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Oracle Advanced Global Intercompany System User's Guide
Release 12.1
Part Number E12794-04
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Intercompany Setup

This chapter covers the following topics:

Introduction

Advanced Global Intercompany System (AGIS) enables you to create, settle and reconcile intercompany transactions. Intercompany transactions are transactions that occur between two related legal entities in an enterprise or between groups in the same legal entity. Transactions that occur between two legal entities are called intercompany transactions and transactions that occur between two groups within one legal entity are called intracompany transactions.

The balances of the intercompany transactions must be eliminated or adjusted when preparing the consolidated financial statement, or it might result in overstated financial results, which in turn might lead to legal repercussions against the enterprise. Intercompany transactions can be identified and eliminated by the use of specific accounts to book these transactions. Defining these accounts allows you to book transactions that are identified as intercompany transactions in the specific accounts. These accounts must be defined as a part of the General Ledger setup process.

Before you start working on AGIS, you must setup the following:

Note: AGIS is referred to as Intercompany in this document.

Related Topics

Creating Accounting Setups, Oracle Financials Implementation Guide

Intercompany and Intracompany Balancing, Oracle Financials Implementation Guide

Setting up AGIS

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.

Intercompany Accounting Pages

This section describes the Intercompany Accounting page.

Intercompany Accounts Pages

This section describes key Intercompany accounting setup pages.

Common Intercompany Accounts Fields

This section describes some of the common fields used in the Intercompany accounts setup pages.

Transacting Legal Entity

The legal entity with the transacting (from) perspective in the intercompany trading relationship. The legal entity from which the intercompany transaction is initiated. Choose the transacting legal entity from the list of values.

Transacting Ledger

The ledger with the transacting (from) perspective in the intercompany trading relationship. You can choose any ledger that is mapped to the transacting legal entity, including both primary and secondary ledgers, since intercompany accounts can be defined for both primary and secondary ledgers.

Transacting Balancing Segment Value

The balancing segment value for the transacting (from) perspective for which intercompany accounts are defined. The list of values displays all the balancing segment values in the transacting ledger to which the transacting legal entity is mapped.

Trading Partner Legal Entity

The legal entity with the trading partner (to) perspective in the intercompany trading relationship. Choose the trading partner legal entity from the list of values. The list of values shows all legal entities to which you have access to and the value All Other.

Trading Partner Ledger

The ledger with the trading partner (to) perspective in the intercompany trading relationship.

Trading Partner Balancing Segment Value

The balancing segment value for the trading partner (to) perspective for which intercompany accounts are defined. The list of values displays all the balancing segment values in the trading partner ledger to which the trading partner legal entity is mapped.

Intercompany Accounts Search Page

Use this page to query, create, and update intercompany accounts. To update intercompany accounts, query the trading legal entity and transacting ledger and click Update, or choose Create Accounts to create a new Intercompany account.

Create Intercompany Accounts Pages

This page is the first step in creating a new intercompany account. To access the Define Accounts page, click the Define Accounts icon.

Define Accounts Page

Use this page to define Intercompany Receivables and Payables accounts. For each of these account types you must define at least one account.

Use for Balancing

Use this field to select an account to be used as the balancing account in subledgers and intercompany General Ledger journals.

Update Intercompany Accounts

This page is similar to the Create Intercompany Accounts page and allows you to update existing intercompany accounts.

View Reciprocal Accounts

Clicking this button displays 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. 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.

Balancing Accounts Search Page

Use this page to query, create, or update intracompany balancing rules. To update a balancing rule, query the rule and select the rule from the results table. Choose the Create Rule button to create a new intracompany balancing rule.

Create Intracompany Balancing Rules Page

Use this page to create new balancing rules. Before creating a new rule, you should query the rule on this page to ensure the rule does not already exist.

Selected Fields

Ledger: Enter the ledger for which to define balancing rules. The list of values displays all the ledgers to which you have access and indicates whether the ledger is primary or secondary. The ledgers available here come from the Data Access Set assigned to your responsibility. The list of values displays only ledgers that are assigned to complete configurations in Accounting Setup Manager and that have the Enable Intracompany Balancing Journals check box checked on the Update Ledger: Ledger Options page.

Status: This field indicates whether the rule is enabled or disabled.

Additional Information Context: This field allows you to enter the context for the Intracompany Rule Descriptive flexfield. The information entered is only for your reference.

