# 16 Processing Overhead for Joint Ventures (Release 9.2 Update)

This chapter discusses:

## 16.1 Understanding Overhead Calculation

After you set up the overhead rule, you assign an overhead rule to the required hierarchy level such as joint venture company, joint venture, project, or business unit using the Overhead Assignment Rule program (P09J57). You use the Calculate Overhead program (R09J408) to calculate overhead for the business unit associated with the joint venture. The system selects the method from the rules assigned and checks the method's effective dates and processes the methods that are effective for the calendar month. The system applies the mathematical calculation associated with the overhead methods and calculates the overhead amount. The system uses data from various tables specific to each overhead method. After you calculate the overhead amounts, you can review and recalculate (if required) the calculated overhead amounts before you create journal entries.

Overhead is calculated once a month, and there can be only one overhead entry for the joint venture, business unit, rule, method, year, and month.

## 16.2 Methods for Calculating Overhead

To calculate overhead, you use the Overhead Rules program (P09J50) to create an overhead rule that can contain different calculation methods. Each method has an effective start and end date for calculating the overhead amount. The system provides five overhead charging methods to use: Fixed Amount, Fixed Amount with Escalation, Fixed Percent, Fixed Percent with Sliding Scale, and Day Rate and User Defined Method.

The operational status of the joint venture is used when calculating the overhead amount using the Fixed Amount, Fixed Amount with Escalation, and Day Rate methods. The system uses all the operational statuses of the joint venture that are effective for the month for which overhead is calculated. If you do not want to include an operational status in calculating overhead, you must set up that operational status as an exception status with chargeable months set to 0.

### 16.2.1 Fixed Amount Method

Overhead amount can be a fixed amount per month as specified in the joint operating agreement. Not all the business units in the joint venture will be eligible to charge overhead. In such a case, the fixed overhead amount can be charged to those business units that are eligible to be charged.

The calculation depends on the effective dates of the operational statuses of the joint venture or the business unit during the calculation month that is specified in the R09J408 processing option. The operational statuses of the joint venture or business units can change multiple times in the calculation month. Therefore, all of the operational statuses in that month will be considered while calculating the overhead amount. If there are exceptions, the operational status can be specified as an exception operational status for that method. The chargeable month must be specified for the exception operational status to be effective. If the joint venture or business unit operational status is specified in the exception operational status for that method, overhead is charged only for the number of chargeable months specified in that method. If you do not want to use an operational status in overhead calculation, you must set up that operational status as an exception operational status with the chargeable months as zero.

After you calculate overhead, you cannot edit or change the operational status for the months for which the calculation exists for a business unit or a joint venture.

Consider the following example for a joint venture:

The Fixed Amount method uses operational status of the joint venture.

• Operational Status of the joint venture available in the F09J70 table:

January 1st, 2018 through March 31st, 2018 = Drilling (100)

April 1st, 2018 through April 30th, 2018 = Producing (170)

May 1st till date = Shut-in

• Exception Operational Status that is set up on the method:

Drilling (100) = 2 chargeable months

Producing (170) = 0 chargeable months

• Base Amount = 150 USD

When you run the overhead calculation for month 01 (January) to 05 (May), the system retrieves the joint venture operational statuses for each month, and checks if these operational statuses are also specified as exception operational statuses on the method, and arrives at the overhead amount to be charged.

• January = 100 USD

• February = 100 USD

The joint venture is at the operational status of Drilling in January till the end of March. The operational status Drilling is also set up on the method as an Exception Operational Status with chargeable months as 2. Therefore, the amount setup for the exception operational status is applied for January and February.

• March = 0 USD

Because the operational status Drilling is set up on the method as an Exception Operational Status with chargeable months as 2, overhead is not calculated for March.

• April = 0 USD

The joint venture is at the Producing status in April, and the Producing status is set up as an Exceptional Operational Status with chargeable months as 0.

• May=150 USD (The base amount is applied.)

