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Oracle Lease and Finance Management User's Guide
Release 12.1
Part Number E13583-05
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Accounting Integration

Accounting Integration Overview

The Oracle Lease and Finance Management accounting process is the result of the integration of several different applications within the Oracle E-Business Suite. In Lease and Finance Management, a transaction is created, associated to a newly generated Subledger Journal, and posted to the Primary Ledger. The following table describes a high level overview of this process.

Oracle Lease and Finance Management Accounting Business Process
Step    
Create Transaction Lease and Finance Management You create an accounting transaction.
Accounting Event Lease and Finance Management Lease and Finance Management evaluates the accounting templates and creates an accounting event.
Create Subledger Journal Lease and Finance Management Subledger Accounting takes the accounting event data and transaction sources, evaluates accounting definitions, and creates a Subledger Journal.
To create a Subledger Journal, you must run the Create Accounting program in Lease and Finance Management.
Create Primary Ledger Journal General Ledger The Subledger Journal is transferred to the Primary Ledger and the process creates the General Ledger Journal.

Lease and Finance Management Transaction Accounting

Lease and Finance Management lease and loan contract transactions can be accounted in different applications of the E-Business Suite. The following sections describe the different categories of Lease and Finance Management transactions.

Lease and Finance Management Transactions

Transactions such as booking, rebook, accrual, and termination are created in Lease and Finance Management. Lease and Finance Management creates an accounting event corresponding to each transaction. The accounting events are processed by running the Create Accounting concurrent program to create a subledger journal. After the subledger journal is created, you must run the General Ledger transfer program to transfer the subledger journal to General Ledger for posting.

For more information on Lease and Finance Management transaction accounting, see Lease and Finance Management Subledger Accounting Flow.

Receivables Transactions

Billing and credit memo transactions created in Lease and Finance Management are interfaced to Oracle Receivables to generate invoices and credit memos. Receipts entered in Lease and Finance Management through the Manual Receipt or Batch Receipt methods, or in Receivables through the Lockbox method, are created in Receivables. You can use any of the methods to create a receipt in Receivables and apply it to the contract invoices. Receipt application and invoice adjustment transactions are also created in Receivables.

All Receivables transactions are accounted in Receivables. After transaction data is imported into Receivables, you must run the Create Accounting program in Receivables to create a subledger journal. After the subledger journal is created, you must run the General Ledger transfer program to transfer the subledger journal to General Ledger for posting.

For more information on Lease and Finance Management transaction accounting, see Lease and Finance Management Subledger Accounting Flow.

Payables Transactions

Payables transactions such as funding, disbursements, and debit memos created in Lease and Finance Management are interfaced to Oracle Payables to generate Payables invoices or debit memos. Payments are created in Payables.

After transaction data is imported into Payables, you must run the Create Accounting program in Payables to create a subledger journal. After the subledger journal is created, you must run the General Ledger transfer process to transfer the subledger journal to General Ledger for posting

For more information on Lease and Finance Management transaction accounting, see Lease and Finance Management Subledger Accounting Flow.

Asset Transactions

Asset-related transactions resulting from any operation on a contract or asset in Lease and Finance Management are created in Oracle Assets in the corporate book that is associated with the primary ledger in Lease and Finance Management. Examples of the asset transactions created are asset addition, asset adjustment, and retirement. When asset transactions are created in Lease and Finance Management, corresponding transactions are created in Assets. Depreciation transactions are created in Assets by running the Run Depreciation program in Oracle Assets.

After transactions are created in Assets, you must run the Create Accounting program to create a subledger journal in Assets. After the subledger journal is created, you must run the General Ledger transfer program to transfer the subledger journal to General Ledger for posting.

For more information on Lease and Finance Management transaction accounting, see Lease and Finance Management Subledger Accounting Flow.

Components of Lease and Finance Management Accounting

The primary components of the accounting process in Lease and Finance Management are as follows:

  1. Ledgers

  2. Subledger Accounting

  3. Source Transactions and Accounting Sources

Ledgers

A ledger is a set of accounting information for a legal or business entity. Each ledger is associated with a chart of accounts, calendar, currency, and subledger accounting method for which accounting information is recorded

The primary ledger is the main accounting representation. A primary ledger can have secondary ledgers associated with it. Secondary ledgers are an alternative representation of the accounting with a different accounting treatment than the primary ledger for a legal or business entity.

