Designing a Chart of Accounts for a Global Company going to Oracle E-Business Suite Release 12

Helene Abrams CEO

eprentise habrams@eprentise.com

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Learning Objectives After completion of this program you will be able to:

Objective 1: List the five fundamental design criteria for creating a forward-thinking chart of accounts.

Objective 2: Explain how to design a chart of accounts to accommodate future growth.

Objective 3: Describe how a good design enables you to reduce costs, streamline reporting, and provide global visibility.

Objective 4: Identify how to leverage Release 12 features like subledger accounting and ledger sets.

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Agenda Introduction

Chart of accounts (COA) basics

Designing a good COA

5 fundamental criteria for a good COA design Accommodating future growth Reduced costs, streamlined reporting, and global visibility

Leveraging Release 12 features

Global visibility, local compliance

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eprentise Can… …So Our Customers Can: Consolidate Multiple EBS Instances Change Underlying Structures and

Configurations Chart of Accounts, Other Flexfields Inventory Organizations Operating Groups, Legal Entities,

Ledgers Calendars Costing Methods

Resolve Duplicates, Change Sequences, IDs

Separate Data

: Transformation Software for E-Business Suite

Reduce Operating Costs and Increase Efficiencies Shared Services Data Centers

Adapt to Change Align with New Business Initiatives Mergers, Acquisitions, Divestitures Pattern-Based Strategies

Make ERP an Adaptive Technology

Avoid a Reimplementation Reduce Complexity and Control Risk Improve Business Continuity, Service

Quality and Compliance Establish Data Quality Standards and a

Single Source of Truth

Company Overview: Established 2006 l Helene Abrams, CEO

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Example Structure Segments, Values, Code Combinations

Company Business Unit

Cost Center

Region Account

01 100 150 East 1111 02 100 210 West 2222

Values

01.100.150.East.1111 Code Combination

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Chart of Accounts Basics: The Flexfield

The EBS accounting flexfield accommodates up to 30 segments for categorizing transactions

Structurally analogous to columns in a table

Have defined lengths for the values they contain

Answering the questions Who, What, Where, Why, and possibly How helps identify segments that will give your accounting flexfield the ability to classify each transaction

Common segment examples: Cost Center, Department, Fund, Location, Product Line

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Chart of Accounts Basics: Segments

Flexfields in the Form

Accounting Key Flexfield

Code Combinations

Value Descriptions

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Chart of Accounts Basics: Hierarchy

The accounting flexfield incorporates parent-child relationships among values

Roll-up Groups

A collection of parent values for a given segment

Used to create summary accounts

The most detail is at the lowest level

Summary Accounts

Hierarchical rollup of children and/or parents

Faster reporting

Account balance inquiries

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5 Fundamental Criteria for a Good COA 1. There is only one type of information in each segment.

2. Information in the chart of accounts is not repeated from other modules.

3. There is enough room to expand within each segment.

4. Summary accounts and rollup groups fall naturally within ranges.

5. You are able to report on critical business components with standard reports without resorting to spreadsheets. FSGs and other reports should be easy to create.

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Criteria 1: One Type of Information

Information should not overlap across segments.

If each segment contains one (and only one) type of information, you:

Reduce the maintenance of keeping information accurate in two places

Reduce the possibility of introducing errors into your accounting

Case: If your cost center has the same type of information as a business unit segment, there is no need to implement both.

Case: You shouldn’t have a Department segment value such as HR – Sacramento, CA if there is also a Location segment in the chart.

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Criteria 2: Information Not Repeated

The accounting flexfield should not repeat information that exists in other modules of EBS.

Reduced maintenance and errors (similar to Criteria 1)

Case: If you are implementing Oracle Projects modules, there is no need to have a project segment in your accounting flexfield.

Case: If you are implementing Receivables, then there is no need for a customer segment.

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Criteria 3: Enough Room to Expand Define your segment lengths to be long enough to accommodate future values added.

Note: Although it likely won’t be an issue, the maximum number of characters for a code combination string is 240, so there are upper limits on how long you can define your segments.

When designing values be sure to allow enough room for future growth within each rollup group

Increment by at least 5 within each group Increment by 10 if the group is likely to be a high growth area.

Example: If you have a location segment, allow enough room to add ten additional values between each of your lowest levels. Your Location segment hierarchy might look like this:

10000 US 11000 Midwest

11100 Detroit Metropolitan Area 11110 Ann Arbor 11120 Canton 11130 Plymouth

20000 Canada

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Criteria 4: Use Logical Ranges Ranging your values logically promotes streamlined reporting,

security, and maintenance.