Overhead Calculation Using Fixed Amount Method

To calculate overhead amount using the Fixed Amount method, the system:

1. Retrieves the base amount from the Overhead Detail table (F09J51) and calculates overhead based on the effective dates specified in the P09J50.

2. Retrieves all of the operational statuses of the joint venture or business unit for the calculation month from the Joint Venture Status History (F09J70) or Business Unit Status History (F09J71) table.

3. Considers any exception operational statuses for the joint venture or for the business units in the F09J52 table, and calculates overhead based on the chargeable months for the exception statuses specified in the overhead method.

Note that if the operational status for the business unit or joint venture is not found, then the overhead will still be charged for the month if the inception date and effective date of the overhead method are applicable for the month.

4. If the Effective From date or Effective Through date of the method results in calculation of a partial month, the system prorates the base amount when the overhead amount is calculated.

Using all of this information, the system calculates the overhead amount using this formula:

Overhead Amount = (Total Number of Active Days)/(Total Number of Days in the Month) x Fixed Amount

### 16.2.2 Fixed Amount with Escalation Method

A fixed overhead amount can be escalated regularly according to an index specified in the joint operating agreement. The escalated fixed amount can be the standard escalation index set up by the COPAS (Council of Petroleum Accountants Societies) in the United States, the PASC (Petroleum Accountants Society of Canada) in Canada, or an agreed-upon index set up for the joint venture.

You calculate the overhead based on the base amount, base year, base month, and escalation index specified in the method. The amount will not be escalated for the base month and the base year. The calculation depends on the effective dates of the operational statuses of the joint venture or the business unit during the calculation month that is specified in the R09J408 processing option. The operational statuses of the joint venture or business units can change multiple times in the calculation month. Therefore, all of the operational statuses in that month will be considered while calculating the overhead amount. If there are exceptions, the operational status can be specified as an exception operational status for that method. The chargeable month must be specified for the exception operational status to be effective. If the joint venture or business unit operational status is specified in the exception operational status for that method, overhead is charged only for the number of chargeable months specified in that method. If you do not want to use an operational status in overhead calculation, you must set up that operational status as an exception operational status with the chargeable months as zero.

Consider the following example for a joint venture:

In the above example, Escalation Index for CPI has the following setup: January 10%, February 10%, March 6%, April 0%, and May 8%.

Base Amount = 1000 USD

In this case, the calculation will be:

• January = 1000 USD

Even if the escalation index for January is 10%, the system will not escalate for January as it is the base month.

• February = 1100 USD

1000+10% of the base amount is 100; 1000+100=1100

• March = 1320 USD

1100+20% of the base amount 1100 is 220; 1100+220=1320

• April = 1320 USD

Because the escalation index in not specified for April, the system considers the overhead amount from the previous month.

• May = 1425.6 USD

1320 + 8% of 1320 is 105.6; 1320+105.6=1425.6

Overhead Calculation Using Fixed Amount with Escalation Method

To calculate overhead amount using the Fixed Amount with Escalation method, the system:

1. Retrieves the base amount, base year, base month, and escalation index, and calculates overhead based on the effective dates specified in the Overhead Rule program (P09J50) for a method.

If you do not run the R09J408 program to calculate overhead for the previous months, and then attempt to calculate the overhead using the Fixed Amount with Escalations method for the current month, the system internally escalates the amount from the last calculated month using the escalation index to arrive at the correct escalated overhead amount for the current calculation.

2. Retrieves all of the operational statuses of the joint venture or business unit for the calculation month from the Joint Venture Status History table (F09J70).

Note that even if there is no operational status record for the joint venture or business unit for the calculation month, the overhead will still be charged for the month if the inception date of the joint venture and the effective date of the overhead method are applicable for the month.

3. Considers any exception operational statuses for the joint venture or for the business units in the F09J52 table, and calculates overhead based on the chargeable months for the exception statuses specified in the overhead method.

