Oracle® Fusion
Accounting Hub Implementation Guide 11g Release 1 (11.1.1.5.0) Part Number E20374-01 |
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This chapter contains the following:
Period Close Components: Explained
Manage Allocations and Periodic Entries
While implementing your accounting configuration, optionally define and maintain the period close components to customize your accounting configurations setup.
Period close components include allocations, period entries, revaluation, and historical rates.
If you use allocations, revaluation, or translation, configure the following tasks under the Define Period Close Components parent task in your implementation project:
Manage Allocations and Period Entries
Manage Revaluations
Manage Historical Rates
Manage Allocations and Period Entries is a manual task in the implementation project. Use the Allocation Manager to create allocations and other formulaic journal templates for generating periodic journal entries automatically. Base formulas on multiple criteria.
You must perform an external procedure outside the Setup and Maintenance work area to complete this task. In order to setup your allocations rules, navigate to the Journals work area and click the Create Allocations Rules task from the Tasks pane. This task navigates you to Allocation Manager, a framework that enables you define your allocation rules and formulas using a graphical interface and intuitive step-by-step wizards.
Defines currency revaluation options, such as the range of accounts to revalue and the gain or loss accounts. Revaluation is done to adjust foreign entered amounts due to currency fluctuations. Navigate to the Manage Revaluations page, and define and generate your revaluation definitions.
Historical rates are the weighted average rate for transactions that occur at different points in time. Used by the system to calculate the conversion rate on equity account balances during foreign currency translation of the balance sheet.
Navigate to the Currency Rates Manager page to define and maintain your historical rates that are used in the translation process. In Oracle Fusion General Ledger, you can currently define historical rates using an ADF Desktop Integrator spreadsheet.
To create new historical rates, specify the required Ledger and the other optional fields, as needed. Click the Create in Spreadsheet button to open the spreadsheet for uploading.
To update the existing historical rates for your ledgers, click the Edit in Spreadsheet button, the spreadsheet is prepopulated with the existing historical rates.
Note
Before using the historical rates spreadsheet, install the ADF Desktop Integrator client as an add on to Microsoft Excel.
In Oracle Fusion General Ledger, use the Allocation Manager to create allocations and other formulaic journal templates for generating periodic journal entries automatically. Base formulas on multiple criteria. For example, use account balances or statistical amounts to allocate shared revenue or costs across multiple organizational units and ledgers. Define complex computations based on variables from different charts of accounts. Group journal formulas together and execute sequentially to update account balances in a step-by-step process.
The Allocation Manager provides flexibility, automation, intelligence, and control in distributing costs and revenues across the enterprise. In addition, the Allocation Manager:
Distributes revenues or costs with recursive allocation rules
Creates complex formula rules using formula component
Contains an Allocation Wizard to define allocation and formula rules
Uses real time check of rule definitions to validate correctness of rules
Minimizes setup and maintenance time with reusable components
Simplifies allocation generation mechanism by integration with enterprise scheduler
Groups rules together in rule sets and cascading allocations for processing efficiencies
Creates primary, statistical, or foreign currency allocation and formula rules
Access the Allocation Manager from the Tasks pane of the General Accounting dashboard or Journals work area by clicking on the:
Define Allocation Rules link to define or modify allocation definitions
Generate Allocations link to run the allocation process
Note
For more information, see:
Hyperion Allocation Manager Release 11.1.2.1 Designer's Guide
This example demonstrates how to generate an allocation or periodic entry manually from the Oracle Fusion General Ledger.
You are the General Accountant for Infusion America Inc. You have created allocation and periodic journal entry definitions for several monthly entries. You now generate these entries.
Note
Schedule allocations and periodic entries in the Journals work area for automatic generation.
Prior to generating the allocation and periodic entries, the following tasks must be completed:
The period is set to Open or Future Enterable. You post in open periods, but generation can take place in either an open or future enterable period.
The rules or rules sets have been defined, validated, and deployed successfully from the Allocation Manager.
The journal balances, that are inputs for the allocation or periodic rules, are entered and posted in the proper period.
Print Output
E-mail me the output
Notify me when this process ends
If you deselect the check box for the Post Allocations option, you must post the entry manually or define an AutoPost Criteria Set to automatically post the journal entries.
After the generation process is complete, the journal entries created by the process are available for inquiry on the Journals page.