Multiple ledgers can be defined and grouped in a ledger set. For more information on ledgers, see Oracle General Ledger User Guide.

Subledger Accounting

Subledger Accounting provides a common accounting infrastructure for accounting setup for accounting transactions in the Oracle E-Business Suite and is a repository for subledger journal information. For information on subledger accounting, see Oracle Subledger Accounting Implementation Guide.

Source Transactions and Accounting Sources

Transactions are generated in E-Business suite applications like Lease and Finance Management, Receivables, and Payables. The transactions are accounted in subledger using the accounting setup and transaction information. The accounting source is pieces of transaction information that is available for configuring accounting for the transaction and deriving the entire subledger journal. The flexibility of Lease and Finance Management allows multiple accounting configurations to meet the differing requirements of lessors.

For more information on Lease and Finance Management accounting configuration, see Oracle Lease and Finance Management Implementation Guide.

Setup Considerations for Lease and Finance Management Accounting

Setup Considerations Overview

Lease and Finance Management has the flexibility to configure accounting for many different business scenarios depending upon the requirements of the lessor. Before initiating the setup of Lease and Finance Management accounting, lessors should review the following key accounting considerations to determine their best option.

  1. Should transactions be accounted in a single ledger or in multiple ledgers?

  2. Can the account code be derived based on a limited number of sources associated with the accounting template, or will additional sources beyond those associated with the accounting template be required?

For a general overview of accounting in Oracle Financials applications, see Accounting with Oracle Financials Applications, Oracle Financials Concepts Guide.

Single or Multiple Ledgers

Lessors can operate within a single country or in multiple countries. If you are operating in a single country, all transactions may be accounted in a single ledger.

However, when you operate in multiple countries, you can account for the lease and loan contract transactions in more than one ledger. For example, one ledger may be used to generate financial reports in the country where the contract is executed, and another ledger for financial reports in the country where the worldwide headquarters are based.

For accounting in a single ledger, define one primary ledger in Oracle General Ledger. For accounting in multiple ledgers, define one primary ledger with multiple secondary ledgers in Oracle General Ledger.

Customers upgrading from prior versions will have the set of books automatically converted into a Primary Ledger.

Limited or Expanded Lease Transaction Elements

Lessors may have different requirements for deriving their account codes. You may require a large number of lease elements for configuring account codes or you may prefer limited configurability and predefined values for account codes. To provide for these different requirements, Oracle Lease and Finance Management provides the following two accounting options:

Contract Level Accounting Review

Some lessors require review of the accounting trial balance for each contract. All accounting created in Lease and Finance Management, Receivables, Payables, and Assets can be reviewed at the contract level with Subledger Accounting’s Supporting Reference functionality by defining the contract number as the supporting reference, and associating it with each subledger journal.

The additional setups to be done for this functionality are detailed in the Oracle Subledger Accounting Implementation Guide.

For information on Supporting Reference, see the Oracle Subledger Accounting Implementation Guide.

Lease and Finance Management Accounting Options

Lease and Finance Management Accounting Options Overview

Lease and Finance Management provides the following two options for deriving accounting codes:

The accounting option can be changed one time from ATS to AMB. However, once the option is set as AMB, it cannot be changed to ATS. During new implementation, the default value for accounting option is AMB.

Accounting Template Set

Account codes are derived for Lease and Finance Management transactions using the Accounting Template Set. Accounting codes are defined on the Accounting Template Lines. The codes can be predefined or derived by using the Account Generator.

The account codes derived in Lease and Finance Management are sent to Subledger Accounting as default accounts. Seeded AMB setup is designed to derive the default account code supplied by Lease and Finance Management as the source for the accounting transaction.

Account Method Builder

For greater flexibility in deriving account codes, lessors can select the AMB accounting option. This option allows lessors to set up accounting rules in the Accounting Method Builder. These rules can use the Accounting Sources of Oracle Lease and Finance Management to provide a greater number of lease elements for configuring account codes.