4. If the Effective From date or Effective Through date of the method results in calculation of overhead for only a few days in a month, the system prorates the escalated base amount when the overhead amount is calculated.

Using all of this information, the system calculates the overhead amount using this formula:

Escalation Amount = (Total Number of Active Days)/(Total Number of Days in the Month) x Escalated Amount

### 16.2.3 Fixed Percent Method

Overhead amount can be a fixed percentage of the indirect costs that must be charged on the basis of inception-to-month, month, or year-to-month. The percentage to be charged is specified in the joint operating agreement. You can also mention the minimum overhead chargeable amount that must be charged. For example, if 10% of the indirect cost charges equals 250 USD and the minimum overhead chargeable amount is 400 USD, then you charge 400 USD as the overhead amount.

In this method, general ledger transaction of specific account or range of accounts are retrieved from the general ledger table (F0911), and the fixed percentage specified on the method is applied on the accumulated amount. If you want to use a single account, then the account must be specified in the method. If you want to use group of accounts then the account group must be created using the Account Group program (P09J53), and the account group name must be specified in the method.

Calculating Overhead on Month Basis

If the calculation is based on the month basis, the general ledger transaction for the calculating month is retrieved based on the general ledger date, and it is summed up. Then, the percentage specified on the method is applied. The system verifies the currency for the minimum overhead chargeable amount currency. If the currency is different from the joint venture currency, the system converts the minimum overhead chargeable amount to the joint venture currency, and then consider overhead amounts, whichever is greater: either the calculated overhead amount or the minimum overhead chargeable amount.

Calculating Overhead on Year-to-Month Basis

If the calculation is based on year-to-month, the general ledger transaction from the beginning of the year, method effective from date, or inception date whichever is greater than the beginning of the year until the calculation month specified in the processing options in the Overhead Calculation program (R09J408) is retrieved based on the general ledger date and it is summed up. Then, the percentage specified on the method is applied. The system checks against the overhead that has previously been applied for this method for the business unit and then applies the difference as the overhead for the calculation month. The system verifies the currency for the minimum overhead chargeable amount currency. If the currency is different from the joint venture currency, the system converts the minimum overhead chargeable amount to the joint venture currency, and then consider overhead amounts, whichever is greater: either the calculated overhead amount or the minimum overhead chargeable amount.

Calculating Overhead on Inception-to-Month Basis

If the calculation is based on inception-to-month, the general ledger transaction from the inception date or method effective date whichever is greater of a joint venture or business unit, until the calculation month specified in the processing options in the Overhead Calculation program (R09J408) is retrieved based on the general ledger date and it is summed up. Then the percentage specified on the method is applied. The system checks against the overhead that has previously been applied for this method for the business unit and then applies the difference as the overhead for the calculation month. The system verifies the currency for the minimum overhead chargeable amount currency. If the currency is different from the joint venture currency, the system converts the minimum overhead chargeable amount to the joint venture currency, and then consider overhead amounts, whichever is greater: either the calculated overhead amount or the minimum overhead chargeable amount.

Note:

If the calculated overhead amount is greater than the minimum overhead chargeable amount, the system then considers the calculated overhead amount as the overhead amount. This applies to all the basis for overhead calculation - month, year-to-month, and inception-to-month.

Consider the following example for a joint venture:

In the above example, the Basis to calculate the overhead = Month, and Fixed Percent = 10%.

The sum of the accumulated transactions for the calculation month = 5000 USD

In this case, the overhead amount will be10% of 5000 = 500 USD

Overhead Calculation Using Fixed Percent Method

To calculate overhead amount using the fixed percent charging method, the system:

1. Retrieves percentage, basis, and minimum overhead chargeable amount from the Overhead Detail table (F09J51).

2. Selects the eligible account from the Overhead Rules Detail - Methods table (F09J51) or Account Groups table (F09J53).

