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Secondary Ledger implementation in Oracle R12

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This is a case study of an actual Cash Basis Secondary Ledger implementation. Oracle has introduced Secondary Ledgers functionality which allow a different accounting method such as Cash Basis and IFRS. This session
will take an in-depth look into the Secondary Ledger functionality in Oracle R12. The challenges presented by
legacy systems, the unique design of the SubLedger Accounting rules to meet those challenges and the
lessons learned will be discussed in detail.

Published in: Software
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Secondary Ledger implementation in Oracle R12

  1. 1. Tales from the Battle Front: How a Secondary Ledger was implemented against all odds Prithis Das – Dynamique Solutions LLC NCOAUG | March 12, 2015
  2. 2. Presenter’s background - Prithis Das • In the Oracle EBS arena since 1997 • Over 22 years of business process improvement experience • Consulting experience with Big 5 and other major organizations • Oracle Certified Specialist in General Ledger • Chartered Accountant and Management Accountant from India • Authored and presented papers on Subledger Accounting, Web ADI, Reports Manager at several OAUG and local events • Currently on a major R12 enhancement assignment • Contact: • Cell: +1.630.3649457 • Email: prithis.das@dynamique.us • Linked In: www.linkedin.com/in/prithisdas/ • Web: www.dynamique.us Dynamique Solutions LLC
  3. 3. AGENDA
  4. 4. Agenda • Case Study background • Business Requirements for a Secondary (Cash Basis) Ledger • Solution Overview for Secondary Ledger • Secondary Ledger Setup • Challenges encountered and unique situations • Accounting Calendar issue • Accounting Adjustments for External systems posting into Oracle • Receivables • Payables • Prepayments • Fixed Assets solution for Secondary Ledger • Other implementation considerations Dynamique Solutions LLC
  5. 5. CASE STUDY BACKGROUND
  6. 6. Case Study Background • 120 + year old Engineering company • Preferred consultants for major power utilities across the world • Revenues from large consulting projects • Oracle Applications customer since 1997 • General Ledger, Receivables, Payables, Purchasing, HR, Assets • Projects is maintained on a custom-developed Projects system with interfaces to EBS • Currently on 12.1.3 • Significant number of legacy systems with interfaces with Oracle EBS • Single Ledger • Accrual basis • Need to maintain Cash-basis books • Cash-basis financial statements maintained on spreadsheets • Several interfaces post directly into General Ledger, skipping Subledgers Dynamique Solutions LLC
  7. 7. BUSINESS REQUIREMENTS For Secondary (Cash Basis) Ledger
  8. 8. Business Requirements • Secondary Ledger with Cash Basis accounting method • Cash transactions should be posted automatically into Secondary Ledger • Common Chart of Accounts, Calendar • Accounting Adjustments for External systems posting directly into GL • Secondary Ledger needs only 2 segments • Balancing segment (Company) • Natural Account segment • Other segments can be populated with a dummy “999…” value • Fixed Assets to post into Cash Basis Ledger for all transactions • Not standard Cash Basis functionality in Oracle • Prepayments must be accounted to expense accounts when they are paid Dynamique Solutions LLC
  9. 9. SOLUTION OVERVIEW For Secondary (Cash Basis) Ledger
  10. 10. Solution Overview Business Requirement Solution Cash transactions should be posted automatically into Secondary Ledger Secondary Ledger with Cash Basis as the Accounting Method - Seeded Cash Basis accounting method as a starting point Common Chart of Accounts, Calendar Setup Secondary Ledger with the same COA, Calendar Accounting Adjustments for Legacy systems posting directly into Oracle GL Account Derivation Rules for Secondary Ledger Secondary Ledger needs only 2 segments ADRs with Rules for Balancing and Natural Account segments Remaining segments deriving constant “dummy” values Cross Validation Rules adjusted to accommodate new CCIDs with “dummy” values Fixed Assets to post into Cash Basis Ledger New Tax Book linked to Secondary (Cash Basis) Ledger GL Posting allowed to Secondary Ledger Prepayments must be accounted to expense accounts when they are paid Custom Account Derivation Rules Disabling of some standard functionality to use custom solution Dynamique Solutions LLC