With the AMB accounting option, Lease and Finance Management Accounting Template Lines are not used. Instead, lease-specific accounting sources are used to derive account codes. Accounting from Receivables, Payables, and Assets can also use lease-specific accounting sources. If the accounting option is set to AMB, you cannot change to the ATS accounting option.

Integration with Subledger Accounting

Integration with Subledger Accounting Overview

Oracle Lease and Finance Management fully integrates with Subledger Accounting so that you can create accounting for your lease contract transactions. Subledger Accounting is an intermediate step between several Oracle applications, including Lease and Finance Management, Oracle Payables, Oracle Receivables, and Oracle Assets, on one side and Oracle General Ledger on the other. Subledger Accounting creates the General Ledger journals for subledger journal entries and transfers the accounting to General Ledger. Subledger Accounting stores a complete and balanced subledger journal entry in a common data model for each business event that requires accounting. In addition, Subledger Accounting can create more than one accounting representation for each transaction.

Subledger Accounting provides a uniform approach to accounting that enables you to configure accounting rules for applications that require accounting. It includes a common user interface and a set of programs that can generate accounting for Oracle applications. When you set up rules in Subledger Accounting, you can define the types of journal lines, descriptions, and account codes used for each journal line. Subledger Accounting partitions data by application, while storing the information in a common model.

Lease and Finance Management generates transactions and accounting events for each transaction, and the Create Accounting Process takes the accounting event and generates the subledger journal entries using the accounting sources and accounting setup information. For more information on Lease and Finance Management accounting options, see Lease and Finance Management Accounting Options.

For an overview of subledger accounting in Oracle Financials, see Subledger Accounting in Oracle Financials, Oracle Financials Concept Guide.

For a detailed explanation of Oracle Subledger Accounting business process, see the Oracle Subledger Accounting Implementation Guide.

Lease and Finance Management Event Model

Lease and Finance Management generates accounting events for transactions that have a financial accounting impact. The Create Accounting process generates subledger journal entries for the accounting events. For example, when a contract is booked, the booking transaction is generated. When the transaction is generated, Lease and Finance Management creates an accounting event for the booking of the transaction. Next, you run the Create Accounting process to generate accounting entries for the accounting events in Subledger Accounting.

Lease and Finance Management has seeded the Application Event Model. Lease and Finance Management creates accounting events for each transaction using the Lease and Finance Management event model. Subledger Accounting processes the accounting events to generate subledger journals based on the AMB setup for the components of an event model. The same event model is also used by Oracle E-Business Tax for tax determination and tax calculation. The event model has the following three components.

Event Entity

An accounting event entity enables Oracle Subledger Accounting to handle the accounting for similar business events in a consistent manner. Lease and Finance Management predefines the following seven accounting event entities.

Event Class

Each event entity is associated with one or more event classes. An event class represents a category of business events for a particular transaction type or document. For example, some of the event classes that Lease and Finance Management predefines within the event entity Contracts include Booking, Rebook, and Termination. Event classes group similar event types and enable the sharing of accounting definitions.

Event Type

An event type represents a business operation that you can perform for an event class. An accounting event has both an event class and an event type that affect how the Create Accounting process determines the subledger accounting. Event types provide the lowest level of detail for storing accounting definitions. For example, the Lease and Finance Management event class Booking is subject to six types of business operations that are represented by the following event types: Booking Create, Booking Cancel, Booking Delete, Booking Update, Booking Tax Override, and Booking Reverse.

Relationship between Lease and Finance Management Transactions and the Event Entity Model

Oracle Lease and Finance Management provides a predefined set of event classes and event types for each accounting event entity. The following tables describe the relationship between Lease and Finance Management transactions and the Lease and Finance Management Event Entity Model.