3. Selects the general ledger transactions from F0911 table for the account or account range.

When calculating overhead using the fixed percent and fixed percent with sliding scale methods, the system needs to determine which journal entries must be selected if an account group is used. First, the system determines all the accounts that will be included based on the inclusion rules, and then from this list of included accounts, the system removes the accounts specified in the exclusion rules.

Note:

Only records with posted code P, and ledger type AA are selected for calculation.
4. The general ledger transaction amounts are converted to joint venture company currency, if the currency is different, and then the percentage is applied on the accumulated amount.

5. Compares the calculated amount (after the percentage is applied) with the minimum overhead chargeable amount. If the calculated amount is less than the minimum overhead chargeable amount, the system updates the minimum amount as overhead amount to the Overhead calculation table.

If the minimum amount is not available, the system updates the calculated amount as overhead amount to the Overhead Calculation table.

### 16.2.4 Fixed Percent with Sliding Scale Method

As the Joint Venture indirect costs increase, the percentage to be applied as overhead may change. In this case, use the Fixed Percent with Sliding Scale method to calculate overhead. The fixed percentage of overhead amounts to be charged and the amount ranges are specified in the joint operating agreement. For example, you can charge 3% up to a cost of 50,000 USD; 2% from 50,001 USD and up to 100,000 USD; and 1% for 100,001 USD and above.

In this method, the general ledger transaction based on the month, year-to-month, or inception-to-month basis specified in the method for a joint venture or business unit, until the calculation month specified in the processing options in the Overhead Calculation program (R09J408) is retrieved based on the general ledger date and it is summed up. Then the percentage specified on the sliding scale range is applied to calculate the overhead amount. After the percentage is applied on the defined sliding scale ranges, the system compares the calculated amount with the minimum overhead chargeable amount. If the calculated amount is lesser than the minimum overhead chargeable amount, then the system considers the minimum amount for overhead calculation.

Consider the following example for a joint venture:

In the above example, the Basis to calculate the overhead = Month, and the Sliding Scale setup has the following ranges:

Upto 1000 USD = 20%

1001 to 2000 USD = 10%

2001 USD onwards = 5%

The sum of the accumulated transactions for the calculation month = 5000 USD

In this case, the overhead calculation will be:

• For the first 1000 USD of the 5000 USD, 20% will apply = 200 USD

• For the next 1000 USD of the 5000 USD, 10% will apply = 100 USD

• For the remaining 3000 USD, 5% will apply = 150 USD

The total overhead amount = 200+100+150 = 450 USD

If the accumulated transaction amount is 1500 USD, the total overhead amount calculated using the same sliding scale setup will be 200+50 = 250 USD. Because 250 USD is lower than the Minimum Overhead Charge of 300 USD, 300 USD will be charged as the overhead.

Overhead Calculation Using Fixed Percent with Sliding Scale Method

To calculate overhead amounts using the sliding scale method, the system:

1. Retrieves sliding scale ranges, percentage, basis, and minimum overhead chargeable amount from the Overhead Rules Detail - Methods table (F09J51).

2. Selects the eligible accounts from the Overhead Rules Detail - Methods table (F09J51) and ranges, and percent from the Overhead Sliding Scale Method Details table (F09J55).

3. Selects the general ledger transaction from F0911 table for the account or account range.

When calculating overhead using the fixed percent and fixed percent with sliding scale methods, the system needs to determine which journal entries must be selected if an account group is used. First, the system determines all the accounts that will be included based on the inclusion rules, and then from this list of included accounts, the system removes the accounts specified in the exclusion rules.

Note:

Only records with posted code P, and ledger type AA are selected for calculation.
4. The general ledger transaction amounts are converted to joint venture company currency, if the currency is different, and then percentage is applied on the accumulated amount.

5. Applies the percentage based on the defined sliding scale ranges specified in the Sliding Scale (F09J55) table.

6. Compares the calculated amount (after the sliding scale ranges is applied) with the minimum overhead chargeable amount. If the calculated amount is less than the minimum overhead chargeable amount, the minimum amount is written as the calculated overhead amount to the Overhead Calculation table (F09J100).