The revaluation process is used to adjust account balances denominated in a foreign currency. Revaluation adjustments represent the difference in the value of the balance due to changes in conversion rates between the date of the original journal entry and the revaluation date. These adjustments are posted through journal entries to the underlying account with the offset posted to an unrealized gain or loss account. All debit adjustments are offset against the unrealized gain account and all credit adjustments are offset against the unrealized loss account. If the same account is specified in the Unrealized Gain Account and Unrealized Loss Account fields, the net of the adjustments is derived and posted.
For balance sheet accounts, the revaluation journal entries are reversed in the next period. AutoReverse can be used to automate the reversals. For income statement accounts that use the PTD method of revaluation, the revaluation journal entries aren't reversed since each period's revaluation adjustment is just for that period.
In Oracle Fusion General Ledger, the revaluation functionality provides the following advantages:
Full multicurrency functionality to eliminate currency barriers across a global business
Predefined revaluation rules to ensure consistency in generation of revaluation entries each period
Usage of prevailing currency normalization accounting standards including:
US Financial Accounting Standards Board (FASB) Financial Accounting Statement No. 52 (FAS 52), Foreign Currency Translation
International Financial Reporting Standards (IFRS) International Accounting Standard No. 21 (IAS 21), The Effects of Changes in Foreign Exchange Rates
Support for multiple balancing segments to provide clarity in tracking the profitability and performance for more distinct segments of the your enterprise in any currency
When defining your revaluations, perform the following:
Include accounts for tracking gains and losses, currency conversion rates, and the number of transaction currencies to revalue.
Define separate revaluation definitions for each class of accounts, using a different rate type for each class.
Choose various conversion types and methodologies for different account ranges, such as current rates and year-to-date (YTD) method for balance sheet accounts, and average rates and period-to-date (PTD) method for income statement accounts.
Note
Income statement accounts can also be revalued using YTD method.
Hierarchies and flexible account selection criteria, such as usage of parent values from your account hierarchy, streamlines maintenance of revaluation definitions. Leveraging hierarchy versions extends your revaluation definitions during organizational changes. Adjust account selection criteria monthly to retrieve the accounts that need to be revalued for the current accounting period.
Share revaluation definitions across ledgers that have the same chart of accounts to reduce maintenance.
Generating revaluations include:
Using defined revaluation criteria and automatically generating entries to shorten your close process.
Selecting automatic posting as part of the generate revaluation criteria to help you to achieve processing efficiency.
Scheduling revaluations to run during off peak hours to save your system resources.
Utilizing date effective account hierarchies to generate revaluations to keep results in line with your current organization structures.
Always run revaluation to bring monetary balances to current rates before performing currency translation or remeasurement.
The Revalue Balances program automatically generates the Revaluation Execution report when you run revaluation. This report shows the details of your account balance revaluation and the journal batches created after running revaluation. The report includes the currencies and revaluation rates used to revalue your accounts, the unrealized gain or loss account in which you recorded net gains and losses, and the range of accounts revalued. The report also prints the names of your batch and journals that the revaluation program creates for each foreign currency, as well as the total debits and credits of the created entries.
If the Revaluation process cannot locate rates for one or more currencies, balances are not revalued for those currencies. In this case, the Revaluation process completes with a warning and the execution report lists which currencies are missing rates.
Revaluation launches a process that revalues the ledger currency equivalent balances for the accounts and currencies you select, using the appropriate current rate for each currency. Resulting unrealized gain or loss amounts are posted to the unrealized gain or loss accounts or to the cumulative translation adjustment (CTA) account you specify, and are balanced by balancing segment values. This process creates a revaluation journal which can be posted automatically.
Oracle Fusion General Ledger creates journal entries to adjust the ledger currency balances for conversion rate fluctuations, in accordance with Statement of Financial Accounting Standards (SFAS) No. 52, Foreign Currency Translation and International Accounting Standard (IAS) 21, The Effects of Changes in Foreign Exchange Rates.
The revaluation journal entries generated and posted in the primary ledger are automatically generated, converted, and posted to each of their reporting currencies. Define the CTA account for unrealized gains or losses in the reporting currency prior to running revaluation.
Revaluation is the process which adjusts asset or liability accounts that may be materially understated or overstated due to a fluctuation in the conversion rate between the time the transaction was entered and the time revaluation takes place. You may want to revalue income statement accounts as well. The Income Statement Accounts Rule indicates whether period-to-date (PTD) or year-to-date (YTD) method is to be used when revaluing income statement accounts.
