Globalized companies face challenges in managing financial operations across different countries with diverse currencies and regulations. Without changes, the company described would have a difficult financial consolidation process involving multiple currency translations between different legal entities, operating units, and sets of books. This complex structure risks costly errors in accounting. Implementing Oracle E-Business Suite R12 and restructuring the company's legal entities, operating units and chart of accounts using tools like Multiple Organization Access Control could reduce the company's financial close cycle from 20 to 3 days while increasing visibility and oversight of global operations.

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Globalized Financials in R12:
Avoiding the Risk of Nuclear Disaster
an eprentise white paper

2. Globalized Financials in R12: Avoiding the Risk of Nuclear Disaster
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© 2014 eprentise, LLC. All rights reserved.
eprentise® is a registered trademark of eprentise, LLC.
FlexField Express and FlexField are registered trademarks of Sage Implementations, LLC.
Oracle, Oracle Applications, and E-Business Suite are registered trademarks of Oracle Corporation.
All other company or product names are used for identification only and may be trademarks of their respective owners.
Author: Helene Abrams
Published: November 10, 2009
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3. Globalized Financials in R12: Avoiding the Risk of Nuclear Disaster
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Growing globally is an engrained goal of organizations that adhere to the principle of increasing
shareholder value. New markets for product adoption often must be pursued across national boundaries
as local markets approach saturation. Strategies must be developed to both create and manage
operations overseas. One of the difficulties inherent in operating globally is that different localizations,
such as regulations and currency, complicate business operations since the business must comply both
with global and local policies. So, while the company must abide by localized tax laws and regulatory
requirements, it is also important for management to maintain a concise view of financial performance of
the company as a whole.
Enterprise resource planning (ERP) systems were developed as a solution to this problem, as well as other
problems. However, complexities that result from international operations are still a major hassle, and
there comes a point when a business must evaluate its current structure and determine if changes to the
fundamental setups of certain ERP components should be undertaken.
Chart A is a depiction of the financial translation structure of a multinational corporation. It is clear at first
glance that the structure of the company is forcing a difficult financial consolidation process, but it is
worth taking a closer look at the relationships between the entities in order to better understand how
time-consuming and error-prone month- and year-end accounting processes must be.
According to Chart A, the company has operations in the following ten locations: the US, Canada, New
Zealand, Australia, Mexico, Brazil, Chile, Taiwan, the UK, and Russia. Reporting requirements mandate that
the financial transactions be reported in multiple currencies, while maintaining drill-down capabilities to
all the subledgers. In order to facilitate financial reporting based on both currencies and location, the
company has structured a number of different units by which to categorize transactions:
1. Operating Units – grouped by currency type
2. Sets of Books (AAA and BBB) – grouped by currency type (AAA) and country (BBB)
These consolidations are grouped and ungrouped by a combination of spreadsheets and by using the
financial consolidation in GL. Looking first at the AAA US Set of Books (marked in orange in Chart A), we
can see that it is comprised of eight balancing segments that originate from USD transactions from eight
different locations that operate with USD as one of their currencies. The financial translation from the AAA
US Set of Books to the BBB Books involves separating the 8 balancing segments into 7 different new sets
of books as the grouping method changes from grouping by currency (AAA) to grouping by country
(BBB). What this means is that an accounting error made in the AAA US Set of Books could have far-
reaching implications, potentially causing an error in 7 different BBB Sets of Books (US SOB, BBB NZ, BBB
AUS, BBB TWN, BBB BRZ, BBB MEX, and UK SOB).
Another example is shown in green and involves an extra translation step. When the company first
implemented E-Business Suite, they created a separate set of books for each currency (rather than have an
entered currency translated to the functional currency for the transaction). The transactions for Legal
Entity (Balancing Segment Value) 007 are in 3 separate sets of books: one for each currency. So, if the
company wants to find out how LE 007 is performing, they have to consolidate all the transactions for LE
007 across all sets of books. When they bring that data into their OBIEE implementation, they need to do
a join for every transaction across 3 sets of books. There is no drill down from their reports, and no way to
determine the accuracy of the data entry on the spreadsheets.

4. Globalized Financials in R12: Avoiding the Risk of Nuclear Disaster
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These are just a couple of examples – imagine what a significant number of errors (they happen) in
multiple sets of books would set off: it would resemble a chain reaction, the kind that a nuclear bomb
undergoes before it causes virtually irreparable damage. Also imagine what happens as the company
acquires a new legal entity, or wants to sell part of their business. No company wants to endure an
irreparable financial mistake, certainly in today’s era of Sarbanes-Oxley, IFRS, and countless other
regulations. The problem is that some organizations are sufficiently complex that avoiding mistakes
involved in financial consolidation becomes impossible. It is a common occurrence, but one that is all too
frequently overlooked.
In Oracle® E-Business Suite R12, the company will have a primary transaction ledger and then create
ledger sets to create the accounting for each of the reporting currencies. But, there is really no way of
getting to a R12 subledger accounting function given the complexity of the consolidation rules currently
implemented. The company is in the process of re-evaluating their legal entity structure, their operating
unit structure, and moving to a global chart of accounts before moving to R12. They will use Multiple
Organization Access Control (MOAC) to report from different operating units. They estimate that the close
cycle will be reduced from their current 20 days to 3 days, that they will have increased visibility into the
enterprise operations as a whole, and that they will reduce the number of spreadsheets significantly.
Curious?
For more information, please call eprentise at 1.888.943.5363 or visit www.eprentise.com.
About eprentise
eprentise provides transformation software products that allow growing companies to make their Oracle® E-Business
Suite (EBS) systems agile enough to support changing business requirements, avoid a reimplementation and lower the
total cost of ownership of enterprise resource planning (ERP). While enabling real-time access to complete, consistent
and correct data across the enterprise, eprentise software is able to consolidate multiple production instances, change
existing configurations such as charts of accounts and calendars, and merge, split or move sets of books, operating
units, legal entities, business groups and inventory organizations.