If the minimum amount is not available, the system writes the calculated amount as overhead amount in the Overhead Calculation table.

### 16.2.5 Day Rate Method

Overhead amount can be a daily flat rate that is specified in the joint operating agreement. For example, overhead amounts for capital drilling and completions for an oil well can be charged a specific flat rate for each day that the drilling rig is on the well, and a different flat rate for each day that the completions rig is in place.

The calculation depends on the default day rate, day rate, and effective dates of the operational statuses of the joint venture or business unit during the calculation month that is specified in the processing option. The operational statuses of the joint venture or business units can change multiple times in the calculation month. Therefore, all of the operational statuses in that month will be considered while calculating the overhead amount. The default day rate is applied to all the operational statuses of the joint venture or the business unit. If there are exceptions, the operational status can be specified as an exception operational status for that method. The day rate for this exception status must be specified for the exception operational status to be effective. If the joint venture or business unit operational status is specified in the exception operational status for that method, overhead is charged using the day rate specified in that method. If you do not want to use an operational status in overhead calculation, you must set up that operational status as an exception operational status with the day rate as zero.

Consider the following example:

Default Day Rate = 100 USD

Operational Status for a joint venture:

• February 1, 2018 = Drilling (100)

• February 15, 2018 = Producing (170)

The overhead calculation for January will be:

Total number of days in January x default day rate = 31x100 = 3100 USD.

For the exception operational statuses, the overhead for February will be calculated as follows:

• From 2/1/18 to 2/14/18 is 2800 (200x14 days)

• From 2/15/18 till 2/28/18 is 4200 (300x14 days)

Total overhead amount for February = 7000 (2800+4200)

Overhead Calculation Using Day Rate Method

To calculate overhead amount using the Day Rate method, the system:

1. Retrieves the default day rate from the Overhead Detail table (F09J51) and calculates overhead based on the effective dates specified in the P09J50

2. Considers any exception operational statuses for the joint venture or business units in the F09J52 table, and calculates overhead for the exception statuses based on the day rate specified for these statuses

If a operational status is available for the joint venture or business unit and the day rate is not specified in the P09J50 program as an exception status, the system considers the default rate to calculate the overhead amount.

3. If the effective from or effective through dates of the method results in overhead calculation for only a few days in a month, then overhead is charged only for the number of days for which the method is valid or effective.

Using all of this information, the system calculates the overhead amount for each day rate using this formula:

Overhead Amount = Number of Days x Default Day Rate

## 16.3 Calculating Overhead Using the Overhead Calculation Program (R09J408)

To calculate the overhead for a joint venture, you run the Overhead Calculation program (R09J408). The system selects the records for processing based on your data selection values and calculates the overhead for the calendar month, year, and for the business unit specified in the processing options. If the calendar year and month are not specified in the processing options, the system date is used as the default date, and the month and year of the system date are used. The system saves the calculated overhead records in the F09J100 table.

When you run the R09J408 program, the system searches for an overhead rule assigned at the child business unit level. If there is no rule assigned at the child business unit level, then the system again searches for the parent business unit (project business unit). If there are no rules assigned until the highest business unit level, then the system searches for the rule assigned to the Joint Venture of that business unit or the Joint Venture company.

The system processes every business unit for the selected joint venture and process every rule assigned to that business unit, project number, joint venture or company. Then, the system processes every method associated with each rule and creates entries for each method for the month specified in the processing option.

You must run the R09J408 program for each month in the calendar year to create overhead entries for the month.

The records for which overhead has been successfully calculated have the status as Available to Process in the P09J100 program; if there are any records in error, their status is shown as Calculation Error.

Calculation records created in F09J100 table can be reviewed through P09J100.