  11. 11. SECONDARY LEDGER SETUP
  12. 12. Secondary Ledger Setup • Accounting Setup Manager Dynamique Solutions LLC
  13. 13. Secondary Ledger Setup Dynamique Solutions LLC
  14. 14. Secondary Ledger Setup Dynamique Solutions LLC
  15. 15. Secondary Ledger Setup Default is “Yes” for Other-Other Dynamique Solutions LLC
  16. 16. ACCOUNTING CALENDAR ISSUE
  17. 17. Accounting Calendar issue • Missing Date issue in Calendar • First attempt to configure a new Secondary Ledger resulted in a show-stopper Dynamique Solutions LLC
  18. 18. Accounting Calendar issue • Missing Date issue in Calendar • Caused due to missing date 29-Feb-2000 • Oracle gave a datafix in 2000 which apparently fixed the issue • However, issue still affects creation of new Ledgers in R12 • Calendar Validation report does not catch the issue • Calendar was fine for existing Ledger • Calendar could not be used for new Primary or Secondary Ledger • Our design was based on using the same Calendar, Chart of Accounts • Sev1 SR was opened with Oracle • Oracle issued datafix to correct the Calendar Dynamique Solutions LLC
  19. 19. ACCOUNTING ADJUSTMENTS for External systems posting into Oracle - Oracle Receivables
  20. 20. Business Requirements • Secondary Ledger with Cash Basis accounting method • Cash transactions should be posted automatically into Secondary Ledger • Common Chart of Accounts, Calendar • Accounting adjustments for External systems posting directly into Oracle GL • Secondary Ledger needs only 2 segments • Balancing segment (Company) • Natural Account segment • Other segments can be populated with a dummy “999…” value • Fixed Assets to post into Cash Basis Ledger for all transactions • Not standard Cash Basis functionality in Oracle • Prepayments must be accounted to expense accounts when they are paid Dynamique Solutions LLC
  21. 21. Business Requirement – AccountingAdjustments - Receivables External Client Invoicing System Oracle Receivables Oracle General Ledger Interface Revenue Journals Receipts InvoicesInvoices Dynamique Solutions LLC
  22. 22. Business Requirement – AccountingAdjustments Receivables example Primary Ledger Accrual Basis Secondary Ledger Cash Basis Standard Oracle Client’s Instance Standard Oracle Client’s Instance Revenue Journals Import from Client Invoicing System Dr. Receivables Cr. Revenue AR Invoice Dr. Receivables Cr. Revenue Dr. Receivables 11010 Cr. Revenue 11010 Cash Receipt (when payment is due) Dr. Cash Cr. Receivables Dr. Cash Cr. Receivables 11010 Dr. Cash Cr. Revenue Dr. Cash Cr. Receivables 11010 ADR Dr. Cash Revenue 32899 Dynamique Solutions LLC
  23. 23. Solution – Accounting Adjustments (AR) Solution Configure a new Subledger Accounting Method - Copy of Standard Cash Configure a new Application Accounting Definition - Copy of “Receivables Default Cash Basis” AAD Dynamique Solutions LLC
  24. 24. Solution – Accounting Adjustments (AR) Solution Configure a new Subledger Accounting Method - Copy of Standard Cash Configure a new Application Accounting Definition - Copy of “Receivables Default Cash Basis” AAD Configure a new Journal Line Definition - Copy of “Receipt – Basis Journal Lines Definition” Dynamique Solutions LLC
  25. 25. Solution – Accounting Adjustments (AR) Solution Configure a new Subledger Accounting Method - Copy of Standard Cash Configure a new Application Accounting Definition - Copy of “Receivables Default Cash Basis” AAD Configure a new Journal Line Definition - Copy of “Receipt – Basis Journal Lines Definition” Configure a new Journal Line Type - Replace Receipt Application to Revenue Dynamique Solutions LLC
  26. 26. Solution – Accounting Adjustments (AR) Solution Configure a new Subledger Accounting Method - Copy of Standard Cash Configure a new Application Accounting Definition - Copy of “Receivables Default Cash Basis” AAD Configure a new Journal Line Definition - Copy of “Receipt – Basis Journal Lines Definition” Configure a new Journal Line Type - Replace Receipt Application to Revenue Dynamique Solutions LLC