Balancing Details Tab

Debit Balancing Segment: This field represents the debit (party recording receivable) balancing segment value. The list of values shows all of the balancing segment values allowed by your security profile. For each ledger-legal entity-source-category combination, there must be the default rule All Other-All Other.

Credit Balancing Segment: This field represents the credit (party recording payable) balancing segment value. The list of values shows all of the balancing segment values allowed by your security profile. For each ledger-legal entity-source-category combination, there must be the default rule All Other-All Other.

Debit Account: This is the balancing account that the debit balancing segment value uses to balance when trading with the credit balancing segment value.

For balancing segment value - balancing segment value rules where values are explicitly chosen, the balancing account you choose is used exactly. However, when you select the value All Other, the Balancing API determines and substitutes the correct balancing and intercompany segment values at the time of balancing. For example, if you enter an account code combination 01.4000.02, it actually means xx.4000.yy, where xx is the balancing segment value of the debit balancing segment value on the journal and yy is the balancing segment value of the credit balancing segment value on the journal. The Balancing API substitutes these values during balancing.

Credit Account: This is the balancing account that the credit balancing segment value uses to balance when trading with the debit balancing segment value.

For balancing segment value - balancing segment value rules where values are explicitly chosen, the balancing account you choose is used exactly. However, when you select the value All Other, the Balancing API determines and substitutes the correct balancing segment value at the time of balancing. For example, if you enter and account code combination 02.2000.01, it actually means xx.2000.yy, where xx is the balancing segment value of the credit balancing segment value on the journal and yy is the balancing segment value of the debit balancing segment value on the journal. The Balancing API substitutes these values during balancing.

Options Tab

Level of Summarization:

Clearing Balancing Segment Value Usage:

Default Options:

Default options include specifying clearing options in case a clearing company should be used but none can be determined for the journal.

Intercompany Organizations Pages

After defining intercompany accounts, you must create organizations and assign them to the legal entities to process intercompany transactions.

Intercompany allows you to define organizations for your diverse business needs. 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.

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.

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 an 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. Additionally, you must associate the organizations with an operating unit if invoices are required for the transactions.

View Intercompany Organization Page

Each intercompany organization is assigned to one or many contacts. The contacts are defined as parties of type Person and assigned to intercompany organizations.

Click the Organization Name to view the Contact Information for an intercompany organization.

Related Topics

Introduction to Oracle Trading Community Architecture, Oracle Trading Community Architecture User Guide

Intercompany Transaction Types Pages

Receivables Assignments Page

Intercompany Security Pages

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:

Use the Security tab to assign a user to an organization.

Intercompany Organization Assignments Page

Use the Intercompany Organization Assignments page to search for and update an organization assignment, or to create new assignments.

Access to Transactions

Select this option to allow the user access to the transactions of the organization the user is assigned to.

Send Approval Notification

Select this option if you want the user assigned to the organization to receive approval notifications.

Intercompany Transaction Types Pages

In AGIS, 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.

Creating Intercompany Transaction Types Page

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

Selected Fields in the Create Transaction Types Page

Invoicing

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.

Select Required to create invoices.

Manual Approval

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.

Intercompany Periods Pages

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.

You must define the intercompany calendar before changing Intercompany Periods. See Defining Intercompany Calendar.

Note: This setup is optional. Use Periods tab to control the period status per transaction type.

Control Period Statuses Page

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

Review Open Transactions Page

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.

Intercompany Invoicing Options Pages

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.

Note: If your business requirement does not require you to create invoices, you need not use the Invoicing Options tab.

Receivables Assignments Page

If an invoice is 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.

Selected Fields in the Receivables Assignments Page

Operating Unit

Lists the operating units that are associated with an active intercompany organization.

Receivables Transaction Type

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

Receivables Memo Line

You can either select the seeded Receivables Memo Line Global Intercompany or choose an existing Receivables Standard Memo Line.

Customer Supplier Associations

You can create the following two types of associations in Intercompany:

The above associations denote how legal entities are represented in other legal entities. For example, if legal entity A has a supplier association with legal entity B, it means that in legal entity B, legal entity A is set up as a supplier that creates a Payables invoice. 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 following levels:

Tip: 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.

