Accounting Setup Examples
This appendix covers the following topics:
- Introduction
- Accounting Setup with Multiple Legal Entities – U.S. Only Operations
- Accounting Setup – North American Company
- Accounting Setup – European Operations
- Accounting Setup - Latin America Operations
- Accounting Setup with No Legal Entities - Consolidation Example
- Management Reporting Example - U.S. Only Operations
Introduction
This appendix provides comprehensive examples for different accounting environment type that you can create using Accounting Setup Manager (ASM). The examples relate to a company called Outdoor Outfitters, a U.S.-based retail apparel company implementing the E-Business Suite. Each example builds upon Outdoor Outfitters' changing business needs as they move from being a U.S. only retail establishment to one that operates in Canada and then Europe and Brazil.
Each accounting setup example describes the recommended implementation options, such as the number of ledgers, balancing segment value assignment issues, security issues, and consolidation issues.
Accounting Setup with Multiple Legal Entities – U.S. Only Operations
Outdoor Outfitters, a U.S. based retail apparel company, wants to use a single instance of Oracle Applications. It has two legal entities located in the U.S., U.S. East, and U.S. West. Both of these legal entities operate in a country that does not enforce strict rules regarding tax and document sequencing. Both legal entities can also share the same chart of accounts, accounting calendar (that is based on the fiscal year end of January 31), currency, subledger accounting method, and ledger processing options.
This section includes the following parts:
Additional Requirements
The following requirements apply to this example:
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Outdoor Outfitters uses a combination of third-party systems and Oracle financial applications.
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Outdoor Outfitters wants to use the five-segment chart of accounts structure for their corporate chart of accounts described in the following table.
Chart of Accounts Segment Number Segment Name Segment Qualifier 1 Legal Entity Balancing Segment 2 Department Cost Center 3 Account Natural Account 4 Product 5 Future Use
The following table outlines the ledger requirements for each of the U.S. legal entities.
| Legal Entity | Chart of Accounts | Calendar | Primary Currency | Subledger Accounting Methods | Ledger Processing Options |
|---|---|---|---|---|---|
| U.S. East | Corporate | Corporate | USD | Standard Accrual | Both legal entities can share the same ledger processing options |
| U.S. West | Corporate | Corporate | USD | Standard Accrual |
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Both legal entities can share the same primary ledger attributes.
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Neither legal entity has special requirements to open and close accounting periods independent from the other.
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Both legal entities engage in intercompany accounting.
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For month-end consolidation purposes, Outdoor Outfitters wants to keep their consolidation adjustments and elimination entries completely separate from the day-to-day transactions of their legal entities.
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Each legal entity is sensitive about data security.
Both U.S. East and U.S. West do not want to share their accounting information with each other. They do not want their respective users to be able to enter or view accounting information for the other legal entity.
Accounting Setup for U.S. Legal Entities
Outdoor Outfitters can assign both US legal entities to the same accounting setup. This allows both legal entities to share the same primary ledger. This is possible because both legal entities operate in the same accounting environment and can share the same primary ledger attributes.
The following table describes the accounting setup for the U.S. legal entities.
| Parameter | Description |
|---|---|
| Legal Entities | U.S. East; Balancing Segment Value Assigned: 01 U.S. West; Balancing Segment Value Assigned: 11 Note: Specific balancing segment values should be assigned to each legal entity. This is particularly important because both legal entities share the same ledger. Users can identify each legal entity's transactions during data entry and reporting. They can also take advantage of all of the legal entity features, such as Intercompany Accounting. |
| Primary Ledger | Outdoor Outfitters (USD) Chart of Accounts: Corporate Accounting Calendar: Corporate Currency: USD Subledger Accounting Method: Standard Accrual |
The following table describes the suggested primary ledger setup steps.
| Setup Step | Description |
|---|---|
| Ledger Options | Required to complete the ledger definition |
| Balancing Segment Value Assignment | Balancing Segment Value: 91 Because Outdoor Outfitters wants to keep their consolidation adjustments and elimination entries completely separate from the day-to-day transactions of their legal entities, they should assign a specific balancing segment value to the ledger. |
| Subledger Accounting Options | Because Outdoor Outfitters uses Oracle financial subledgers, they should define Subledger Accounting options for the Standard Accrual subledger accounting method. |
| Intercompany Accounts | Intercompany accounts should be defined to use the intercompany accounting feature. |
No other setup steps are required to complete the accounting setup for Outdoor Outfitters (USD). The following accounting options can be used in the future if business needs change:
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Reporting Currencies: If Outdoor Outfitters needs to maintain additional currency representations of their primary ledger, they can assign a reporting currency at any time.
