43 Closing the Fiscal Year

This chapter contains the following topics:

Note:

Country-specific functionality for closing a fiscal year exists for France and Italy.

43.1 Understanding the Fiscal Year Close

As part of your year-end procedures, you must close your books for the fiscal year and run the Annual Close program. To close your books, you close these systems on the Company Setup form:

  • JD Edwards EnterpriseOne Accounts Payable and JD Edwards EnterpriseOne Accounts Receivable for year-end reconciliations to the GL.

  • JD Edwards EnterpriseOne General Accounting for retained earnings calculations.

After you close the fiscal year for these systems, you should run the Annual Close program (R098201). This sequence is suggested to prevent users from posting to the fiscal year while you are running the program or after you have completed running the program. Changing this sequence can cause integrity issues such as out-of-balance issues.

The Annual Close program:

  • Calculates and posts retained earnings for all ledger types for which the Close to Retained Earnings Account check box is selected in the Ledger Type Rules Setup program (P0025).

    Entries that are posted to the retained earnings account are included in the final retained earnings figure.

  • Creates account records in the F0902 table for the new fiscal year for the AA ledger and budget ledger types.

  • Updates balance forward fields and prior year-end net posting fields in the F0902 table.

    Regardless of the type of account, the system always updates the Balance Forward field in the F0902 table. However, the system does not show the balance forward amounts for profit-and-loss accounts in online inquiries or on reports that use AAI items GLG6 and GLG12. The system updates the Balance Forward field in the F0902 table to allow inception-to-date reporting, which is commonly used for job costing.

  • Prints the Annual Close report (R098201).

You can close the same fiscal year as often as needed. Multiple closings are often necessary to handle audit adjustments or unexpected final adjustments. If you close the fiscal year multiple times, the Annual Close program calculates and posts the correct balances without doubling or otherwise inflating balances. For example, if you run the program twice, balances are not doubled.

Note:

You can provide reports for the first period of the new fiscal year without performing the final year close. Run the Annual Close program to update the balance forward fields for every account in the F0902 table. This carries forward the amounts to the first period of the new fiscal year for reporting purposes.

43.1.1 Retained Earnings

To adjust the amount of the retained earnings account, do not enter an adjusting entry. This can cause undesirable results. Instead, create a new account with the same business unit and object of the retained earnings account and a new subsidiary.

You can close more than one company to a single retained earnings account. This is necessary if corporate divisions are set up as companies. You close these divisions to a single retained earnings account to consolidate reporting for the legal corporate entity.

43.1.2 Balance Sheet Entries

If you close a fiscal year and later find out that you must create entries for balance sheet accounts for that year, you do not have to reopen the year (that is, change the current period back to the prior year ending period) and rerun the Annual Close program. Instead, create the entries for document type ## (prior year transactions) using the Journal Entry program (P0911). The system generates a warning message but accepts the transactions. Post the transactions as usual. The system updates the beginning balance forward amounts in the F0902 table for the balance sheet accounts affected. Because the entries are balance sheet entries, they do not impact the retained earnings account so there is no need to reopen the fiscal period and year and run the Annual Close program.

43.1.3 Intercompany Settlements

After you run the Annual Close program, you might have to create journal entries for intercompany settlements to keep the companies in balance. The Annual Close program posts retained earnings to a retained earnings account for a single company but does not create automatic entries for intercompany settlements.

43.1.4 Prerequisites

Before you perform the final fiscal year close:

  • Back up your entire environment for fiscal auditing purposes.

    You might be asked to provide reproductions of your reports as well as your electronic data files during a tax audit of your information system.

  • Ensure that no users are accessing the F0902 table while the Annual Close program is running.

    If users are accessing the F0902 table, records might be skipped when the program calculates retained earnings.

43.2 Understanding Setup Requirements and Common Tasks

This section provides an overview of fiscal year setup requirements and common tasks for the year-end close.

43.2.1 Understanding Fiscal Year Setup Requirements

This table lists the setup that you must complete for the annual close:

Setup Description
Chart of Accounts These accounts must be set up:
  • Profit and loss account

  • Beginning balance sheet

  • Ending balance sheet

Automatic Accounting Instructions (AAIs) These AAI items must be set up:
  • GLG4: retained earnings

  • GLG6: beginning revenue account

  • GLG12: ending profit and loss account

AAI item GLG4 for retained earnings is the only GLG item that is company specific.

Note: If you close the year, change any of these AAI items, and then rerun the close, you might get different results.

Ledger Types Ledger type AA and budget ledger types must be set up in UDC table 09/LT and on the Ledger Type Rules Setup form. For the AA ledger, select these check boxes on the Ledger Type Rules Setup form:
  • Close to Retained Earnings Account

  • Ledger is Required to Balance

For budget ledger types, select the Roll Original Budget to Next Year check box.