Event Entity Event Class Lease and Finance Management Transaction Type Event Type Accounting Enabled Tax Enabled
Transactions Accrual Accrual Accrual Create Yes No
Transactions Accrual Accrual Accrual Reverse Yes No
Transactions General Loss Provision General Loss Provision General Loss Provision Create Yes No
Transactions General Loss Provision General Loss Provision General Loss Provision Reverse Yes No
Transactions Specific Loss Provision Specific Loss Provision Specific Loss Provision Create Yes No
Transactions Specific Loss Provision Specific Loss Provision Specific Loss Provision Reverse Yes No
Transactions Receipt Application Receipt Application Receipt Application Create Yes No
Transactions Principal Adjustment Principal Adjustment Principal Adjustment Create Yes No
Assets Asset Relocation Asset Relocation Asset Relocation Create No Yes
Assets Asset Relocation Asset Relocation Asset Relocation Cancel No Yes
Assets Asset Relocation Asset Relocation Asset Relocation Delete No Yes
Assets Asset Relocation Asset Relocation Asset Relocation Tax Override No Yes
Assets Asset Relocation Asset Relocation Asset Relocation Update No Yes
Contracts Booking Booking Booking Create Yes Yes
Contracts Booking Booking Booking Reverse Yes No
Contracts Booking Booking Booking Cancel No Yes
Contracts Booking Booking Booking Delete No Yes
Contracts Booking Booking Booking Tax Override No Yes
Contracts Booking Booking Booking Update No Yes
Contracts Rebook Rebook Rebook Create Yes Yes
Contracts Rebook Rebook Rebook Reverse No Yes
Contracts Rebook Rebook Rebook Cancel No Yes
Contracts Rebook Rebook Rebook Delete No Yes
Contracts Rebook Rebook Rebook Tax Override No Yes
Contracts Rebook Rebook Rebook Update No Yes
Contracts Release Release Release Create Yes Yes
Contracts Termination Termination Termination Create Yes No
Contracts Upfront Tax Upfront Tax Upfront Tax Create Yes Yes
Contracts Upfront Tax Upfront Tax Upfront Tax Reverse Yes Yes
Contracts Asset Disposition Asset Disposition Asset Disposition Create Yes No
Contracts Evergreen Evergreen Evergreen Create Yes No
Contracts Split Asset Split Asset Split Asset Create Yes No
Investor Agreements Investor Investor Investor Create Yes No
Sales Quotes Sales Quote Sales Quote Sales Quote Create No Yes
Tax Schedule Requests Tax Schedule Tax Schedule Tax Schedule Create No Yes
Asset Management Quotes Estimated Billing Estimated Billing Estimated Billing Create No Yes

Accounting Sources

Accounting sources are pieces of information that Oracle Subledger Accounting uses to determine how to create accounting for an accounting event. Sources are a key component for setup in the Account Method Builder (AMB). You use sources to provide information about transactions to Subledger Accounting. For example, Lease and Finance Management predefines such sources as Contract Number, Book Classification, Transaction Type, and others

Lease and Finance Management assigns each set of sources to either an event entity or an event class to make them available for the creation of subledger journal entries. The sources assigned to the event class are available for all the event types associated with the event class.

Lease and Finance Management also assigns the predefined sources to accounting attributes. Accounting attributes are values that the Create Accounting process requires to create subledger journal entries. The Create Accounting process uses the sources assigned to the accounting attributes to determine the values of the accounting attributes.

You can use the Accounting Methods Builder to review source assignments and accounting attribute assignments for each event class. For additional information on AMB, see Oracle Subledger Accounting Implementation Guide.

When a transaction is created in Lease and Finance Management for an event class, Lease and Finance Management determines the values for each source that is assigned to the event class and makes them available at the time of journal entry generation. The Create Accounting program uses source values to evaluate the setup for the components of the Application Accounting Definition in AMB to create the subledger journal.

Lease and Finance Management seeds a wide variety of sources to provide maximum flexibility in creating accounting definitions. Using these seeded sources, you can create unique accounting definitions to match your accounting needs.

Following is an example of how source values can be used to derive accounting: The Accounting Rule defined by the user:

Based on the above accounting rule, if the transaction has a source value for the Sales Representative as John Smith, then the account code used is 50016.

Lease and Finance Management Subledger Accounting Flow

Lease and Finance Management ATS Subledger Accounting Flow

Oracle Lease and Finance Management provides the two accounting options of ATS and AMB. When the accounting option is ATS, the Lease and Finance Management Accounting Template Set is used to derive the account codes. These account codes are then passed, along with the transaction, as a source value. Subledger journals are created using seeded accounting rules in subledger accounting and the default account codes.