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Secondary Ledgers: Secondary ledgers can be added at any time if Outdoor Outfitters wants to maintain an additional accounting representation of their legal entities' transactions.
Consolidation
Outdoor Outfitters maintains both legal entities' accounting data in the same ledger; therefore, consolidation is not required. They can use Financial Statement Generator to produce consolidated reports. This is possible because the U.S. legal entities have fairly simple consolidation requirements. If their consolidation needs change in the future, they can choose to use Oracle Financial Consolidation Hub to address more complex consolidation requirements.
To address their month-end consolidation concerns to separate consolidation adjustments from their day-to-day transactions, an additional balancing segment value should be used to represent the elimination company. For example, balancing segment value 91 that was assigned to the ledger is used to enter all consolidation adjustments and eliminating entries.
To create consolidated reports that include the results from each legal entity as well as the consolidation adjustments, parent value U.S. is used. Parent U.S. includes child values 01 U.S. East, 11 U.S. West, and 91 U.S. Eliminations. The following figure describes this proposed balancing segment value hierarchy to achieve consolidated results by using the parent value U.S. in Financial Statement Generator reports.
Security
Data Access Sets
Because different balancing segment values represent transactions for two different legal entities in the same ledger, the only way to secure access to data for each legal entity is to create data access sets that use the balancing segment value Access Set Type.
To secure data for each legal entity, at least two different Data access sets need to be created, one to be assigned to U.S. West responsibilities, another for U.S. East responsibilities.
The following table describes an example of the two data access sets that should be created for each responsibility entering transactions for each legal entity:
| Parameter | Value for Data Access Set #1 | Value for Data Access Set #2 |
|---|---|---|
| Data Access Set | U.S. East Access | U.S. West Access |
| Description | Access to U.S. East Only | Access to U.S. West Only |
| Chart of Accounts | Corporate | Corporate |
| Calendar/Period Type | Corporate/Monthly | Corporate/Monthly |
| Ledger | Outdoor Outfitters (USD) | Outdoor Outfitters (USD) |
| Access Set Type | Balancing Segment Value | Balancing Segment Value |
| Balancing Segment Values | 01 | 11 |
| Privileges | Read and Write | Read and Write |
Another data access set that provides full read and write access to the ledger is required for the controller. This allows the controller to view accounting information for both legal entities from a single responsibility as well as perform certain operations that require full ledger access, such as opening and closing periods, creating budgets, and creating summary accounts. With full ledger access, the controller can also use the balancing segment value 91 to enter consolidation adjustments.
The following table describes the additional data access set.
| Parameter | Value |
|---|---|
| Data Access Set #3 | U.S. Full Access |
| Description | Full Access to U.S. Operations |
| Chart of Accounts | Corporate |
| Calendar/Period Type | Corporate/Monthly |
| Ledger | Outdoor Outfitters (USD) |
| Access Set Type | Full Ledger |
| Privilege | Read and Write |
Note: Depending on the number of different responsibilities and job roles used in the organization, additional data access sets may need to be defined that provide more restrictive or less restrictive access to the ledger and/or balancing segment values.
Definition Access Sets
Because both legal entities share the same ledger, both legal entities have access to each other's definitions. For example, the U.S. West legal entity has access to the U.S. East's definitions, such as their recurring journals and FSG report definitions.
To prevent one legal entity from using, viewing, or modifying the definitions used by another legal entity that shares the same ledger, definition access sets must be used and assigned to each legal entity's responsibility.
Accounting Setup – North American Company
Outdoor Outfitters, a U.S. based retail company, uses a single instance of Oracle Applications. It has two existing legal entities located in the U.S. that are assigned to the same accounting setup. Each legal entity is identified by a specific balancing segment value. The following table describes the primary ledger for Outdoor Outfitters.
| Parameter | Value |
|---|---|
| Ledger Name | Outdoor Outfitters (USD) |
| Legal Entity and Balancing Segment | U.S. East: 01 |
| Legal Entity and Balancing Segment Assignment | U.S. West: 11 |
| Chart of Accounts | Corporate |
| Accounting Calendar | Corporate |
| Currency | USD |
| Subledger Accounting Method | Standard Accrual |
Note: Accounting Setup for Multiple Legal Entities - U.S. Only Operations
Outdoor Outfitters decided to expand its business and acquire a credit card company in Canada called Credit Services Group (CSG). Outdoor Outfitters can now provide credit processing, collections, and other services for the proprietary credit programs of its retail operating divisions. Outdoor Outfitters wants to incorporate its newly acquired Financial Services business into their existing E-Business Suite solution.