Customer and Supplier Association Page

Use the Customer and Supplier Association page to create customer and supplier association. You can create an association by:

Selected Fields in Customer and Supplier Association Page

Supplier Site

Enter the site name for the chosen supplier. This field can only be used when the supplier is entered.

Customer Account Location

Enter the site name for the chosen customer. This field can only be used when the customer is entered.

Trading Partners Page

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

Fields in the Legal Entity Customers and Suppliers Page

Initiator Organization

The supplier initiating the transaction.

Recipient Organization

The customer receiving the transaction.

Intercompany System Options

Intercompany system options help you to manage intercompany transactions across the enterprise. 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.

Note: Before setting up intercompany system options, you must decide how to process Intercompany transactions. You must decide whether to enforce an enterprise-wide currency or allow Intercompany transactions in local currencies, allow recipients to reject intercompany transactions, what minimum amount of transactions should be processed, and so forth.

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.

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

Intercompany Batch Numbering

In AGIS, all transactions are numbered sequentially. Use this option to manually or automatically number intercompany transactions.

See Defining Document Sequences, Oracle System Administrators User Guide

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.

Note: 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 ledger currency.

Note: You cannot have user defined conversion rates in intercompany transactions.

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.

Approvals Management Setup for Intercompany

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 Accounts Rules Setup In Subledger Accounting for Intercompany

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).

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

Note: 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:

To create a new Transaction Account Definition:

  1. Log in to Subledger Accounting using the SLA responsibility.

  2. Create accounting derivation rules using the Account Derivation Rules window.

  3. Create the TAD and assign the account derivation rules to the transaction account definition.

  4. Log in to General Ledger using the GL responsibility and assign the TAD to the ledger.

Note: A default account is assigned when you create a new TAD to generate the intercompany distribution accounts. This default account is generated whenever the account derivation rule satisfies none of the specified conditions.

Related Topics

Creating Account Derivation Rules, Oracle Subledger Accounting Implementation Guide

Creating Transaction Account Definitions, Oracle Subledger Accounting Implementation Guide

Example of Setting Default Account Rules

This section explains creating a new TAD with the help of an example. A TAD can be set up in two ways:

This example uses the Vision Enterprise setup that has two charts of accounts namely US Ledger and Euro Ledger, each for the Vision Corporation ledger and the Vision Europe ledger.

The following comprises the Ledger: Vision Corporation:

Balancing Segment Value Legal Entity Intercompany Organization
01 Vision West Vision SFO
02 Vision East Vision Boston
03 Vision East Vision Jersey

The following comprises the Ledger: Vision Europe:

Balancing Segment Value Legal Entity Intercompany Organization
10 Vision France Vision Paris
11 Vision Germany Vision Frankfurt

Single Balancing Segment Value mapped to a Legal Entity

When a single balancing segment value is mapped to a legal entity , the initiator and recipient balancing segment values are the Source in the Transaction Account Builder to obtain the distribution accounts. The initiator and recipient balancing segment values are identified through the From and To legal entity when entering the transactions.

Assume that Vision SFO of Vision West (balancing segment value 01) in the US Ledger chart of accounts is the initiator and Vision Paris of Vision France (balancing segment value 10) in the Euro Ledger chart of accounts is the recipient. To generate the default distribution accounts you must define the account derivation rules for the initiator and distributor transaction account types, which are the following:

Based on the rule for each segment a default initiator and recipient distribution account is generated when entering the transactions.

Generating the Initiator Distribution Account

Use the Account Derivation Rules window to create account derivation rules for generating the initiator distribution account. The following table describes the account derivation rule for the initiator balancing segment value.

Priority Value Type Value Override Segment Value Type Value
1 Source Initiator BSV      

The following table describes the account derivation rule for the initiator natural account.

Priority Value Type Value Override Segment Value Type Value
1 Constant 2100      
Condition          
  Source Operator Value Type Value  
  Transaction Type = Constant Allocation  

The following table describes the account derivation rule for initiator other segments.

Priority Value Type Value Override Segment Value Type Value
1 Constant 000      

Using the Transaction Account Definitions page, assign the above created rules to the appropriate transaction account type as shown in the following table to create a TAD to generate the initiator distribution account of US Ledger.