The following table describes what happens when an accounting transaction is created in Lease and Finance Management.

Lease and Finance Management ATS Subledger Accounting Flow
Event Description
Create Transaction You create an accounting transaction in Lease and Finance Management and a call is made to the Lease and Finance Management accounting engine.
Accounting Template Evaluated The applicable accounting template is evaluated.
Amount Derived From Formula An amount is derived from a formula, if applicable. This occurs only for transactions where the amount is derived using formulas, like Booking.
Account Codes Derived Since the account derivation option is ATS, the accounting engine evaluates the accounting template lines and provides the template line CCID as a source.
Accounting Event Created An accounting event is created for the transaction.
Create Journals To create journals, you must run Subledger Accounting’s Create Accounting program.
Accounting Events Processed When the Subledger Accounting Create Accounting program is run, it identifies the accounting events that need to be processed.
Transaction Object Loaded The process loads the transaction object and selects the sources.
Accounting Rules Evaluated Seeded Lease and Finance Management accounting rules are evaluated.
Subledger Journals Created Subledger journals are created using the Accounting Flexfield CCID from the transaction data.
Journal Transferred The journal is then transferred to General Ledger.

Lease and Finance Management ATS Transactions

The following table describes the accounting flow for ATS transactions originating in Lease and Finance Management and accounted in Subledger Accounting.

Accounting Flow for ATS Transactions in Lease and Finance Management
Action Application
Create Accounting Transactions Lease and Finance Management
Call Accounting Engine Lease and Finance Management
Evaluate Accounting Template Lease and Finance Management
Derive Amount Lease and Finance Management
Derive Account Codes Lease and Finance Management
Create Accounting Distributions Lease and Finance Management
Capture Accounting Sources (including Account Codes) Lease and Finance Management
Create Accounting Event Lease and Finance Management
Identify Accounting Event Subledger Accounting
Select Sources Subledger Accounting
Evaluate Seeded Accounting Rules Subledger Accounting
Create Subledger Journal (with Lease and Finance Management Account Codes) Subledger Accounting
Transfer to General Ledger Subledger Accounting

Lease and Finance Management ATS Transactions Through Oracle Payables

The following table describes the accounting flow for ATS transactions originating in Lease and Finance Management and interfaced to Oracle Payables.

Accounting Flow for ATS Transactions in Lease and Finance Management Through Payables
Action Application
Create Billing Transactions Lease and Finance Management
Call Accounting Engine Lease and Finance Management
Evaluate Accounting Template Lease and Finance Management
Derive Account Codes Lease and Finance Management
Create Distributions (with Template CCID) Lease and Finance Management
Capture Accounting Sources Lease and Finance Management
Populate Payables Interface Table Lease and Finance Management
Submit Invoice Import Program Payables
Create Invoice Payables
Use CCID from Interface Payables
Populate Transaction Objects with Payables and Lease and Finance Management Sources Payables
Create Accounting Event Payables
Identify Accounting Events Subledger Accounting
Load Transaction Objects Subledger Accounting
Select Source Values from Transaction Objects Subledger Accounting
Use Sources and Apply Accounting Definitions Subledger Accounting
Create Subledger Journal Subledger Accounting
Transfer to General Ledger Subledger Accounting

Lease and Finance Management ATS Transactions Through Oracle Receivables

The following table describes the accounting flow for ATS transactions originating in Lease and Finance Management and interfaced to Oracle Receivables.

Accounting Flow for ATS Transactions in Lease and Finance Management Through Payables
Action Application
Create Billing Transactions Lease and Finance Management
Call Accounting Engine Lease and Finance Management
Evaluate Accounting Template Lease and Finance Management
Derive Account Codes Lease and Finance Management
Create Distributions (with Template CCID) Lease and Finance Management
Capture Accounting Sources Lease and Finance Management
Populate Receivables Interface Table Lease and Finance Management
Submit Auto Invoice Program Receivables
Create Invoice Receivables
Use CCID from Interface Receivables
Populate Transaction Objects with Receivables and Lease and Finance Management Sources Receivables
Create Accounting Event Receivables
Identify Accounting Events Subledger Accounting
Load Transaction Objects Subledger Accounting
Select Source Values from Transaction Objects Subledger Accounting
Use Sources and Apply Accounting Definitions Subledger Accounting
Create Subledger Journal Subledger Accounting
Transfer to General Ledger Subledger Accounting

Lease and Finance Management AMB Subledger Accounting Flow

When the accounting option is AMB, the Lease and Finance Management Accounting Template Lines are not used. Instead, you define accounting rules using the AMB tool in Subledger Accounting. Subledger journals are created using the source values of the transaction and the user-defined accounting rules.