Both the U.S. and Canada operate in similar accounting environments where neither country enforces strict statutory compliance; however, they do use different currencies and Canada is required to meet special regulatory requirements for the financial services industry. The U.S. legal entities use the USD currency and the Canadian legal entity uses the CAD currency. In addition, because Credit Services Group is a Financial Services company, they want to maintain average daily balances. Because of these differences, Canada must maintain its legal entity transactions in its own primary ledger.
The following table compares the primary ledger requirements for both the U.S. and Canada.
| Parameter | U.S. Primary Ledger Value | Canadian Primary Ledger Value |
|---|---|---|
| Name | Outdoor Outfitters (USD) | Credit Services Group (CAD) |
| Chart of Accounts | Corporate | Corporate |
| Accounting Calendar | Corporate | Corporate |
| Currency | USD | CAD |
| Accounting Method | Standard Accrual | Standard Accrual |
| Special Ledger Options | None | Maintain average balances |
This section includes the following parts:
Additional Requirements:
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Credit Services Group uses Oracle financial applications.
The following graphic and table summarize the complete ledger requirements for Credit Services Group.
| Ledger Attributes | Primary Ledger | Secondary Ledger (Adjustments Only) |
|---|---|---|
| Name | Credit Services Group (CAD) | CSG Regulatory |
| Chart of Accounts | Corporate | Corporate |
| Accounting Calendar | Corporate | Corporate |
| Currency | CAD | CAD |
| Accounting Method | Standard Accrual | N/A |
| Reporting Currency | Balance level reporting currency | N/A |
| Name | Credit Services Group (USD) | N/A |
| Currency | USD | N/A |
Credit Services Group wants to maintain two accounting representations: one for corporate accounting needs and another for regulatory reporting.
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Corporate Accounting Ledger: The primary ledger is used as the corporate representation that uses the same chart of accounts, accounting calendar, and subledger accounting methods as its U.S. parent. It requires using its own local currency.
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Regulatory Reporting Ledger: Credit Services Group operates in a regulated industry, the Financial Services industry. They are required to adhere to specific regulatory requirements for certain types of transactions. Because of this, Credit Services Group wants to maintain a separate representation that will be used to report to their regulatory body. They want to use an adjustments only secondary ledger because they do not need to maintain a complete regulatory representation; they only need to enter a handful of manual journal entries to reflect their regulatory adjustments.
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Balance Level Reporting Currency: For ease of cross-entity reporting, a balance level reporting currency is assigned to the primary ledger to represent the translated USD balances. This balance level reporting currency can be combined with the primary ledger of the U.S. legal entities to address simple consolidation requirements.
Accounting Setup for Canadian Legal Entity
Outdoor Outfitters should define another accounting setup for the Canadian legal entity.
The following tables summarize the Accounting Setup for CSG Canada and the suggested ledger setup steps.
| Parameter | Description |
|---|---|
| Legal Entity | Legal Entity: CSG Canada Balancing Segment Value Assigned: 21 Even though only one legal entity is assigned to this accounting setup, specific balancing segment values should be assigned to the legal entity. It shares the same chart of accounts as the U.S. legal entities and automatically shares the same value set for the balancing segment value. By assigning a specific balancing segment value to this legal entity, it prevents users from accidentally using the values intended for other legal entities during transaction processing and journal entry. CSG can also take advantage of other features, such as Intercompany Accounting, that require specific balancing segment values be assigned to all legal entities. |
| Setup Step | Description |
|---|---|
| Primary Ledger | Credit Services Group (CAD) |
| Ledger Options | Required to complete the ledger definition and enable Average Balance Processing |
| Balancing Segment Value Assignment | N/A Balancing segment values do not need to be assigned directly to the ledger unless reserving a value for non-legal entity related transactions. Balancing segment values can be assigned to the ledger at any time. |
| Subledger Accounting Options | Define Subledger Accounting Options for the Standard Accrual accounting method to successfully integrate data from Oracle financial subledgers . |
| Reporting Currencies | Name: Credit Services Group (USD) Currency: USD Currency Conversion Level: Balance This USD balance level reporting currency represents the translated USD balances that are used for consolidation purposes. |
No other setup steps are required for the primary ledger. The following accounting options can be completed in the future if business needs change.
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Intercompany Accounts: Intercompany accounts can be defined at any time to enable intercompany accounting.
The following table summarizes suggested secondary ledger setup steps.
| Setup Step | Description |
|---|---|
| Secondary Ledger- Adjustments Only | CSG Regulatory |
| Ledger Options | Average Balance Processing can be enabled for the secondary ledger to keep it consistent with the primary ledger.