Transaction Account Type Account Derivation Rule
Balancing Segment Value Initiator BSV Rule
Natural Account Segment Initiator Distribution Account Rule
Other Segments Initiator Other Segment Rule

Generating the Recipient Distribution Account

Using the Account Derivation Rules window, create account derivation rules to generate the recipient distribution account. The following table describes the account derivation rule for the recipient balancing segment value.

Priority Value Type Value Override Segment Value Type Value
1 Source Recipient BSV      

The following table describes the account derivation rule for the recipient natural account.

Priority Value Type Value Override Segment Value Type Value
1 Constant 2100      
Condition          
  Source Operator Value Type Value  
  Transaction Type = Constant Allocation  

The following table describes the account derivation rule for recipient other segments.

Priority Value Type Value Override Segment Value Type Value
1 Constant 000      

Using the Transaction Account Definitions page, assign the above created rules to the appropriate transaction account type as shown in the following table to create a TAD to generate the recipient distribution account of Euro Ledger.

Transaction Account Type Account Derivation Rule
Balancing Segment Value Recipient BSV Rule
Natural Account Segment Recipient Distribution Account Rule
Other Segments Recipient Other Segment Rule

Multiple Balancing Segment Values mapped to a Legal Entity

When two or more balancing segment values are mapped to a legal entity, you must determine the balancing segment value that must be used as the initiator distribution of the initiator legal entity by defining mapping sets. Mapping sets must be defined before creating account derivation rules for each intercompany organization.

Assume that Vision Boston (balancing segment value 02) of Vision East in the US Ledger chart of accounts is the initiator and Vision Paris of Vision France (balancing segment value 10) in the Euro Ledger chart of accounts is the recipient.

To generate the default distribution accounts you must first define mapping sets to assign Vision Boston as the initiator distribution to derive a value and then define the account derivation rules for the initiator and distributor transaction account types. A default initiator and recipient distribution account is generated when entering the transactions based on the rules defined.

Defining Mapping Sets

The following is the initiator mapping set to derive the balancing segment value from the intercompany organization.

Value Type Input Value Output Value Effective From Effective To
Input Vision SFO 01    
  Vision Boston 02    
  Vision Jersey 03    

The following is the recipient mapping set.

Value Type Input Value Output Value Effective From Effective To
Input Vision Paris 10    
  Vision Frankfurt 11    

Generating the Initiator Distribution Account

Use the Account Derivation Rules window to create account derivation rules for generating the initiator distribution account. The following table describes the account derivation rule for the initiator balancing segment value.

Priority Value Type Value Segment Input Source
1 Mapping Set Balancing segment value derived from intercompany organization <Mapping Set Name> Natural Account Segment Initiator

The following table describes the account derivation rule for the initiator natural account.

Priority Value Type Value Override Segment Value Type Value
1 Constant 2100      
Condition          
  Source Operator Value Type Value  
  Transaction Type = Constant Allocation  

The following table describes the account derivation rule for initiator other segments.

Priority Value Type Value Override Segment Value Type Value
1 Constant 000      

Using the Transaction Account Definitions page, assign the above created rules to the appropriate transaction account type as shown in the following table to create a TAD to generate the initiator distribution account of US Ledger.

Transaction Account Type Account Derivation Rule
Balancing Segment Value Initiator BSV Rule
Natural Account Segment Initiator Distribution Account Rule
Other Segments Initiator Other Segment Rule

Generating the Recipient Distribution Account

Use the Account Derivation Rules window to create account derivation rules for generating the recipient distribution account. The following table describes the account derivation rule for the recipient balancing segment value.

Priority Value Type Value Segment Input Source
1 Mapping Set Balancing segment value derived from intercompany organization <Mapping Set Name> Natural Account Segment Recipient

The following table describes the account derivation rule for the recipient natural account.

Priority Value Type Value Override Segment Value Type Value
1 Constant 2100      
Condition          
  Source Operator Value Type Value  
  Transaction Type = Constant Allocation  

The following table describes the account derivation rule for the recipient other segments.

Priority Value Type Value Override Segment Value Type Value
1 Constant 000      

Using the Transaction Account Definitions page, assign the above created rules to the appropriate transaction account type as shown in the following table to create a TAD to generate the recipient distribution account of Euro Ledger.

Transaction Account Type Account Derivation Rule
Balancing Segment Value Recipient BSV Rule
Natural Account Segment Recipient Distribution Account Rule
Other Segments Recipient Other Segment Rule