Troubleshooting Records with Errors

When the R09J408 program is unable to calculate overhead using the overhead method, the transaction status is Error for that calculation record in the F09J100 table. If required, you can review these records using P09J100. For any other warnings, and messages occurred during calculation process check the work center. In order to make changes to the overhead setup to correct any errors, first mark the record for recalculation using P09J100.

### 16.3.1 Prerequisites

Before you run the Calculation Overhead program (R09J408), you must:

• Set up the overhead attributes as required in the Joint Venture Master program (P09J30).

• Set up business unit attributes.

• Ensure that the operational status of the joint venture and business unit have been entered for the month for which you are performing the overhead calculation.

• Set up account groups.

• set up escalation index.

• Set up overhead rule.

• Assign overhead rules.

• Set up these processing options for the Calculation Overhead program (R09J408):

• Calendar Month: Specify the month for overhead calculation. if this option is left blank, then the calendar month of the system date is used.

• Calendar Year: Specify the year for overhead calculation. If this option is left blank, then the calendar year of the system date is used.

• Business Unit: Specify a business unit for overhead calculation. if this processing option is left blank, then overhead is calculated for all the business units that are part of the Joint Venture(s) specified as overhead calculations in the data selection.

• Set up data selection to include the joint ventures for which you want to calculate overhead.

### 16.3.2 Running the Overhead Calculation Program (R09J408)

From the Joint Venture Management module (G09J), select Periodic Processing, Process Overhead, and then Calculate Overhead.

## 16.4 Reviewing and Recalculating Process for Overhead Amounts

You use the Review and Recalculate Overhead program (P09J100) to review the overhead amount that was created as a result of Overhead Calculation (R09J408).

Using the P09J100 program, you can drill down and review the overhead information set up for a joint venture or a business unit.

For example, you can review and drill down the following:

• Joint venture or business unit operational status that was used while calculating the overhead amount using fixed amount, fixed amount with escalation, and day rate methods.

• Account group information that was used while calculating the overhead amount using fixed percent and fixed percent with sliding scale methods.

• Escalation index information that was used while calculating the overhead amount using the fixed amount with escalation method.

• Joint venture master and overhead rule information that was used while calculating the overhead amount using all the five methods.

• General ledger transactions to understand how the system has calculated the overhead amount using the general ledger transaction for fixed percent and fixed percent with sliding scale methods.

After you review existing overhead information, if the overhead calculation is incorrect, then you can recalculate the overhead after changing the method setup or operational status. In order to do so, you must first mark that specific overhead record to recalculate through the Row menu. Then, after updating the records in the respective setup programs, you can recalculate the overhead record through the Form menu. During recalculation, the system considers these applications: Escalation Index, Account Group, Overhead Methods, Joint Venture and Business Unit Operational Statuses, and General Ledger transactions. All the records marked for recalculation is re-evaluated, and updated calculation is displayed in P09J100 program.

You can delete a calculated record only when there are no journal entries associated with an overhead record.

Eligibility Criteria for Recalculation

Before you mark the overhead record for recalculation, you must take into account the following eligibility for recalculating overhead records:

• If a journal entry is created for an overhead calculation and it is posted, then you will not be able to mark that record for recalculation even if the journal entry is voided.

• If a journal entry is created for an overhead calculation and it is not posted, you must first delete the journal entry in order to mark the overhead record for recalculation.

• If overhead is calculated using the fixed percent method or fixed percent with sliding scale method, where the basis is month, then the overhead record for any month using this method can be marked for recalculation. However, if the basis is year-to-month or inception-to-month, then only the latest overhead calculation record can be marked for recalculation.

• If the records for a month in the P09J100 program are marked for recalculation, the system unlocks and enables you to change the operational status of a joint venture or business unit for that month.

The system also enables you to change the escalation index for future months and also for the month for which the record is marked for recalculation.

• In the overhead rule assignment setup, an overhead rule assignment can always be inactivated.

• If overhead is calculated using the fixed amount escalation index, the system unlocks and enables you to change only the future month index.