Include a whole range of values in your rule (cross validation, security) and FSG report definitions

Exclude specific values if needed

Minimize the number of cross validation rules needed (under 50 using logical ranges compared to hundreds or thousands when not using logical ranges)

Use numbers only randomly.

Avoid using intelligent numbers

For items with embedded intelligent numbers like Products, introduce non-intelligent numbers as well

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CVR Implications on COA Design Out of Range — Cross-validation rules can get messy if your chart of

accounts values are not organized in logical ranges.

Rule elements are much more complex due to the inability to rely on value ranges for exclusion

Example Goal: Prevent revenue account values between 30000 and 40000 from being used with any department values other than the following 5 values (we’ll begin with the familiar global Include element):

3001

5057

6124

8537

9905

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Example Goal: Prevent revenue account values between 30000 and 40000 from being used with any department values other than the following 5 values (we’ll begin with the familiar global Include element):

3001 5057 6124 8537 9905

CVR Implications on COA Design

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Example Goal: Prevent revenue account values between 30000 and 40000 from being used with any department values other than the following 5 values (we’ll begin with the familiar global Include element):

3001 5057 6124 8537 9905

CVR Implications on COA Design Cont.

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CVR Implications on COA Design

Criteria 5: No Reliance on Spreadsheets Be able to get the information you need from built-in EBS reports.

Real-time value No errors introduced by use of spreadsheets Streamlined workflow, lower resource requirements, and reduced

maintenance

No need to integrate with 3rd party reporting applications

Capitalize on a master row set for FSG reports.

Allows you to generate different reports without having to rewrite each report

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A Global Chart of Accounts Primary ledger is single source of truth for all accounting,

reconciliation, and analytical reporting

Consistency but flexibility to accommodate different requirements

External reporting without relying on a separate financial consolidation system

Drill down to individual transactions in the subledgers without translation

Transparency (3 - 5 years) to meet IFRS standards and international auditing requirements

Common metrics and reporting structures with common interpretation

Enterprise Visibility with Subledger Accounting and Secondary Ledgers

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A Global Chart of Accounts – Reduced Costs Reduce complexity of configurations

Cross validation rules Security rules Reporting within ranges

No conversions required for data warehouse queries, drill-down to subledgers, ad-hoc reporting

Facilitate movement to shared service centers

Single COA to manage Standardized training

Enterprise governance and control of new combinations

Reduce redundancies

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A Global Chart of Accounts – Reduced Complexity

Taiwan

Malaysia

China

India

UK

Russia

DolEx US

DloEx Mexico

DolEx Guatemala

Eurofil

Muzo

Hong Kong

Maldives

Singapore

Sri Lanka

Philippines

Brunei

US

Canada

Macau

USDEURGBPAUD

PHPUSD

BND

TWDUSD

MYR

CNYUSD

INRUSD

GBPEURUSDSGDCADAUDHKDCHFDKKJPY

MOP

HKD

USD

SGDUSD

LKR

NOKNZDSEK

RUB

USD

MXN

USD

CADUSD

GTQ

EUR

CZK

AsiaPac LKR

AsiaPac AUD

AsiaPac EUR

AsiaPac GBP

AsiaPac BND

AsiaPac PHP

AsiaPac MYR

AsiaPac INR

AsiaPac TWD

AsiaPac CNY

Europe GBP

Europe EUR

Europe USD

Europe SGD

Europe CAD

Europe AUD

Europe HKD

Europe CHF

Europe DKK

Europe JPY

Europe NOK

Europe NZD

Europe SEK

GPN RUS

AsiaPac MOP

AsiaPac HKD

AsiaPac SGD

DOLEX US

DOLEX MX

DOLEX GT

GPN EUR

GPN MZO

NAm USD

AsiaPac USD

NAm CAD

021

023

911912913

025

401

201

301

024

027

028

029

030

031

951

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106105103107

022

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001

005002

Hong Kong

Singapore

TaiwanChinaIndia

Sri Lanka

Sri Lanka

Sri Lanka

Sri Lanka

Brunei

Philippines

Malaysia

India

Taiwan

China

UK

UK

UK

UK

UK

UK

UK

UK

UK

Canada

Sri LankaMaldives

SingaporePhilippines

Macau

UK

UK

UK

UK

US

CanadaComerica

GPS LKR

GPS AUD

GPS EUR

GPS GBP

GPS BND

GPS MYR

GPS INR

GPS TWD

GPS CNY

GPS CHF

GPS DKK

GPS JPY

GPS NOK

GPS NZD

GPS SEK

GPS MOP

GPS HKD

GPS SGD

GPS US

GPS CAD

021

023

911912913

025

401

201

301

024

027

028

029

030

031

951

952

953

954

955

956

957

958

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022

960

961

962

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001

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021

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025

401

201

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027

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022

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Location CCY Op Unit BalSegLocation GPS Book BalSegBalSeg