Click the Income Statement radio buttons on the Create Revaluation page to specify whether you want to revalue income statement accounts using PTD or YTD balances. There are two radio buttons, one for PTD and one for YTD.
If you select to revalue PTD balances for income statement accounts, the program continues to appropriately revalue YTD balances for balance sheet accounts. In the revaluation definition if the range of accounts consists of both income statement and balance sheet accounts and you select PTD as an option for income statement account revaluation rule, a separate revaluation journal is created for the income statement accounts. Revaluing the PTD balance of your income statement accounts creates weighted average YTD balances using period rates from each corresponding period against the PTD account balance in compliance with the Statement of Financial Accounting Standards (SFAS) No. 52, Foreign Currency Translation.
To summarize, when you run revaluation on your income statement accounts, the program produces two separate journal entries; one that revalues your balance sheet accounts and another for your income statement accounts. You do not need to reverse the PTD revaluation journal entry for your income statement accounts in the subsequent period since that revaluation only applies to last period's activity.
Note
This functionality only applies when the range of accounts to be revalued in the revaluation definition consist of income statement accounts in addition to balance sheet accounts. Normally only balance sheets accounts are revalued.
This example demonstrates how to revalue foreign currency balances across multiple balancing segments. Your company, InFusion America, Inc. has three lines of business. You revalue your foreign currency account balances for two of your divisions, Air Components and Repair Parts. Your Installation Services line of business does not have foreign currency transactions. Your company is your primary balancing segment and your lines of business are represented in your secondary balancing segment.
Note
Enable up to three balancing segments to use the multiple balancing segment feature.
The following are points to consider in running the revaluation process.
Revaluation posts the resulting gain or loss amounts against the unrealized gain or loss accounts, substituting the balancing segment values appropriately for all balancing segments.
Gain or loss accounts and revaluation account ranges are not validated against your data access set security when the revaluation definition is created because the ledger context is not known at the time of definition.
Data access set security is enforced when the Revalue Balances program is executed. Limited write access to the gain or loss accounts due to inadequate access results in an error.
Segment value security rules are enforced when you enter the account ranges and the unrealized gain and loss accounts. Only segment values you have access to are available in the list of values.
Account ranges you have read and write access to are revalued. Account combinations that you do not have access to are ignored.
Revaluation expands all parent balancing segments to the child values. Data access set security applies to the child values only, not the parent value.
Posting supports multiple balancing segments for calculating the entry to the Cumulative Translation Adjustment accounts when replicating revaluation journals to reporting currencies.
Field |
Value |
---|---|
Name |
InFusion America Revaluation |
Description |
Revaluation for all foreign currency balances. |
Chart of Accounts |
InFusion America Chart of Accounts |
Currency |
Leave blank Note If left blank, all currencies are revalued and after saving, the field automatically displays: All currencies. |
Conversion Rate Type |
Daily |
Days to Roll Forward |
5 |
Unrealized Gain Account |
011-00-96600000-0000-000-000 |
Unrealized Loss Account |
011-00-96700000-0000-000-000 |
Income Statement Account Basis |
PTD |
Post Automatically |
Yes |
Field |
Value |
---|---|
Equals |
011 |
Note: Your Installation Services line of business, 50, is not included because it does not have foreign currency transactions.
Field |
Value |
---|---|
Between |
30 |
40 |
Field |
Value |
---|---|
Between |
10000000 |
29999999 |
Optionally, select the Save and Generate buttons to run the revaluation immediately.
For all ledgers, primary, secondary, and journal and subledger level reporting currencies, open the first period of the ledger when you are ready to transact in that period.
To open the first period of your ledgers, navigate to the Open First Period task in the primary ledger task list and click the Go to Task icon. On the submission page, select the ledger and the period to open. Click the Submit button to launch the open period process.
There are other ways to open the first period or subsequent periods without going into the Setup and Maintenance work area. You can maintain the ledgers' period statuses from the:
Close Status region in the General Accounting Dashboard. The Close Status region provides real time visibility into the period close process from your subledgers to your General Ledger across the entire enterprise.
Manage Accounting Periods task in the Period Close work area.
Process Monitoring work area, which provides a framework for launching, monitoring and maintaining processes across Oracle Fusion Financials.