• If all the overhead records that are using the account group are marked for recalculation, then the system allows you to change the account group setup.

### 16.4.1 Reviewing and Recalculating Overhead Amounts

To review and recalculate existing overhead records:

1. From the Joint Venture Management module (G09J), click Periodic Processing, Process Overhead, and then Review and Recalculate Overhead.

2. On the Review and Recalculate Overhead form, search and select the record that you want to review.

3. Select Mark to Recalculate from the Row menu.

Note:

When the record is marked for recalculation, the system changes the transaction status to ”Available to Recalculate” in the form.
4. Update or modify the required setup information.

Note:

When a record is marked to recalculate, you can access the respective setup applications, and you add or update the information specific to the various overhead setup.

For example, if you want to update an existing overhead rule or methods associated with an overhead rule, you can directly access the Overhead Rule (P09J50) program.

5. After reviewing and updating the records, select Recalculate All from the Form menu.

The system recalculates all the records that have been marked for recalculation. This could include more records than are currently displayed on your form.

6. When you have finished reviewing and recalculating overhead records, click the Close button to exit the form.

### 16.4.2 Voiding and Deleting Overhead Journal Entry

To void or delete overhead journal entry, you use the Review and Recalculate Overhead program (P09J100). If the journal entry is posted, the system voids the journal entry. If the journal entry is not posted the system deletes the unposted journal entry.

Voiding a Journal Entry

You can void a journal entry that is created and posted for the overhead amount. The system then marks the transaction status as Journal Entry Voided in the overhead calculations table (F09J100). At the batch level, the system reopens the batch, and therefore the batch must be posted again.

Deleting a Journal Entry

When the journal entry is not posted, then the journal entry will be deleted from the table, and it does not leave an audit trail. The journal entry field information will be cleared from the F09J100 table. You can delete a journal entry when the F09J100 record is in the status Process Complete. You cannot delete a journal entry that is associated with a F09J100 that has the status Journal Entry Creation Error, as there is no journal entry that has been created for it. After you delete a journal entry using the P09J100 program, the system automatically changes the status to Available to Process, and enables you to include the transactions in new journal entries.

#### 16.4.2.1 Voiding a Posted Overhead Journal Entry

To void a posted journal entry:

1. From the Joint Venture Management module (G09J), click Periodic Processing, Process Overhead, and then Review and Recalculate Overhead.

2. On the Review and Recalculate Overhead form, search and select the record that you want to void.

3. With the journal entry selected, select Void/Delete JE on the Row menu.

4. On the Void Journal Entry window, optionally update the G/L Date.

Note:

If the general ledger date is not entered, the system uses the default system date.
5. Click Void to void the journal entry.

6. Click Close to exit the Void Journal Entry window.

7. Click Cancel to exit the Review and Recalculate Overhead form.

#### 16.4.2.2 Deleting an Unposted Overhead Journal Entry

To delete an unposted journal entry:

1. From the Joint Venture Management module (G09J), click Periodic Processing, Process Overhead, and then Review and Recalculate Overhead.

2. On the Review and Recalculate Overhead form, search and select the record that you want to delete.

3. With the journal entry selected, select Void/Delete JE on the Row menu.

4. On the Delete JE Confirmation window, click Ok to delete the overhead journal entry.

5. Click Close to exit the Void Journal Entry window

6. Click Cancel to exit the Review and Recalculate Overhead form.

## 16.5 Creating Journal Entries for Overhead

After you review and recalculate (if need be) the overhead amount, you run the Create Overhead Journal Entry Transaction program (R09J409) to create a journal entry for the calculated overhead amount. The overhead journal entries are created with batch type JO (Joint Venture OH entries). These journal entries can then be processed by the joint venture distribution process.

The Create Overhead Journal Entry Transaction program (R09J409) processes the overhead records in the F09J100 table that you select using the data selection. The system processes only those selected records with transaction status as:

• Available to Process

• Journal Entry Creation in Error

If the journal entry creation results in error, you can review and resolve the error and rerun the R09J409 program for the same record.