Note: No subledger accounting method should be assigned to the adjustments only secondary ledger unless planning to use Subledger Accounting to create adjusting entries from Oracle transaction sources. A subledger accounting method can be assigned at any time. |
Note: No other setup steps need to be performed for the Adjustments Only Secondary Ledger.
Ledger Sets
By itself, the adjustments only secondary ledger only holds the regulatory adjustments. To obtain a complete statutory representation, the results from the adjustments only secondary ledger must be combined with the primary ledger, which holds the day-to-day transactions using a ledger set.
Note: Ledger Sets
Consolidation
No balance transfer consolidations need to be performed to obtain consolidated results for the parent entity, Outdoor Outfitters.
CSG's balance level reporting currency that is assigned to the primary ledger uses the same chart of accounts, accounting calendar/period type combination, and currency as the parent entity, Outdoor Outfitters.
By creating another ledger set that combines the balance level reporting currency with the primary ledger of the parent entity, consolidated results are obtained without having to run consolidation.
The following figure shows the configuration of both accounting setups with the use of ledger sets to combine ledgers in different accounting setups:
During month-end close, Credit Services Group simply needs to run translation to update the translated balances in the balance level reporting currency. The parent entity can then run a Financial Statement Generator report that references the ledger set for consolidation purposes to report on consolidated balances.
Note: Using ledger sets consolidation purposes is not recommended if you have complex consolidation requirements. For example, if your organization performs frequent acquisitions, disposals, and reorganizations, or has many partially owned subsidiaries, you should use Oracle Financial Consolidation Hub for your consolidation needs.
Note: See Oracle Financial Consolidation Hub User's Guide.
Security
Definition Access Sets
CSG's accounting information is contained in its own ledger, separate from other legal entities. This creates a natural boundary from Outdoor Outfitter's other legal entities. Thus, the other legal entities are not able to to view CSG’s financial information unless they are explicitly granted view access to CSG’s ledger. Because CSG shares the same chart of accounts as the other US legal entities, many definitions that are at the chart of accounts level, such as FSG reports and MassAllocations, will be shareable across all legal entities. If the Canadian and US legal entities do not want some definitions to be shared, they can secure use, view, or modify access to specific definitions using Definition Access Sets.
For example, if CSG does not want certain users to be able to change their FSG Report definitions, they can secure those reports using definition access sets.
Accounting Setup – European Operations
Outdoor Outfitters, a U.S. based retail company, currently operates in both U.S. and Canada and uses a single instance of Oracle Applications. The following graphic describes the existing accounting setups for Outdoor Outfitters:
Outdoor Outfitters has chosen to expand its business internationally and has acquired London Rain, a U.K.-based retail company that currently has operations in the U.K.
Note: Accounting Setup - U.S. Only Operations
Accounting Setup with Multiple Legal Entities - North American Company
This section includes the following parts:
Note: For information about consolidation for this entity, see Accounting Setup with No Legal Entity - Consolidation Example.
Requirements for London Rain (U.K.):
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London Rain uses Oracle financial applications.
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London Rain must use the local currency, GBP, and follow U.K. GAAP accounting standards.
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London Rain wants to keep the accounting for their only legal entity in the U.K. completely separate from the other legal entities.
London Rain U.K. has statutory reporting requirements and needs to report VAT to the appropriate taxation authorities. They want to maintain two accounting representations: one for statutory reporting and another for corporate accounting needs.
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Corporate Accounting Ledger: The primary ledger is used as their corporate representation that uses the same chart of accounts, calendar, and subledger accounting method as its parent entity. The currency will be different; it will use the local GBP currency.
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Statutory Reporting Ledger: The subledger level secondary ledger is used for their statutory representation that uses the statutory chart of accounts and U.K. GAAP accounting method. Every time they enter a subledger transaction, Subledger Accounting will create the appropriate subledger journal entries in both the primary and secondary ledger to allow them to maintain both representations simultaneously.
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Balance Level Reporting Currency: Outdoor Outfitters, a U.S.-based company, is the parent of London Rain (U.K.). For ease of consolidation, a balance level reporting currency is assigned to the corporate accounting ledger (primary ledger) to represent the translated USD balances. The translated balances are transferred to its parent entity, Outdoor Outfitters, each period for consolidation purposes.
The following graphic and table summarize the complete ledger requirements for London Rain (U.K.).
| Ledger Attributes | Primary Ledger | Secondary Ledger (Subledger Level) |
|---|---|---|
| Name | London Rain Corporate (GBP) | London Rain U.K. (GBP) |
| Chart of Accounts | Corporate | Fiscal |
| Accounting Calendar | Corporate | Fiscal |
| Currency | GBP | GBP |
| Accounting Method | Standard Accrual | U.K. GAAP |
| Reporting Currency | Balance Level Reporting Currency | N/A |
| Name | London Rain Corporate (USD) | N/A |
| Currency | USD | N/A |
Accounting Setup for the U.K.