The following table describes what happens when an accounting transaction is created in Lease and Finance Management.

Lease and Finance Management AMB Subledger Accounting Flow
Event Description
Create Transaction You create an accounting transaction in Lease and Finance Management and a call is made to the Lease and Finance Management accounting engine.
Accounting Template Evaluated The applicable accounting template is evaluated.
Amount Derived From Formula An amount is derived from a formula, if applicable. This occurs only for transactions where the amount is derived using formulas, like Booking.
Source Values Captured The accounting source values are captured.
Accounting Event Created An accounting event is created for the transaction.
Create Journals To create journals, you must run Subledger Accounting’s Create Accounting program.
Accounting Events Processed When the Subledger Accounting Create Accounting program is run, it identifies the accounting events that need to be processed.
Transaction Object Loaded The process loads the transaction object and selects the sources.
Transaction Sources Selected The transaction sources are selected from the transaction object.
Accounting Rules Evaluated User-defined accounting rules are evaluated.
Subledger Journals Created Subledger journals are created using the source values passed with the transaction.
Journal Transferred The journal is then transferred to General Ledger.

Lease and Finance Management AMB Transactions

The following table describes the accounting flow for AMB transactions originating in Lease and Finance Management and accounted in Subledger Accounting.

Accounting Flow for AMB Transactions in Lease and Finance Management
Action Application
Create Accounting Transactions Lease and Finance Management
Call Accounting Engine Lease and Finance Management
Evaluate Accounting Template Lease and Finance Management
Derive Amount Lease and Finance Management
Capture Accounting Sources Lease and Finance Management
Create Accounting Event Lease and Finance Management
Identify Accounting Event Subledger Accounting
Select Sources Subledger Accounting
Evaluate User-Defined Accounting Rules Subledger Accounting
Create Subledger Journal Subledger Accounting
Transfer to General Ledger Subledger Accounting

Lease and Finance Management AMB Transactions Through Oracle Payables

The following table describes the accounting flow for AMB transactions originating in Lease and Finance Management and interfaced to Oracle Payables.

Accounting Flow for AMB Transactions in Lease and Finance Management Through Payables
Action Application
Create Billing Transactions Lease and Finance Management
Call Accounting Engine Lease and Finance Management
Capture Accounting Sources Lease and Finance Management
Populate Payables Interface Table Lease and Finance Management
Submit Invoice Import Program Payables
Create Invoice Payables
Populate Transaction Objects with Payables and Lease and Finance Management Sources Payables
Create Accounting Event Payables
Identify Accounting Events Subledger Accounting
Load Transaction Objects Subledger Accounting
Select Source Values from Transaction Objects Subledger Accounting
Evaluate User-Defined Accounting Rules Subledger Accounting
Create Subledger Journal Subledger Accounting
Transfer to General Ledger Subledger Accounting

Lease and Finance Management AMB Transactions Through Oracle Receivables

The following table describes the accounting flow for AMB transactions originating in Lease and Finance Management and interfaced to Oracle Receivables.

Accounting Flow for AMB Transactions in Lease and Finance Management Through Payables
Action Application
Create Billing Transactions Lease and Finance Management
Call Accounting Engine Lease and Finance Management
Capture Accounting Sources Lease and Finance Management
Populate Receivables Interface Table Lease and Finance Management
Submit Auto Invoice Program Receivables
Create Invoice Receivables
Populate Transaction Objects with Receivables and Lease and Finance Management Sources Receivables
Create Accounting Event Receivables
Identify Accounting Events Subledger Accounting
Load Transaction Objects Subledger Accounting
Select Source Values from Transaction Objects Subledger Accounting
Evaluate User-Defined Accounting Rules Subledger Accounting
Create Subledger Journal Subledger Accounting
Transfer to General Ledger Subledger Accounting

Subledger Accounting Setup

Any accounting event created in an Oracle application is accounted in Oracle Subledger Accounting with the entered accounting definitions. Before Subledger Accounting can be utilized, all accounting for subledgers must be set up. For detailed information on how to set up accounting definitions for Subledger Accounting, see Oracle Subledger Accounting Implementation Guide.

