Oracle® Fusion Accounting Hub Implementation Guide 11g Release 1 (11.1.2) Part Number E20374-02

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9 Define and Maintain Intercompany Processing Rules

This chapter contains the following:

Manage Intercompany Balancing Rules

Manage Ledger Balancing Options

Reconcile Accounts

Manage Intercompany Balancing Rules

Intercompany Balancing Rules: Explained

Intercompany balancing rules are used to generate the accounts needed to balance journals that are out of balance by legal entity or primary balancing segment values.

You specify the intercompany receivables and intercompany payables accounts you want to use. The intercompany balancing feature then uses these rules to generate the accounts of the balancing lines it creates.

Defining Intercompany Balancing Rules

You can define intercompany balancing rules at the following rule levels:

1. Primary balancing segment

2. Legal entity

3. Ledger

4. Chart of accounts

The rules are evaluated in the order shown above. For example, you can define a Primary Balancing Segment rule and a Legal Entity level rule. If both rules are used to balance a particular journal, the Primary Balancing Segment rule is used, as it has a higher precedence.

You have flexibility in defining your intercompany balancing rules. You can have a simple setup in which you define one rule for your chart of accounts. This rule is used for all intercompany balancing for all ledgers that use this chart of accounts. Alternatively, you can have a more granular set of rules. For example, you can define a different rule for each legal entity and one chart of accounts rule to cover any gaps in your rule definitions. You can gain even more granularity by defining rules for specific journal and/or category combinations or intercompany transaction types.

Intercompany Balancing Rules: Examples

This topic provides examples of intercompany balancing rules and the intercompany balancing lines generated. These rules are used to generate the accounts needed to balance journals that are out of balance by legal entity or primary balancing segment values.

Scenario

Simple Chart of Accounts

In this scenario the enterprise has one chart of accounts for all its ledgers. The chart of accounts has an intercompany segment. They are using this intercompany segment and the company segment to identify the intercompany trading partners for each transaction. They do not have a need to track their intercompany activity at a granular level such as by journal source and journal category or by intercompany transaction type.

Setup

• InFusion USA Chart of Accounts

• Ledger, Legal Entity, Primary Balancing Segment Value Assignments

• Chart of Accounts Rule

• Journal Balancing

  • Journal before Balancing

• Journal Balancing

  • Journal after Balancing

Scenario

Legal Entity and Chart of Accounts Rules

In this example the legal Entity InFusion Textiles intercompany manufacturing activities are tracked separately from its non-manufacturing activities. In order to achieve this legal entity level rules are defined specifically between the legal entity InFusion Textiles and the two manufacturing legal entities, InFusion Products (East) and InFusion Products (West). A chart of accounts rule is created to cover all other intercompany activities.

Setup

• InFusion USA Chart of Accounts

• Ledger, Legal Entity, Primary Balancing Segment Value Assignments

• Chart of Accounts Rule

• Legal Entity Level Rule

• Journal Balancing

  • Journal before Balancing

• Journal Balancing

  • Journal after Balancing

Manage Ledger Balancing Options

Defining Ledger Balancing Options: Explained

Ledger balancing options are defined for the ledger to balance the second balancing segment and/or the third balancing segment, when a transaction is unbalanced by one of these segments.

Ledger balancing options include the following settings:

• Receivables and payables accounts used for ledger balancing

• Summarization options

• Clearing company options

Receivables and Payables Accounts used for Ledger Balancing

You can choose to specify the receivables and payables accounts to be used, if your chart of accounts has the second balancing segment and/or the third balancing segment enabled. These accounts are used for the balancing lines generated when a journal is balanced by its primary balancing segment values but is not balanced by its second balancing segment and/or third balancing segment.

Summarization Options

You can choose to summarize balancing lines generated for a primary balancing segment out of balance scenario, where all the primary balancing segment values are assigned to the same legal entity. You do this by specifying the Summarization option of Summary Net or Detail. You can choose to summarize by primary balancing segment value or alternatively have individual balancing lines (that have not been summarized) generated. Note that summarization always applies to balancing lines generated in a cross legal entity scenario.

Clearing Company Options

You can choose to set clearing company options to balance a journal with different primary balancing segment values that all belong to a single legal entity. Set the following options to handle your clearing company balancing.

• Clearing company condition

  • You can choose to balance using a clearing company value for all journals or for journals with many legal entities on the debit side and many legal entities on the credit side.

  • The default value for this option is to error Many-to-Many journals.

