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Oracle Financials Implementation Guide
Release 12.1
Part Number E13425-05
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Overview of Accounting Setups

This chapter covers the following topics:

Introduction

This chapter explains how multiple legal entities and companies can be configured within one or more accounting setups using Accounting Setup Manager.

Accounting Setups

An accounting setup defines the accounting context for one or more legal entities or a business need if legal entities are not involved.

Note: Accounting Setup

Defining an accounting setup is based on several factors, such as the following:

Legal entities should be assigned to accounting setups to maintain a legal entity context for transactions and use Oracle financial subledgers that require a legal entity context. No legal entities should be assigned to accounting setups if there are business needs that do no require a legal entity context.

If legal entities are involved, the general rule is to define a separate accounting setup for each legal entity or group of legal entities that require their own primary ledger. In other words, if legal entities require any one of the following attributes to be different from other legal entities, a different primary ledger is required, and therefore a different accounting setup is required:

Ledger Processing Options

Ledger Processing Options are defined at the ledger level and refer to the following options that control how journals and transactions are processed for that ledger:

If there are legal entities that require any one of the above ledger processing options to be different, then define a separate primary ledger for each legal entity and therefore, a new accounting setup.

Note: Ledger Options

Example

Assume that a U.S.-based global company called Global Operations has four legal entities: two in the U.S., one in the U.K. and one in France. The following table describes the ledger attributes required for each legal entity.

Ledger Attributes Required for Global Operations Legal Entities
Ledger Attributes U.S. East Operations U.S. West Operations U.K. Operations France Operations
Chart of Accounts Corporate Corporate Corporate French Statutory
Accounting Calendar/Period Type Monthly/Month Monthly/Month Monthly/Month Fiscal/Fiscal
Currency USD USD GBP EUR
Subledger Accounting Method Standard Accrual Standard Accrual Standard Accrual French GAAP
Ledger Options
  • Enable Average Balances

  • Enable Journal Approval

No Average Balances or Journal Approval enabled No Average Balances or Journal Approval enabled No Average Balances or Journal Approval enabled

Based on the above information, create four different accounting setups because each legal entity requires its own primary ledger.

Note: If the two U.S. legal entities, U.S. East and U.S. West, shared the same ledger processing options, they could share the same primary ledger and be included in the same accounting setup.

Secondary Ledgers

Additional ledgers called secondary ledgers can optionally be assigned to an accounting setup to maintain multiple accounting representations for the same legal entity.

Note: Secondary Ledgers

Assign an unlimited number of secondary ledgers to each primary ledger of an accounting setup. Each secondary ledger can be maintained at one of the following data conversion levels:

Note: Data Conversion Levels

Using Secondary Ledgers

Secondary ledgers are used for multiple purposes, such as statutory reporting, adjustments, or consolidation.

For example, if both a statutory and corporate accounting representation is required for a legal entity's transactions, two ledgers for the same legal entity can be used: a primary ledger for the corporate representation and a secondary ledger for the statutory representation.

Note: Secondary Ledger

Reporting Currencies

If you only need a different currency representation of the primary or secondary ledgers, assign reporting currencies to them. Unlike secondary ledgers, reporting currencies must share the same chart of accounts, accounting calendar/period type combination, subledger accounting method, and ledger processing options as their source ledger.

As a general rule, always use reporting currencies instead of secondary ledgers if you only need to maintain an accounting representation that differs in currency alone.

You can assign reporting currencies to both primary and secondary ledgers. Reporting currencies are maintained at one of the following currency conversion levels:

Accounting Setup Considerations

Before creating accounting setups, carefully consider the number of legal entities that you want to assign to each accounting setup.

Associate each accounting setup with one of the following accounting environment types:

Note: For detailed examples of using the different accounting environment types, see Introduction, Accounting Setup Examples.

Related Topics

Designing the Chart of Accounts

Accounting Setups with One Legal Entity

You should only assign one legal entity to an accounting setup type if your legal entities meet any one of the following criteria:

Accounting Setups with Multiple Legal Entities

If an accounting setup has more than one legal entity it means that multiple legal entities can share the same primary ledger attributes, such as the same chart of accounts, accounting calendar/period type combination, currency, subledger accounting method, and ledger processing options.

Assign multiple legal entities to the same accounting setup if all of the legal entities assigned to the accounting setup meet all of the following criteria:

Accounting Setups with No Legal Entities

Accounting setups that do not have legal entities assigned can be used for multiple purposes based on business needs. For example, define an accounting setup with no legal entity assigned if a legal entity context is not required for transaction processing, or use it to supplement the accounting contained in other accounting setups that have legal entities assigned.