An accounting setup with only one legal entity is defined for London Rain (U.K.) in the following tables.
| Parameter | Description |
|---|---|
| Legal Entity | Legal Entity: London Rain U.K. Balancing Segment Value: 31 Note: Even though only one legal entity is assigned to this accounting setup, specific balancing segment values should be assigned to the legal entity. It shares the same chart of accounts as the U.S. and Canadian legal entities; it automatically shares the same value set for the balancing segment. They can also take advantage of other features, such as Intercompany Accounting, that require specific balancing segments values be assigned to all legal entities. |
| Setup Step | Description |
|---|---|
| Primary Ledger | London Rain Corporate (GBP) |
| Ledger Options | Required to complete the ledger definition |
| Subledger Accounting Options | Because London Rain U.K. uses Oracle financial subledgers, they should define Subledger Accounting options for the Standard Accrual accounting method. |
| Reporting Currencies | Currency Conversion Level: Balance Name: London Rain Corporate (USD) Currency: USD This balance level reporting currency maintains the translated USD balances for the primary ledger. This reporting currency is used for consolidation purposes when consolidating to Outdoor Outfitters. |
| Intercompany Accounts | Intercompany accounts should be defined to use the intercompany accounting feature. |
No other setup steps are required for the primary ledger. The following accounting option can be completed in the future if business needs change.
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Ledger Balancing Segment Value Assignment: Optionally, balancing segment values can be assigned to the ledger to represent non-legal entity transactions, such as adjustments.
| Setup Step | Description |
|---|---|
| Secondary Ledger – Subledger Level | London Rain U.K. (GBP) |
| Ledger Options | Required to complete the ledger definition |
| Primary to Secondary Ledger Mapping | Assign a chart of accounts mapping because both the primary and secondary ledgers use a different chart of accounts. Specify journal conversion rules to have General Ledger Posting select those journals for automatic transfer to this secondary ledger. |
| Subledger Accounting Options | Because London Rain U.K. wants to maintain a statutory accounting representation at the subledger level they should define Subledger Accounting options for the U.K. GAAP accounting method. |
No other setup steps are required for the secondary ledger unless their business needs change.
Accounting Setup - Latin America Operations
Outdoor Outfitters, a U.S. based retail company, currently operates in the U.S., Canada, and the U.K. and uses a single instance of Oracle Applications. The following graphic describes the existing accounting setups for Outdoor Outfitters.
Outdoor Outfitters has chosen to expand its business to Latin America and create a company in Brazil called Outdoor Outfitters Brazil.
This section includes the following parts:
Note: For information about consolidation for this entity, seeAccounting Setup with No Legal Entity - Consolidation Example.
Requirements for Brazil:
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A localized version of Oracle Applications is required for the Brazilian subsidiary in order to meet the complex legal and financial rules in Brazil.
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Companies that operate in Brazil must adhere to the many legal requirements set forth by the Complemento Estatutario Brasileiro (Brazilian Statutory Complement). There are requirements to use a statutory chart of accounts, a calendar based on the calendar year (January-December), and the local currency, the Brazilian Real.
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Outdoor Outfitters Brazil wants to maintain two accounting representations: one for corporate accounting needs and another for statutory reporting.
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Corporate Accounting Ledger: The primary ledger is used as their corporate representation that uses the same chart of accounts, accounting calendar, and subledger accounting method as its U.S. parent. The currency is the local currency.
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Statutory Reporting Ledger: Because Brazil has statutory requirements to produce reports to tax authorities regarding their subledger activity, such as receivables and payables, the secondary ledger at the subledger level is used. This subledger level secondary ledger uses the statutory chart of accounts, calendar, subledger accounting method, and the local currency. Every time they enter a subledger transaction in the primary ledger, Subledger Accounting automatically creates the subledger journals in both the primary and secondary ledger simultaneously. They can then produce statutory reports directly from their secondary ledger.
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Subledger Level Reporting Currency: Brazil also operates in a highly inflationary economy. They want to use a subledger level reporting currency to maintain a complete currency representation of their primary ledger using a more stable currency, such as USD.