  27. 27. Solution – Accounting Adjustments (AR) Solution Configure a new Account Derivation Rule - Account segment - XXSL Receivables Account Replaced by Revenue Dynamique Solutions LLC
  28. 28. Solution – Accounting Adjustments (AR) Solution Configure a new Account Derivation Rule - Account segment - ADR: XXSL Receivables Account Replaced by Revenue - Use a Constant (Revenue) account = 32899 Dynamique Solutions LLC
  29. 29. Solution – Accounting Adjustments (AR) Solution Invoice Primary Ledger Dr. Receivables 11010 Cr. Revenue 11010 Dynamique Solutions LLC
  30. 30. Solution – Accounting Adjustments (AR) Solution Receipt Primary Ledger Dr. Cash Cr. Receivable 11010 Receipt Secondary (Cash Basis) Ledger Dr. Cash Cr. Revenue 32899 Dynamique Solutions LLC
  31. 31. ACCOUNTING ADJUSTMENTS for External systems posting into Oracle - Oracle Payables
  32. 32. Business Requirement – AccountingAdjustments Payables example Primary Ledger Accrual Basis Secondary Ledger Cash Basis Standard Oracle Client’s Instance Standard Oracle Client’s Instance Labor cost Journals Import from Projects Accounting System to Oracle GL Dr. Labor Expenses Cr. Payroll Clearing Payroll Journals Import from Payroll (ADP) system to Oracle GL Dr. Payroll Clearing Cr. Net Payroll Cr. Employee FICA …… Cr. Etc. AP Invoices Dr. Net Payroll Dr. Employee FICA …. Cr. Payables Liability Dynamique Solutions LLC
  33. 33. Business Requirement – AccountingAdjustments Payables example Primary Ledger Accrual Basis Secondary Ledger Cash Basis Standard Oracle Client’s Instance Standard Oracle Client’s Instance Payment of AP Invoices to ADP Dr. Payables Liability Cr. Cash Dr. Net Payroll Dr. Employee FICA …. Cr. Cash ADR Dr. Labor Expenses Cr. Cash Dynamique Solutions LLC
  34. 34. Solution – Accounting Adjustments (AP) Solution Configure a new Subledger Accounting Method - Copy of Standard Cash Configure a new Application Accounting Definition - Copy of “Cash Basis” AAD Configure a new Journal Line Definition XXSL Cash, Payments All - Copy of “Cash, Payments All” Dynamique Solutions LLC
  35. 35. Solution – Accounting Adjustments (AP) Solution Configure a new Subledger Accounting Method - Copy of Standard Cash Configure a new Application Accounting Definition - Copy of “Cash Basis” AAD Configure a new Journal Line Definition XXSL Cash, Payments All - Copy of “Cash, Payments All” Configure a new Journal Line Type - Replace Item Expense JLT Dynamique Solutions LLC
  36. 36. Solution – Accounting Adjustments (AP) Solution Configure a new Account Derivation Rule - Account Segment - XXSL Item Expense Distribution Account - Cash Basis Dynamique Solutions LLC
  37. 37. Solution – Accounting Adjustments (AP) Solution Configure a new Account Derivation Rule - Account Segment - XXSL Item Expense Distribution Account - Cash Basis Create Mapping Sets between Payroll Liability Accounts and Labor Expense Accounts Dynamique Solutions LLC
  38. 38. Solution – Accounting Adjustments (AP) Solution Configure a new Account Derivation Rule - Account Segment - XXSL Item Expense Distribution Account - Cash Basis Create Mapping Sets between Payroll Liability Accounts and Labor Expense Accounts Create Conditions to drive the ADRs Dynamique Solutions LLC
  39. 39. Solution – Accounting Adjustments (AP) Solution Configure a new Account Derivation Rule - Account Segment - XXSL Item Expense Distribution Account - Cash Basis Create Mapping Sets between Payroll Liability Accounts and Labor Expense Accounts Create Conditions to drive the ADRs Put “Catch-all” ADR at the bottom, and one-off ADRs at the top in order of priority - Catch-all ADR will not have conditions Dynamique Solutions LLC
  40. 40. Solution – Accounting Adjustments (AP) Solution Payment of ADP Payroll invoice Secondary (Cash Basis) Ledger Dr. Labor Expense Accounts (various) Cr. Cash Dynamique Solutions LLC
  41. 41. ORACLE ASSETS SOLUTION Secondary (Cash Basis) Ledger