To create journal entries, the system uses the general ledger date from the processing option specified in the R09J409 program. The journal entry transactions can be detailed or summarized. If you have set up the Transaction Summarization processing option to summarize the overhead amounts by account, the system creates a summarized journal entry line with the aggregated overhead amount for each account for the specific business unit for which the overhead is calculated. The remark in the summarized journal entry has the joint venture name and overhead. If you have set up the Transaction Summarization processing option to detail the overhead amount by account, the system creates a detailed journal entry line with the overhead amount for each account. The remark in the detailed journal entry line has the description of the overhead method used in calculating the overhead.

The system creates separate journal entries for each business unit that it processes. There will be a single batch number for the entire joint venture for that session. When the journal entry is created successfully, the transaction status is updated from ”Available to Process” to ”Process Complete”. If the journal entry results in error, the system updates the transaction status to ”Journal Entry Creation Error”.

After the overhead journal entries are created and posted, you cannot change the setup information in the respective methods, except for the Active or Inactive option.

Debit and Credit Entries for Joint Venture Journal Entries in the F0911 Table

The overhead amount is debited to the account set up in the method. If the account is found at the method level, and if no business unit is specified and only object and, or subsidiary is found at the method level, then the system uses the business unit for which overhead is calculated to locate the account. If the account is not found at the method level, the system searches for the account from the JVOHE AAI. If you have specified a business unit in the JVOHE AAI, the system uses the AAI business unit to locate an expense account. If the business unit is not specified in the JVOHE, then the system uses the business unit for which the overhead is calculated.

The offset entry is made to the offset account from the JVOHO AAI. If the business unit is specified in the AAI, the system uses the AAI business unit to create an offset entry. If the AAI business unit it is blank, the system uses the recovery business unit that is mentioned in the Business Unit Attribute program (P09J0006). If the recovery business unit is blank, the system uses the business unit for which the overhead is calculated.

Example: G/L Accounting Entries when a Joint Venture Overhead Journal Entry Transaction is Entered for a Business Unit

Overhead amount can be a daily flat rate. For example, overhead for capital drilling for an oil well is charged a flat rate of 100 USD for each day from January through the end of March. An overhead journal entry is created for the business unit to which the overhead is charged. The journal entry uses the object account from the AAI item JVOHE and the overhead offset account for the credit side of the journal entry.

This diagram illustrates the G/L entries created for January month. Because the day rate is 100 USD and January has 31 days, overhead charged = 100 x31=3100.

### 16.5.1 Prerequisites

Before you complete the tasks in this section, set up the processing options for the Create Overhead Journal Entry Transaction program (R09J409):

• On the Process tab, specify the following:

• Transaction Summarization: Either summarize the transactions by account or not summarize (display details of the transactions).

• G/L Date: Assign to the journal entry. If you do not enter a date, the system date is used.

• Document Type: Assign to the journal entry. If this option is left blank, the overhead document type OH is used to create the journal entry.

• Batch Approval Process: Set the batch as automatically approved or apply the status specified in the general accounting constants. If this option is left blank, the system applies the status specified in the general accounting constants.

• On the Versions tab, specify the versions that you want to use for these programs:

• Journal Entry MBF (P0900049)

If you do not specify a version for the P0900049 program, the system uses ZJDE0001 as the default version.

• General Ledger Post (R09801)

If you do not specify a version for the R09801 program, the journal entry will not be automatically posted by the R09J409 program.

### 16.5.2 Running the Create Overhead Journal Entry Transaction Program (R09J409)

From the Joint Venture Management module (G09J), select Periodic Processing, Process Overhead, and then Create Overhead Journal Entries.

Note:

Overhead journal entries can only be deleted or voided using the Review and Recalculate Overhead program (P09J100). You cannot make any changes (for example: edit, delete or void) to overhead journal entries from outside the Joint Venture Management system.