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The following graphic and table summarize the ledger requirements for Brazil.
| Ledger Attributes | Primary Ledger | Secondary Ledger (Subledger Level) |
|---|---|---|
| Name | Outdoor Outfitters Brazil Corporation (BRL) | Outdoor Outfitters Brazil Statutory |
| Chart of Accounts | Corporate | Brazil Statutory |
| Accounting Calendar | Corporate | Brazil Statutory |
| Currency | BRL | BRL |
| Accounting Method | Standard Accrual | Brazil GAAP |
| Reporting Currency | Subledger Level Reporting Currency | N/A |
| Name | Outdoor Outfitters Brazil Corporation (USD) | N/A |
| Currency | USD | N/A |
Accounting Setup for Brazil
An accounting setup with only one legal entity should be defined for Brazil. The Brazilian legal entity operates in a country with strict statutory requirements. In addition, Brazil has unique document sequencing requirements that can only be accomplished if only one legal entity is assigned to an accounting setup.
The following tables summarize the exclusive legal environment and the suggested ledger setup steps.
| Parameter | Description |
|---|---|
| Legal Entity Assigned | Legal Entity: Outdoor Outfitters Brazil Balancing Segment Value: 41 Note: Even though only one legal entity is assigned to this accounting setup, specific balancing segment values should be assigned to the legal entity. It shares the same chart of accounts as all of the other legal entities and automatically shares the same value set for the balancing segment. They can also take advantage of other features such as Intercompany Accounting that require specific balancing segment values be assigned to all legal entities. |
| Setup Step | Description |
|---|---|
| Primary Ledger | Outdoor Outfitters Brazil Corporation (BRL) |
| Ledger Options | Required to complete the ledger definition |
| Reporting Currencies | Name: Outdoor Outfitters Brazil Corporation (USD) Currency: USD Currency Conversion Level: Subledger To address the need to maintain Brazil's primary accounting transactions using a more stable currency, such as USD, a reporting currency at the subledger level is used. This reporting currency is assigned to Brazil's primary ledger to act as a complete additional currency representation of Brazil's transactions. This allows Brazil to simultaneously maintain two complete currency representations, one in Brazilian Real and the other in U.S. Dollars. |
| Subledger Accounting Options | Because Outdoor Outfitters Brazil uses Oracle financial subledgers, they should define Subledger Accounting options for the subledger accounting method. |
| Setup Step | Description |
|---|---|
| Secondary Ledger - Subledger Level | Outdoor Outfitters Brazil Statutory A secondary ledger at the subledger level is used to maintain a complete statutory representation. |
| Ledger Options | Required to complete the ledger definition |
| Primary to Secondary Ledger Mapping | Assign a chart of accounts mapping because both the primary and secondary ledgers use a different chart of accounts. Specify journal conversion rules to have General Ledger Posting select those journals for automatic transfer to this secondary ledger. |
| Subledger Accounting Options | Because the secondary ledger uses a different subledger accounting method than the primary ledger, specify Subledger Accounting options to provide instructions on how to account for subledger transactions differently. |
No other setup steps are required for the primary or secondary ledger. The following accounting options can be completed in the future if business needs change
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Ledger Balancing Segment Value Assignment: Optionally, balancing segment values can be assigned to each ledger to represent non-legal entity transactions, such as adjustments.
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Intercompany Accounts: Intercompany accounts can be defined to use intercompany accounting.
Accounting Setup with No Legal Entities - Consolidation Example
Outdoor Outfitters, a U.S. based retail company, uses a single instance of Oracle Applications. It has the following legal entities and accounting setup types defined:
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Two legal entities located in the U.S., U.S. East, and U.S. West that are assigned to the same accounting setup.
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One legal entity in Canada that is assigned to its own accounting setup.
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One legal entity in the U.K. that is assigned to its own accounting setup.
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One legal entity in Brazil that is assigned to its own accounting setup.
Outdoor Outfitters has decided they want to use a separate consolidation ledger to consolidate data across multiple legal entities in different accounting setups This allows them to keep their consolidation adjustments completely separate from the day-to-day transactions for each legal entity.
The following graphic and tables describe the different accounting setups for all of Outdoor Outfitters' legal entities:
| Legal Entity | U.S. East/West | Canada | U.K. | Brazil |
|---|---|---|---|---|
| Chart of Accounts | Corporate | Corporate | Corporate | Corporate |
| Calendar | Corporate | Corporate | Corporate | Corporate |
| Currency | USD | CAD | GBP | BRL |
| Accounting Method | Standard Accrual | Standard Accrual | Standard Accrual | Standard Accrual |
| Legal Entity | U.S. East/West | Canada (Balance Level) | U.K. (Balance Level) | Brazil Subledger Level) |
|---|---|---|---|---|
| Currency | N/A | USD | USD | USD |
| Legal Entity | U.S. East/West | Canada (Adjustments Only) | U.K. (Subledger Level) | Brazil (Subledger Level) |
|---|---|---|---|---|
| Chart of Accounts | N/A | Corporate | Fiscal | Brazil Statutory |
| Calendar | N/A | Corporate | Fiscal | Brazil Statutory |
| Currency | N/A | CAD | GBP | BRL |
| Accounting Method | N/A | N/A | U.K. GAAP | Brazil GAAP |
Accounting Setup for Consolidation Purposes
An accounting setup with no legal entities assigned should be defined. The primary ledger should share the same ledger attributes as the parent entity, such as the same chart of accounts, accounting calendar, and currency.