  42. 42. Business Requirements • Secondary Ledger with Cash Basis accounting method • Cash transactions should be posted automatically into Secondary Ledger • Common Chart of Accounts, Calendar • Accounting Adjustments for Legacy systems posting directly into Oracle GL • Secondary Ledger needs only 2 segments • Balancing segment (Company) • Natural Account segment • Other segments can be populated with a dummy “999…” value • Fixed Assets to post into Cash Basis Ledger for all transactions • Not standard Cash Basis functionality in Oracle • Prepayments must be accounted to expense accounts when they are paid Dynamique Solutions LLC
  43. 43. Solution – Fixed Assets • Standard Cash SLAM does not account for Fixed Assets There are no inflows or outflows of Cash in an Asset transaction (Depreciation, Adjustment, Retirement) Purchase of an asset has already been part of the Payables process The client required accounting of Assets in the Secondary Ledger (Cash Basis) for Tax purposes using different depreciation methods. Dynamique Solutions LLC
  44. 44. Solution – Fixed Assets • Existing Tax Book cannot be re-assigned to post to the Secondary Ledger Dynamique Solutions LLC
  45. 45. Solution – Fixed Assets • Alternate Ledger could not be the Secondary (Cash Basis) Ledger “List of values contains no entries”. Dynamique Solutions LLC
  46. 46. Solution – Fixed Assets • Solution to meet Business Requirement Custom Cash Basis Subledger Accounting Method (SLAM) Based on Oracle’s “Standard Cash” accounting method Add the “Assets Standard Accounting” AAD to the custom SLAM Else, Oracle will not know how to account for Assets transactions in the Secondary (Cash Basis) ledger. Setup new Tax Book in Assets module Associate to the Corporate Book which posts to the Primary Ledger Allow GL Posting Assign the Secondary (Cash Basis) ledger for posting Migrate all assets from the old Tax Book to the new Tax Book This amounts to a re-implementation of the Tax Book Run Initial Mass Copy and Periodic Mass copy to process assets in the new Tax Book Process new Tax Book till current month Dynamique Solutions LLC
  47. 47. Solution – Fixed Assets • Custom Cash-Basis SLAM based on Standard Cash Add the “Assets Standard Accounting” AAD to the SLAM. Else, Oracle will not know how to account for Assets transactions in the Secondary (Cash Basis) ledger. Dynamique Solutions LLC
  48. 48. Solution – Fixed Assets • Tax Type Cash Asset Book with GL Posting Allowed Dynamique Solutions LLC
  49. 49. Solution – Fixed Assets • Process Assets in Both Asset Books to post to both Ledgers Dynamique Solutions LLC
  50. 50. PREPAYMENTS SOLUTION for Secondary (Cash Basis) Ledger
  51. 51. Business Requirements • Secondary Ledger with Cash Basis accounting method • Cash transactions should be posted automatically into Secondary Ledger • Common Chart of Accounts, Calendar • Accounting Adjustments for Legacy systems posting directly into Oracle GL • Secondary Ledger needs only 2 segments • Balancing segment (Company) • Natural Account segment • Other segments can be populated with a dummy “999…” value • Fixed Assets to post into Cash Basis Ledger for all transactions • Not standard Cash Basis functionality in Oracle • Prepayments must be accounted to expense accounts when they are paid Dynamique Solutions LLC
  52. 52. Solution – Prepayments Primary Ledger Oracle “Standard Accrual” Basis Secondary Ledger Cash Basis When Prepayment invoice is created DR Prepayment Cr AP Liability When Prepayment invoice is created No accounting When Prepayment invoice is paid DR AP Liability CR Cash When Prepayment invoice is paid DR Expense CR Cash When Standard invoice is entered and matched to Prepayment (each month) DR Expense CR Prepayment When Standard invoice is entered and matched to Prepayment (each month) No accounting Business Requirement • Prepayments must be accounted to expense accounts when they are paid • Even if expensed over multiple periods in Primary Ledger, expensed when paid (fully in first period) in Secondary Ledger Dynamique Solutions LLC
  53. 53. Dr. Prepayment Cr. Cash Solution – Prepayments Dynamique Solutions LLC
  54. 54. Solution – Prepayments Dr. Expense Cr. Prepayment Dynamique Solutions LLC