GPS US

201301401

Bk Seg

GPN SRL

GPN BRU

GPN PHI

GPN MLS

GPN IND

GPN TWN

GPN CHN

UK SOB

GPN MAC

GPN HK

GPN SNG

US SOB

CAN SOB

525

575

585

505

570

804

802

803

801

915

565

545

851

205

021

023

911

912

913

025

024

027

028

029

030

031

951952

953

954

955

956

957958959

006

106

105

103

107

022

960961962963

001

005002

GPN Book BalSegBalSeg

201301401

US SOB

205

565

570

801

802

803

525

575

585

505

804

915

545

851

DLX

RUS

EUR

MZO

Seg Bk

Streamline the month- and year-end closing processes

No more messy financial consolidations using spreadsheets

R12 eliminates the need for using and maintaining multiple charts of accounts

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R12 Features – Ledger Sets Open/Close periods Create journals Allocations across ledgers Recurring journals for all ledgers Elimination sets for all ledgers Translate and revalue balances

View information without changing responsibilities

View journals and account balances across ledgers

Submit standard reports Create financial statements that include

data for multiple ledgers

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Global Visibility – Local Compliance with R12 Subledger Accounting, Accounting Methods Builder Replaces Global Accounting Engine

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Global COA Design Recommendations Add an intercompany segment – take advantage of AGIS Add a segment to accommodate local requirements

Ranges, rollups defined for each country to use Local bank accounts Statutory reporting

Location segment (optional) but helps with security, cross validation

Implement other modules for detailed tracking at a local level (through an OU) Project Accounting Collections

Implement Multiple Reporting Currencies, secondary ledgers to report in different currencies

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How Do You Leverage AGIS? Advanced Global Intercompany System

Intercompany Balancing

Intercompany Invoicing

Intercompany Reconciliation/Eliminations

Manual Intercompany Transactions

Netting Process

Common Chart of Accounts

Intercompany Segment

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Leveraging the Chart of Accounts for Global Operations

Two ways to handle local/regulatory requirements

Separate Segment

Each country can use a range of values for their statutory requirements

Secondary Ledger

Analysis Segment Ranges Values Descriptions

000000-001000 France 000321 Crédit Agricole Bank Account

000544 Droits D'enregistrement Tax

001001-002000 Italy 001321 Intesa Sanpaolo Bank Account

002001-003000 UK 002321 Barclays Bank Account

002584 VAT Tax

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Use the transition to R12 to redesign your COA if it is not optimized or to adopt a single COA if your organization is currently using multiple charts.

As you are redesigning your COA, focus on the 5 fundamental criteria. One type of information per segment

No repeated information from other EBS modules

Leave room for future expansion and flexibility

Use logical ranges

Make sure you can get the reporting you need straight from the flexfield structure

Design your chart with Ledger Sets, Secondary Ledgers, Subledger Accounting, AGIS in mind.

Conclusions

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Transformation Software Solutions Two Product Lines

FlexField®

Change chart of accounts in EBS

Built-in Rules

Changes data in all subledgers

Retain all historical transactions

Quick, easy project, low price point

eprentise®

Software that remodels any setup data

Reorganizes configuration, master, and transaction data

Maintains all history resulting in a single source of truth

Based on a source that is transformed into a target

Enterprise-level scope project

Metadata Analysis and intelligent knowledge repository

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FlexField Software – Process Flow

• Run report set to reconcile

• Pair accounting flexfields • Map either segments and values or code combinations • Create mapping file from software • Add new values, combinations in Excel® • Load csv file into FlexField Software • Resolve Exceptions • Execute Changes

• Transform CCIDs • Apply changes to history, subledgers • Align balances

• Print audit report

• Create new COA in E-Business Suite (Structure, Qualifiers) • Install FlexField software (client/server) • Run current baseline report set

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Mapping the Accounting Flexfield Either Segments and Values or Code Combinations