The following table summarizes the suggested primary ledger setup steps for the Other accounting setup
| Setup Step | Description |
|---|---|
| Primary Ledger | Consolidation Ledger
Note: No Subledger Accounting Method is required because this ledger will be a standalone ledger. It will not integrate with Oracle subledgers. |
| Ledger Options | Required to complete the ledger definition |
No other setup steps are required for the primary ledger. By not assigning any balancing segment values to the ledger, it allows the ledger to use all balancing segment values
Consolidation Steps
Step 1: Translate balances for the following legal entities to convert balances from their local currencies to U.S. Dollar, the currency of the parent entity:
-
Canada
-
U.K.
Note: For the Brazilian legal entity, the subledger level reporting currency already maintains subledger journals, GL journal entries, and balances in USD. No translation is required because every time a transaction or journal entry is entered, it will be converted to the subledger level reporting currency.
Step 2a:If you have simple consolidation needs and do not want to perform balance transfer consolidation, you can define a ledger set for consolidation purposes. This ledger set should include the following ledgers and reporting currencies:
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The primary ledger for the US legal entities
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The USD balance level reporting currency for the Canadian legal entity
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The USD balance level reporting currency for the UK legal entity
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The USD subledger level reporting currency of the Brazilian legal entity
-
Consolidation ledger
Step 2b: If you prefer to transfer balances for consolidation purposes, transfer balances to the consolidation ledger
Use GL Consolidation to transfer USD balances from the ledger or reporting currencies of the respective legal entities to the consolidation ledger.
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U.S. Legal Entities: Transfer balances from the primary ledger of the U.S. legal entities to the consolidation ledger.
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Canadian Legal Entity: Transfer translated balances from the balance level reporting currency to the consolidation ledger.
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U.K. Legal Entity: Transfer translated balances from the balance level reporting currency to the consolidation ledger.
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Brazil Legal Entity: Transfer balances from the subledger level reporting currency to the consolidation ledger.
Step 3: Enter consolidation adjustments in the consolidation ledger.
Step 4: Prepare consolidation reports.
Use Financial Statement Generator to create and submit consolidated financial statements.
Management Reporting Example - U.S. Only Operations
Outdoor Outfitters, a U.S. based retail apparel company, uses a single instance of Oracle Applications.
The following table shows the accounting setup for its U.S. operations:
| Parameter | Description |
|---|---|
| Legal Entities | U.S. East; Balancing Segment Value Assigned: 01 U.S. West; Balancing Segment Value Assigned: 11 |
| Primary Ledger | Outdoor Outfitters (USD) Chart of Accounts: Corporate Accounting Calendar: Corporate Currency: USD Subledger Accounting Method: Standard Accrual |
Outdoor Outfitters decided they want to maintain an additional ledger for management reporting and analysis purposes. They only want to do this for their U.S. Operations. They want their U.S. Department Managers to use this ledger to book internal management adjustments that are not published to their financial statements.
This section includes the following parts:
Additional Requirements
Outdoor Outfitters currently uses the following chart of accounts structure. They have specified the Department segment to be both their cost center and management segment.
Note: You can enable the management segment at any time for an existing chart of accounts.
The following table describes the chart of accounts.
| Segment Number | Segment Name | Segment Qualifier |
|---|---|---|
| 1 | Legal Entity | Balancing Segment |
| 2 | Department | Cost Center and Management Segment |
| 3 | Account | Natural Account |
| 4 | Product | |
| 5 | Future Use |
The following figure illustrates the Department hierarchy for the U.S. managers only and is described in the following table:
| CEO: Steve Jones | Managers | Parent Values | Child Values |
|---|---|---|---|
| Linda W. | 100 Finance | 101-199 | |
| Bernie L | 200 Sales 300 Marketing |
201- 299 301-399 |
|
| Steve S. | 400 Consulting | 401-499 |
Transactions are entered across all four departments during the normal course of business. For example, expenses are entered for each department. Outdoor Outfitters does not want any of the Department Managers to view or enter data outside of their own departments.
Using Secondary Ledgers for Management Reporting
Because Outdoor Outfitters only need to enter management adjustments for a specific legal entity or group of legal entities that are represented in the same accounting setup, you can assign an adjustments only secondary ledger to the existing accounting setup for the U.S. legal entities.