• Clearing Company Source

  • Choose how the clearing company value is derived for your balancing lines, from the following options:

    • Default clearing balancing segment value. Choose this option if you want a single specific primary balancing segment value for your clearing company.

    • Default Rule. Choose this option if you want to allow the system to derive the clearing company value from a default intercompany balancing rule.

    • Manually entered clearing balancing segment value. Choose this option if you want to enter the clearing company value when you create a journal.

• Clearing Company Value

  • If you chose the default clearing balancing segment value as your clearing company source, you can enter your chosen primary balancing segment value in this field.

Defining Ledger Balancing Options: Examples

This topic provides examples of ledger balancing options, the setup required, and the journal before and after balancing.

Scenario

Simple ledger balancing option with no clearing company options

In this scenario the enterprise has the second balancing segment and the third balancing segment enabled for its chart of accounts. The journal is balanced by primary balancing segment but is out of balance by the second balancing segment and the third balancing segment.

Setup

• InFusion USA Chart of Accounts

• Ledger, Legal Entity, Primary Balancing Segment Value Assignments

• Ledger Balancing Options

• Journal Balancing

  • Journal Before Balancing

• Journal Balancing

  • Journal after Balancing

Scenario

Ledger balancing options with detail summarization and clearing company options set

In this scenario the enterprise has the second balancing segment and the third balancing segment enabled for its chart of accounts. Management has decided to use a clearing company for balancing Many-to-Many journals only. Since the primary balancing segment values in the journal are out of balance intercompany balancing is required. Additionally since clearing company options have been specified they will be used to balance the journal. Note that if the primary balancing segment values were balanced and only the second balancing segment and the third balancing segment were out of balance, the clearing company options would not be used.

Setup

• InFusion 1000, USA Chart of Accounts

• Ledger, Legal Entity, Primary Balancing Segment Value Assignments

• Chart of Accounts Rule

• Ledger Balancing Options

• Clearing Company Options

• Journal Balancing

  • Journal before Balancing

• Journal Balancing

  • Journal after Balancing

Reconcile Accounts

Intercompany Reconciliation: Explained

Intercompany reconciliation provides you with reports to assist you with reconciling your intercompany receivables and intercompany payables accounts and to identify any differences.

The main goal of the reports is to make it easy for you to identify either the receiver side or provider side of a transaction that has not been posted to the intercompany receivables or intercompany payables account.

The reports show the following intercompany lines:

• Intercompany receivables and intercompany payables lines generated by the intercompany balancing feature

• Intercompany receivables and intercompany payables lines generated for the provider and receiver of each intercompany transaction

The following are not included on the intercompany reconciliation reports:

• Ledger balancing lines generated when the primary balancing segment value is in balance but either the second balancing segment or the third balancing segment is out of balance

• Clearing company balancing lines

Reconciliation Reports

The reconciliation reports show the Entered or Transaction amount of the accounting entries booked to the intercompany receivables and payables accounts for a pair of Provider and Receiver legal entities. Since the accounted amounts may be different if the conversion rates used for the intercompany receivables and intercompany payables are different, you can choose to run the reports using an additional currency and conversion rate that will convert all amounts into a common currency for comparison.

The intercompany reconciliation process starts with running the Extract Intercompany Reconciliation Data program. Choose from a variety of parameters to determine what data will appear on your reports. For example, choose the provider legal entity and receiver legal entity you want to run reconciliation for.

Once the Extract Intercompany Reconciliation Data program has completed successfully, choose your request from the Oracle Business Intelligence Publisher (BI Publisher), BI Publishing Options list of values and view the Reconciliation Period Summary report. This report displays the intercompany receivables and intercompany payables balances in summary for a period, and any differences between them. Drill down on the hyperlinks to view the balances by source and then by journal lines. You have full drill down capabilities to the general ledger journal, subledger accounting entry and source receivables or payables transaction.

Extract Intercompany Reconciliation Data

This process will extract the data to generate reports that a user can view and utilize to assist with their reconciliation.

Run the report from the Intercompany Reconciliation Task Panel and optionally schedule the report to run periodically.

Parameters

Ledger associated with the provider organization. Exclude secondary and reporting currency ledgers.

Legal entity of the provider organization.

Accounting period of the provider ledger.

Ledger associated with the receiver organization.

Legal entity of the receiver organization.

Accounting period of the receiver ledger.

Currency for converting the accounted amount.

Conversion rate type for the additional currency.

Conversion rate date for the additional currency.

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