43.2.2 Understanding Common Tasks for the Year-End Close

The specific process for closing a fiscal year is unique for each company. Your organization should develop its own detailed closing tasks and include them in your internal documentation.

This list includes common tasks that most companies perform for the fiscal year close:

  • Review and post all batches.

  • Run integrity reports and correct errors.

    This is one of the tasks that every company should include in their closing processes. Integrity reports supplement your internal balancing procedures and locate any data inconsistencies.

  • Enter and post audit adjustments.

    Many companies reserve an accounting period for audit adjustments. Many companies also use a specific document type (UDC table 00/DT) for their year-end closing entries.

    Assume that you want to enter and post audit adjustments to record the final adjusting entries for fiscal year 2008. Ensure that the fiscal year on the Company Setup form is 2008. If the fiscal year is 2009, reopen fiscal year 2008 by entering the beginning start date (for example, January 1, 2008) and change the current period to the last period of fiscal year 2008 for General Accounting only.

  • Close the fiscal period and year for AP, AR, and GL.

  • Run year-end financial reports, trial balances, and any other reports that are required.

  • Close the fiscal period and year for financial reporting.

  • Run the Annual Close program.

43.3 Closing a Fiscal Year

This section provides an overview of the Annual Close program and discusses how to:

  • Run the Annual Close program.

  • Set data selection and sequence for Annual Close.

  • Set processing options for Annual Close.

43.3.1 Understanding the Annual Close Program

When you run the Annual Close program to close a fiscal year, the system produces a report that lists the company that was closed, and the retained earnings account and amount. Use this report to verify that a company closed successfully.

By setting a processing option, you can print a detailed list of the accounts and balance amounts that are used in the retained earnings calculation. This is useful to research an incorrect retained earnings amount. The detailed list for retained earnings can be lengthy. Do not print it unless you have to research the retained earnings calculation.

43.3.1.1 Error Messages on the Annual Close Report

If any errors prevent a company from closing, the errors are listed on a report. This table lists examples of error messages and the corresponding resolutions:

Error Message Resolution
The retained earnings account is not set up in the Account Master table (F0901). Set up the retained earnings account for AAI item GLG4.
The close program could not find AAI item GLG6. Set up AAI item GLG6 to define beginning revenue account.

If AAI item GLG12 is not set up, an error message does not appear on the annual close report. The system uses account 999999.99999999 as the default.

43.3.2 Running the Annual Close Program

Select Periodic and Annual Processes (G0924), Annual Close.

43.3.3 Setting Data Selection and Sequence for Annual Close

You cannot close multiple years at the same time. You must close them consecutively, one year at a time. To help ensure a successful close, observe these rules for data selection and sequence:

  • For data selection, enter the company and fiscal year. Do not specify any other data selection.

  • If you close multiple companies to the same retained earnings account:

    • The companies must have the same fiscal date pattern.

    • You must use a single version that selects all of the companies that are being closed together.

  • For data sequence, the sequence must be by fiscal year, company, and ledger type; do not change it.

43.3.4 Setting Processing Options for Annual Close (R098201)

Processing options enable you to specify the default processing for programs.

43.3.4.1 Profit/Loss

Profit/Loss

Specify whether to create profit/loss account records for next year if the net posting for this year has a zero balance. Values are:

Blank: Do not create profit/loss records.

1: Create profit/loss records.

43.3.4.2 Orig Budget

Original Budget

Specify whether to override the original budget regardless of whether record for next year already exists. Values are:

Blank: Do not override the original budget.

1: Override the original budget.

Note:

With job cost accounts, you enter an original budget and then make changes using change orders. For example, assume that you have a job in 2008 that you budgeted for and expect to complete in 2010. You added budgetary information to the original budget in 2008. To override the original budget with new information, enter 1 for this processing option.

43.3.4.3 Print

Print

Specify whether to print detail information for the retained earnings calculation. Values are:

Blank: Do not print supporting detail.

1: Print supporting detail.

The detailed list for retained earnings can be lengthy and should not be printed unless you have to research the retained earnings calculation.

43.4 Closing a Fiscal Year for Budgets

This section provides an overview of closing a fiscal year for budget ledger types.

43.4.1 Understanding the Fiscal Year Close for Budget Ledger Types

When you close a fiscal year, you can roll the original budget amounts in the F0902 table to the next year for budget ledger types, such as:

  • BA (budget amounts)

  • JA and JU (job cost budget amounts and units)

  • PA and PU (job cost commitment amounts and units)

You control how to process the original budget amount on the Ledger Type Rules Setup form and with a processing option for the Annual Close program. When you run the Annual Close program, the system determines if records exist in the F0902 table for the new year and then does one of the these:

  • If a record already exists, the system updates the original budget amount if a processing option is set accordingly.

  • If a record does not exist, the system uses the ledger type rules to determine whether to roll forward the original budget amount.