Note: You could also create another accounting setup with no legal entities assigned for management adjustments and reporting. This is preferable if you need to book management adjustments across ledgers in multiple accounting setups. For more information, see Accounting Setups with No Legal Entities.
The following table provides an example of how your accounting setup would be configured with the addition of the secondary ledger:
| Parameter | Description |
|---|---|
| Legal Entities | U.S. East; Balancing Segment Value: 01 U.S. West; Balancing Segment Value: 11 |
| Primary Ledger | Outdoor Outfitters (USD) Chart of Accounts: Corporate Accounting Calendar: Corporate Currency: USD Subledger Accounting Method: Standard Accrual |
| Secondary Ledger (Adjustments Only) | Management Ledger (USD) Chart of Accounts: Corporate Accounting Calendar: Corporate Currency: USD |
The primary ledger would hold the day-to-day transactions and the adjustments only secondary ledger would hold the management adjustments. By itself, this secondary ledger does not represent the complete management picture; it only holds the management adjustments. This allows you to keep your management adjustments completely separate from your day-to-day transactions. In order to obtain a complete management picture, you must group both ledgers in a ledger set to see the combined results.
Ledger Set
The Ledger Set described in the following table is created to allow them to obtain management results.
| Parameter | Description |
|---|---|
| Ledger Set | U.S. Management Set |
| Description | Ledger Set for U.S. Management Reporting |
| Chart of Accounts | Corporate |
| Calendar/Period Type | Corporate/Monthly |
| Ledgers |
|
Security
Data Access Sets
In order to prevent department managers from accessing the data for other departments, Outdoor Outfitters must create data access sets that use the Management segment value access set type.
Assume the parent values for each department as described in the following table:
| Value | Department |
|---|---|
| 100 | Finance |
| 200 | Sales |
| 300 | Marketing |
| 400 | Consulting |
To secure data for each of the three department managers, at least three different data access sets need to be created, one to be assigned to each U.S. department manager.
The following tables describe the three data access sets that should be created for each manager's responsibility. The ledger set is assigned and parent segment values ease the creation and maintenance of data access sets.
| Parameter | Value |
|---|---|
| Data Access Set #1 | Finance Access |
| Description | Access to Finance Department |
| Chart of Accounts | Corporate |
| Calendar/Period Type | Corporate/Monthly |
| Ledger Set | U.S. Management Set |
| Access Set Type | Management Segment Value |
| Management Segment Values | 100 |
| Privileges | Read and Write |
| Parameter | Value |
|---|---|
| Data Access Set #2 | Sales Access |
| Description | Access to Sales and Marketing Departments Only |
| Chart of Accounts | Corporate |
| Calendar/ Period Type | Corporate/Monthly |
| Ledger Set | U.S. Management Set |
| Access Set Type | Management Segment Value |
| Management Segment Values | 200, 300 |
| Privileges | Read and Write |
| Parameter | Value |
|---|---|
| Data Access Set #3 | Consulting Access |
| Description | Access to Consulting Department Only |
| Chart of Accounts | Corporate |
| Calendar/ Period Type | Corporate/Monthly |
| Access Set Type | Management Segment Value |
| Ledger Set | U.S. Management Set |
| Management Segment Values | 400 |
| Privileges | Read and Write |
The first data access set is assigned to Linda's responsibility, the manager for Finance. She is not able to access the information for any other departments but those assigned to the parent value 100.
The second data access set is assigned to Bernie's responsibility, the manager for Sales and Marketing. She has read and write access only to her departments.
The third data access set is assigned to Steve's responsibility, the manager of Consulting. He has access only to his departments.
Another data access set that provides full read and write access to the management ledger is required for the controller. The controller can view accounting information across all departments as well as perform certain operations that require full ledger access, such as opening and closing periods, creating budgets, and creating summary accounts. By assigning a ledger set to the data access set, the controller can open and close periods for both ledgers simultaneously.
The following table describes the fourth data access set.
| Parameter | Value |
|---|---|
| Data Access Set #4 | U.S. Management Ledger Access |
| Description | Full Access to U.S. Management Ledger |
| Chart of Accounts | Corporate |
| Calendar/Period Type | Corporate/Monthly |
| Ledger Set | U.S. Management Set |
| Access Set Type | Full Ledger |
| Privileges | Read and Write |
Definition Access Sets
Because all of the managers are entering their management adjustments to the same ledger, they all have access to each other's definitions, such as each other's Recurring Journals, MassAllocations, and FSG Reports. To prevent one manager from changing, viewing, or using a definition created by another manager, definition access sets should be used and assigned to each manager's responsibility.