Segments Company Company New

Segment Current Segment

Cost Center Cost Center New Segments

Current Segment + Location

Product Line Line of Business New Segment

Current Segments + Cost Center

1:1

1:M*

M:1 Values or Code Combinations

Company 01

Company 100

New Value

Current Value

Cost Centers 01 02 03

Activity 101

New Value

Current Values

1:1

M:1

New Mapping Must be Derived from Old Segment Values

*Segment Level Only

CO-CC-ACT 01-10-1000 01-20-1500

CO-CC-ACCT-LOC 100-300-16000-200

New Value

Current Value

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Select the Source and Target Flexfield

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FlexField Software to Change your EBS Chart of Accounts

Map Segments and Values or Code Combinations

Segment Mapping

1 1 Mapping

M 1 Mapping

1 M Mapping

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FlexField Software to Change your EBS Chart of Accounts

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Changes CCID everywhere • All setups • All subledgers • All history • Looks as though the

new chart of accounts was part of the original implementation

• Full audit trail, drill down, roll up

• Built in exception reporting

Create Mapping Files 1:M – Mapping of Company to (Company and Business Unit)

M:1 – Mapping of (Region, Account, Product) to Account

A B C D E F

CO Value CO Description

New CO Value

New CO Description New BU Value New BU Description

1 01 North America Company 01 New Company 101 New Business Unit 2 02 Overseas Distribution 02 New Distribution Company 102 Overseas Operations BU 3 03 French Company 03 French Manufacturing Company 103 Project Mfg BU 4 27 Consulting Services Company 04 New Vision Consulting Ltd 104 Vision Consulting BU

5 95 Operation Elimination 05 Intercompany 195 Operations Elimination BU

6 99 Corporation (Vision Consolidation) 99 New Vision Consolidation 199 Vision Consolidation BU

Current Company Segment

Values and Descriptions

New Company and Business Unit

Segment Values and

Descriptions

Current Region,

Account, and Product

Segment Values and

Descriptions

A B C D E F G H

Reg Value

Reg Description

Account Value Account Description Product

Value Product Description

New Account Value

New Account Description

1 01 Southwest 1400 SALES COMMISSIONS 001 computer 140000 SALES COMMISSIONS GENERAL

2 01 Southwest 1405 SALES COMMISSIONS - OTHER 002 hard drive 140500 SALES COMMISSIONS HARD DRIVE

3 02 Northeast 1410 SALES COMMISSIONS - RESERVE 001 computer 140000 SALES COMMISSION GENERAL

4 02 Northeast 1415 SALES COMMISSIONS SERVICES - SUPPORT 003 Services 146000 SALES COMMISSION -

SERVICES

5 02 Northeast 1415 SALES COMMISSIONS SERVICES - WARRANTY 003 Services 146000 SALES COMMISSION -

SERVICES

6 03 Southeast 1410 SALES COMMISSIONS - RESERVE 002 hard drive 141000 SALES COMMISSIONS - RESERVE

New Account Segment

Values and Descriptions

Exceptions: • Account Type Mismatch • Multiple Descriptions

• Splitting Balancing Segment • Length of Value

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Create Mapping File from FlexField

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Load Mapping Files into FlexField • Overwrites existing segment value mappings • Repeat Loading until you are satisfied with mappings and have no exceptions

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Apply Changes to Database

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Align Accounts

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Merging Balances Balance Tables (GL, AX, XLA etc.)

Unique constraint on code combination ID

Forces one balance per code combination

No other tables are affected

Old CCID

Entity Cost Center

Account Interco Future Use

Balance

7754 02001 00965 150170 0000 0 $100,000.59

7766 02001 00965 150170 0000 0 $10,250.33

7783 02001 00965 150170 0000 0 ($7,432.84) 02001 00965 150170 0000 0 $102,818.08

Many old CCIDs mapped to the same new code combination

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Export Current and New Code Combinations

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Post-Change Steps (Not covered by Software) Hard-Coded (RICE Activities) Interfaces to third-party systems Data Warehouse Reports Workflows OFA – Oracle Financial Analyzer

Uses Ranges Approval Assignments Budget Assignments

New EBS Features New Modules/Functionality Some Configuration – New CoA, Ledgers Upgrade to R12

Definition of Target Testing and Cutover Strategy & Execution Rules (Use Business Logic) Cross Validation Consolidation Account Derivation Rules Accounting Generator Roll-up Groups Security Rules Summary Templates Mass Allocations Costing and Revenue Recognition

Rules

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Questions?

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Thank You!

- One World, One System, A Single Source of Truth -

Helene Abrams CEO

www.eprentise.com habrams@eprentise.com