Multi-GAAP Accounting

Multi-GAAP Accounting Overview

Large leasing business organizations with multinational operations may be required to account and report results of their operations using multiple sets of accounting principles called Generally Accepted Accounting Principles (GAAP). For example, in addition to reporting the results of operations as per the local GAAP, multinational leasing organizations may be required to prepare their accounting reports as per the GAAP applicable in the home country of the parent company for consolidation. In the leasing business, this accounting is more complex because the accounting scheme may change across different geographic regions, and the rules that determine the lease classification of the contract may also be different.

The Oracle Lease and Finance Management (OLFM) Multi-GAAP accounting feature addresses the varied accounting and reporting needs of the leasing business organization operating across multiple countries. The Multi-GAAP accounting feature enables multinational companies to generate two accounting representations of the contract transaction using two sets of GAAP. Multi-GAAP leverages the architecture of subledger accounting (SLA) and Ledger to generate accounting in the primary ledger and one associated secondary ledger, each automatically using different GAAP.

For example, a single contract can be an Operating Lease as per local laws and Finance Lease as per laws applicable to the parent company. With Multi-GAAP accounting, you can define accounting rules to generate accounting in primary ledger (local ledger) as per local laws and in secondary ledger (parent company ledger) as per the laws applicable to parent company.

OLFM offers the following Multi-GAAP accounting options:

Automatic Multi-GAAP Accounting

Automatic Multi-GAAP accounting in OLFM enables you to book a contract that is accounted in two ledgers, one primary ledger and one associated secondary ledger. This is achieved by associating the contract with a financial product which has a reporting product. The financial product determines the accounting in primary ledger and the reporting product determines the accounting in secondary ledger based on system options setups for representations and asset books. Each ledger has its own separate subledger accounting method by which contract transactions are processed for accounting. The Chart of Accounts and Currency associated with the primary and secondary ledgers must be the same due to Oracle Assets requirements.

The various processes, such as booking, billing, accrual, and terminations create transactions. OLFM and Oracle Assets, which are registered as valuation applications in SLA, create separate transactions for each ledger. Oracle Receivables and Oracle Payables, which are registered as non-valuation applications in SLA, create a single transaction for primary ledger and all secondary ledgers.

These transactions are then processed by the Create Accounting concurrent program in the respective applications and generate subledger journals for each ledger using the subledger accounting method automatically associated to the individual ledger. Accounting in both primary and secondary ledgers is generated by OLFM. Journals are then posted in each ledger.

OLFM has the following two options for generating the account codes for contract transactions:

Generate Default Account Codes in OLFM

This section consists of the following topics:

Generate Default Account Codes in OLFM Overview

When you generate default account codes in OLFM, the default account codes are derived based on the accounting template set associated with the financial product and passed to SLA as a source. The account code source, along with other sources, are is available for defining conditions in the Account Derivation Rules setup in SLA, and these rules are evaluated when transactions are processed by the Create Accounting concurrent program.

This method involves less manual intervention and cost for creating accounting in the secondary ledger compared to the manual Multi-GAAP accounting option. However, this method requires a higher maintenance cost for accounting template set setup.

You can switch to the Multi-GAAP accounting option where account codes are generated in SLA by changing the Account Derivation Method to Account Method Builder (AMB).

Generate Default Account Codes in OLFM Setup

Before you can generate default account codes in OLFM, you must complete the following setup tasks:

For information on these set up tasks, see Accounting Options, Oracle Lease and Finance Implementation Guide.

