then upload the transactions. The spreadsheet document created using WebADI has predefined formats for entering intercompany transactions.

To create a spreadsheet document:

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1. Navigate to the WebADI page.

2. Select Create Document from the Navigation menu.

3. Specify the WebADI settings by selecting the Viewer. The Viewer is the spreadsheet application you must choose to create the document.

4. Select the Intercompany - Single Batch Entry Integrator. WebADI Integrator is the application that integrates with various Oracle Applications.

5. Select the Intercompany - Single Batch Entry Layout.

Note: You can create new layouts or modify the seeded layouts available in Intercompany.

6. Review the selections and click Create Document.

On clicking Create Document, the spreadsheet application opens with the defined spreadsheet where you can enter transactions.

After entering the transactions, you must upload the transactions to Intercompany.

To upload the transactions:

1. Click Upload Journal on the WebADI menu and specify the upload parameters. The transactions are uploaded into the Intercompany Interface tables.

2. Submit the Intercompany Open Interface program to import the transactions into Intercompany.

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Intercompany Reporting

Intercompany Reporting

Advanced Global Intercompany System provides extensive reports that help you in reviewing and reconciling transactions reports. These reports are built using Oracle XML Publisher technology. Oracle XML Publisher enables you to easily change the layout and publishing format of the reports thus allowing you to customize the reports to suit your requirements. The reports available in Intercompany are:

• Oracle Intercompany Transaction Summary Report

• Oracle Intercompany Account Details Report

• Intercompany Reconciliation Report

Navigate to the Schedule Requests page to run the reports. For each parameter, the list of values displays the options associated with the user running the report. If no option is selected, then the report is generated for all the options in the list of values.

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Intercompany Transaction Summary Report

Intercompany Transaction Summary Report

The Intercompany Transaction Summary report shows detailed information about intercompany transactions created in Oracle Advanced Global Intercompany System. Navigate to Schedule Requests page and select Oracle Intercompany Transaction Summary Report from the Program Name list of values.

The report gives a clear overview of intercompany transactions and their statuses. This simplifies day-to-day tasks and speeds up period close activities. For example, run this report to find all unapproved transactions that need to be processed before the period end. The report also provides supporting documentation for intercompany reconciliation and helps keep intercompany in balance by uncovering any potential discrepancies. For instance, you can find recipients who do not approve their transactions on time, and resolve the issue before it causes reconciliation differences.

You run the report to display all transactions initiated and received by organizations that you can access. Your can choose to run the report only for outbound batches, inbound transactions, or both. You can also run this report by transaction status to find out what transactions are waiting for approval, or how many transactions remain to be processed before the end of the period. You can choose to include parameters and columns for this report. For example, in the Outbound Transactions section, you can add the columns such as Initiator Receivables

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Accounts, Description, Invoice Number, etc. For inbound transactions, you can add the columns such as Recipient Legal Entity, Transaction Date, Recipient Payables Accounts, Description, Approver, Invoice Number, etc.

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Intercompany Account Details Report

Intercompany Account Details Report

The Intercompany Account Detail report provides a detailed listing of all accounting lines for intercompany batches, grouped by transaction. Navigate to Schedule Requests page and select Oracle Intercompany Account Details Report from the Program Name list of values. This report displays how intercompany transactions are accounted, thereby help you to ensure that intercompany transactions are accounted to correct accounts. This also helps you to identify out of balance conditions and supports audits that verify accounting of intercompany transactions.

The report is divided into two sections: one section for the outbound batches, and the second section for inbound transactions. The outbound section shows transactions initiated by the organizations to which the user can access, the inbound section shows transactions received by these organizations. You can choose to include inbound, outbound, or both sections in the report. You can also run the report for the organizations that you can access.

You select the parameters to run the report by ranges of initiator and recipient accounts to see the transactions that make up their balances. You can also choose the columns that must be displayed in the report, including descriptive flexfield columns. Some examples of columns that can be used included in the Outbound Transactions section are: Batch Status, Transaction

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Type, and Description. Additional columns can be also included in the Inbound Transactions section, some examples are Description, and Invoice Number.

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Intercompany Reconciliation Report

Intercompany Reconciliation Report

Reconciliation is the process of ensuring an intercompany transaction is accounted in Receivables for the initiator legal entity and Payables for the recipient legal entity. The Intercompany reconciliation report enables you to check any discrepancies or missing transactions. Navigate to Schedule Requests page and select Intercompany Reconciliation Data Extract Program from the Program Name list of values.

Note: Setting up unique intercompany accounts for each relationship between a transacting and trading legal entity simplifies the reconciliation.

To run the reconciliation report:

1. Submit the concurrent request Intercompany Reconciliation Data Extract Program. This program gathers all the transactional data.

2. Navigate to the Reconciliation tab and select the ID of the concurrent request that was run in step 1.

3. Choose the template to display the results.

4. Drill down using the links provided in the report for detailed information.

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Summary

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Appendix: Oracle Advanced Global Intercompany...

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Transcript of Appendix: Oracle Advanced Global Intercompany...