  55. 55. Solution – Prepayments Primary Ledger Oracle “Standard Accrual” Basis Secondary Ledger Oracle “Standard Cash” Basis When Prepayment invoice is created DR Prepayment Cr AP Liability When Prepayment invoice is created No accounting When Prepayment invoice is paid DR AP Liability CR Cash When Prepayment invoice is paid DR Prepayment CR Cash When Standard invoice is entered and matched to Prepayment (each month) DR Expense CR Prepayment When Standard invoice is entered and matched to Prepayment (each month) DR Expense CR AP Liability DR AP Liability CR Prepayment Standard Oracle – does not meet specific business requirement Dynamique Solutions LLC
  56. 56. Solution – Prepayments Create new Subledger Accounting Method (SLAM) Copy from “Standard Cash” Create Account Derivation Rule (ADR) to debit Expense when Cash flows out - Payments Event Class Use Prepayment Account on Supplier to drive the Expense account Use Mapping Sets: - Prepayment A/C AAA = Expense A/C PPP - Prepayment A/C BBB = Expense A/C QQQ Use Condition: - To determine which Mapping Set is to be used Disable standard Journal Line Type “Prepaid Expense - Cash Basis” Setup Mapping Sets and Conditions Solution to meet Business Requirement Dynamique Solutions LLC
  57. 57. Solution – Prepayments Solution Configure a new Subledger Accounting Method - Copy of Standard Cash Configure a new Application Accounting Definition - Copy of Cash Basis AAD Dynamique Solutions LLC
  58. 58. Solution – Prepayments Solution Configure a new Subledger Accounting Method - Copy of Standard Cash Configure a new Application Accounting Definition - Copy of Cash Basis AAD Configure a new Journal Line Definition - Copy of Cash, Payments All JLD Dynamique Solutions LLC
  59. 59. Solution – Prepayments Solution Configure a new Subledger Accounting Method - Copy of Standard Cash Configure a new Application Accounting Definition - Copy of Cash Basis AAD Configure a new Journal Line Definition - Copy of Cash, Payments All JLD Disable “Prepaid Expense – Cash Basis” Journal Line Type (JLT) Dynamique Solutions LLC
  60. 60. Solution – Prepayments Solution Create new JLT replacing “Prepaid Expense – Cash Basis” Create new ADR to replace Prepayment account with Expense account Dynamique Solutions LLC
  61. 61. Solution – Prepayments Solution Create new JLT replacing “Prepaid Expense – Cash Basis” Create new ADR to replace Prepayment account with Expense account Create Mapping Sets for groups of Prepayment accounts and Expense accounts Dynamique Solutions LLC
  62. 62. Solution – Prepayments Solution Create new JLT replacing “Prepaid Expense – Cash Basis” Create new ADR to replace Prepayment account with Expense account Create Mapping Sets for groups of Prepayment accounts and Expense accounts Multiple mapping sets used instead of single mapping set to facilitate grouping of similar Prepayment accounts Dynamique Solutions LLC
  63. 63. Solution – Prepayments Solution • Condition to dictate which Mapping Set (and therefore which Expense account) to be used Dynamique Solutions LLC
  64. 64. Solution – Prepayments Solution Prepayment created Dr Prepayment Cr AP Liability Dynamique Solutions LLC
  65. 65. Solution – Prepayments Solution Primary Ledger (Accrual): Prepayment paid Dr AP Liability Cr Cash Secondary Ledger (Cash): • Prepayment paid • Dr Expense • Cr Cash Dynamique Solutions LLC
  66. 66. Solution – Prepayments Solution Primary Ledger (Accrual): Prepayment amortized Dr Expense Cr AP Liability Primary Ledger (Accrual): Prepayment amortized Dr AP Liability Cr Prepayment Dynamique Solutions LLC
  67. 67. OTHER IMPLEMENTATION CONSIDERATIONS
  68. 68. Other Implementation Considerations • Over 50 ADRs (mostly in Payables, few in Receivables) were required to re-class accounts from Primary Ledger to Secondary Ledger • Many of these ADRs used Mapping Sets and Conditions • No custom sources were used for the ADRs • Initial balances for Secondary Ledger were uploaded through WebADI • Financial Statement Generator Reports were created/updated to report on the Secondary (Cash Basis) Ledger • Ledger Set was setup along with Data Access Set to give certain responsibilities access to both Ledgers • “Parallel run” for first quarter to verify that Secondary Ledger was accounting cash transactions correctly. Dynamique Solutions LLC
  69. 69. • Prithis Das • Email: prithis.das@dynamique.us • Linked in: www.linkedin.com/in/prithisdas/ • Web: www.dynamique.us • Cell: +1.630.3649457 Dynamique Solutions LLC

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