Generate Default Account Codes in OLFM Process

To generate accounting in primary and secondary ledgers in OLFM, perform the following tasks:

Generate Account Codes in SLA

This section consists of the following topics:

Generate Account Codes in SLA Overview

When you generate account codes in SLA, the account codes are derived based on the subledger accounting method associated to the ledger. In this method, no account code is generated in OLFM, and thus an OLFM account code is not available as a source for the Account Derivation Rules setup. But all other accounting sources are available for defining conditions in the Account Derivation Rules setup, and these sources are evaluated when transactions are processed by the Create Accounting concurrent program.

Generating account codes in SLA involves less manual intervention and cost for creating accounting in the secondary ledger when compared to the manual Multi-GAAP accounting option. However, this method requires the additional task of setting up the subledger accounting method for the secondary ledger and maintaining both subledger accounting methods for primary and secondary ledgers.

You cannot change the Account Derivation Method from AMB to Accounting Template Set.

Generate Account Codes in SLA Setup

Before you can generate account codes in SLA, you must complete the following setup tasks:

For information on these set up tasks, see Accounting Options, Oracle Lease and Finance Implementation Guide.

Generate Account Codes in SLA Process

To generate accounting in primary and secondary ledgers in SLA, perform the following tasks:

Manual Multi-GAAP Accounting

You can choose to perform manual Multi-GAAP accounting in a secondary ledger. With this method, you use the Multi-GAAP Adjustment Report to determine the accounting adjustments to be manually entered in the secondary ledger. This method gives you manual control over all Multi-GAAP adjustments, but is more time-consuming. Accounting in the primary ledger is generated by running the Create Accounting concurrent program.

Manual Multi-GAAP accounting gives you manual control over the secondary ledger accounting, but requires more manual intervention.

For information on manual Multi-GAAP accounting in OLFM, see Generate Multi-GAAP Adjustment Report.

Secondary Representation Transaction Accounting

If an operating unit is enabled for automatic accounting, then OLFM performs additional processing to create secondary representation transactions and accounting of the secondary representation transactions in secondary ledger, along with processing the transactions created for the primary representation. The transaction type determines how the secondary representation transaction is processed and how the accounting amounts are derived.

The following table describes secondary representation transactions.

Secondary Representation Transaction Processing
OLFM Transaction Types Account Derivation Method Secondary Representation Transaction Generated Transaction Application Account Codes Generated in OLFM for Primary or Secondary Representation Basis of Amount Determination for Secondary Representation Transaction Sources Generated in OLFM for Primary Representation Transaction Sources Generated in OLFM for Secondary Representation Transaction
Booking, Rebook, Termination, Release, Renewal, Asset Disposition, Split Asset, Evergreen, Formula based Accrual transaction Accounting Template Set Yes OLFM Yes Formula defined on the accounting template for reporting product Yes Yes
Booking, Rebook, Termination, Release, Renewal, Asset Disposition, Split Asset, Evergreen, Formula based Accrual transactions Accounting Method Builder Yes OLFM No Formula defined on the accounting template for reporting product Yes Yes
General Loss Provision, Special Loss Provision, Receipt Application, Principal Adjustment, Upfront tax, Investor Accounting Template Set Yes OLFM Yes Secondary transaction Amount is the same as the primary transaction amount Yes Yes
General Loss Provision, Special Loss Provision, Receipt Application, Principal Adjustment, Upfront tax, Investor Accounting Method Builder Yes OLFM No Secondary transaction Amount is the same as the primary transaction amount Yes Yes
Non-formula based Accrual transactions Accounting Template Set Yes OLFM Yes Formula defined on the accounting template for reporting product Yes Yes
Non-formula based Accrual transactions Accounting Method Builder Yes OLFM No Formula defined on the accounting template for reporting product Yes Yes
Billing (Receivables Invoices), disbursement, funding (payable invoices) Credit Memo, Debit Memo Accounting Template Set No Oracle Receivables or Oracle Payables Account codes are generated for primary but not generated for secondary representation No secondary representation transaction generated Limited sources are passed to AR/AP No
Receivables Invoices and payable invoices Accounting Method Builder No Oracle Receivables or Oracle Payables No No secondary representation transaction generated Limited sources are passed to AR/AP No
Receipts and payments Accounting Template Set No Oracle Receivables or Oracle Payables No No secondary representation transaction generated Only related Invoice sources are available at the time of application No