You can use accounting setups with no legal entities for the following business needs:

Using Accounting Setups with No Legal Entities for Management Purposes

If your organization uses legal entities and you have accounting setups that have legal entities assigned, you can use another accounting setup with no legal entity for management purposes. For example, you can use its primary ledger to book internal management adjustments across ledgers in different accounting setups. The management adjustments can be for any management entity, such as line of business, cost center, department, or other segment that has management responsibility.

For example, assume the department segment of the chart of accounts represents the management entity and you have three departments: Finance, Sales, and HR. The figure below represents the management hierarchy for the department segment with the three departments reporting to the CEO.

the picture is described in the document text

Use the accounting setups described in the following table to perform the day-to-day accounting.

Accounting Setups
Legal Entity Vision Credit Group Legal Entity Vision Services and Vision Consulting Legal Entities Vision Operations Legal Entity
Number of Legal Entities One Multiple One
Primary Ledger Vision Credit Group Vision Services Vision Operations
Chart of Accounts: Corporate Corporate Corporate
Calendar: Monthly Monthly Monthly
Currency: USD USD USD

Transactions are entered for all three departments in all three ledgers during the normal course of business. For example, enter expenses for each department.

To enter management adjustments that cross the management entity for all three ledgers, define another accounting setup that has no legal entities assigned as described in the following graphic and table.

the picture is described in the document text

Accounting Setup for Vision Management
Setup Description
Primary Ledger Vision Management
Chart of Accounts: Corporate
Calendar Monthly
Currency USD

By itself, this management ledger may not represent the complete accounting picture; it may hold only the management adjustments. You can keep the management adjustments completely separate from day-to-day transactions. In order to obtain a complete management picture to use for management reporting and analysis, use a ledger set to combine the results of the management ledger with the other ledgers that hold the day-to-day transactions. You can obtain a complete management view of the company when reporting on the ledger set.

Note: Ledger Sets group multiple ledgers together (that share the same chart of accounts and accounting calendar/period type combination) to obtain processing efficiencies, such as opening and closing periods and reporting across multiple ledgers simultaneously.

Note: Ledger Sets

Note: Make sure the ledger that is used for management reporting purposes shares the same chart of accounts, accounting calendar/period type combination, and currency as its associated ledger contained in another accounting setup to obtain meaningful results when combining the ledgers in a ledger set.

Note: Data access sets is a security feature in General Ledger that controls read only and read and write access to data in ledgers and ledger sets. It also limits access to specific balancing segment values or management segment values assigned to a ledger or ledger set.

Note: Oracle General Ledger Security

Using Accounting Setups with No Legal Entities for Consolidation Purposes

If you have different ledger attributes across accounting setups that are not standardized by chart of accounts, calendar, and currency, you can use the primary ledger of another accounting setup that has no legal entities assigned to act as the complete consolidation ledger. Perform balance transfer consolidations from the respective ledgers in the different accounting setups to this consolidation ledger and then enter consolidation adjustments directly in this ledger.

Designing the Chart of Accounts

If your company uses legal entities and wants the ability to identify legal entities during transaction processing, designate the balancing segment of the chart of accounts as the legal entity or company segment. This allows you to identify transactions per legal entity and take full advantage of the legal entity accounting features available, such as intercompany accounting.

If you have multiple legal entities that use different charts of accounts, it is recommended that you limit the number of value sets that you define for the balancing segment. This allows you to share the same value set across multiple charts of accounts and assign unique balancing segment values for each legal entity that is consistent across charts of accounts.

Feature Comparison by Accounting Setup

The number of legal entities assigned to an accounting setup affects different key features available in the E-Business Suite. Review the features in the following table to understand how different features are affected.

Accounting Setups
Feature One Legal Entity Assigned Multiple Legal Entities Assigned No Legal Entities Assigned
Open/Close GL Accounting Periods Legal entities can open/close periods at different times. All legal entities in a ledger must open/close periods at the same time. The standalone ledger can open/close periods independently.
Document Sequencing Legal entities can have autonomous document sequencing rules. All legal entities in a ledger must share the same document sequencing rules. The ledger can have autonomous document sequencing rules.
Multiple Legal Entity Journals No Journal entries can cross multiple legal entities. N/A
No legal entities exist.