Performing Interim Closing

The only source for interim closings is journals. Interim closing is similar to year end closing except that it does not create carryforward balances. Other differences are discussed in the following topic:

See Interim Versus Year End Closings.

The interim closing process provides flexibility in tracking profit and loss by enabling you to:

• Close frequently.

  You can transfer net income to retained earnings as often as needed. For example, financial institutions may need to close P/L to retained earnings daily, but other companies may close to retained earnings monthly. You include only the transactions that have been posted to the specified period since the last interim close.

• Maintain closing consistency.

  The interim closing process depends on a consistent use of periods for interim closing throughout the year. You must maintain daily, monthly, or quarterly interim closings on a consistent basis, or you must perform a closing undo after any ad hoc interim close. You must also complete all interim closes for the year. The year end close uses the specified interim close offset account as the target retained earnings account. The offset is a contra-equity account that is zeroed-out against the P/L accounts to arrive at the correct year end retained earnings amount.

• Integrate interim and year end close.

  When you integrate the interim close into the year end close process, the offset account in interim close is similar to an income summary account (which is an intermediate account used to summarize revenue and expense accounts before posting net income to retained earnings). The interim close process is similar to posting net income to retained earnings. Use of the interim close offset account as the target account in year end close is similar to summarizing the revenue and expense accounts to the income summary account. The offset account must net to zero after the final interim close for the applicable period and the year end close processes are run. You verify the results when the year end close process results in a zero balance for the interim close offset account.

• Identify specific P/L distribution accounts.

  You can identify the specific accounts to close, as well as the retained earnings accounts to which they are distributed. These can be the same as the retained earnings accounts that you use for year end close. Furthermore, you can close only part of the chart of accounts (rather than the entire ledger) during an interim close.

• Maintain an audit trail.

  You maintain the audit trail by creating alternative offsets to the retained earnings entries. In addition, you identify the offset account values.

• Create supporting journal entries.

  The system creates journals from the results of the interim close. Create a journal ID mask for these transactions to easily identify the closing journals.

• Select target currency for retained earnings.

  If you manage financial information in multiple currencies, you can select the currency for the retained earnings amounts.

Interim closing involves three major tasks.

To perform an interim close:

1. Define ChartField value sets.

   You define the sets of values for the ChartFields that you want to use as the source for the interim closing. These can be the same value sets of ChartFields that you use for year end closing or different value sets. They can include some or all the values in your chart of accounts.

   Note: Because the intent of the interim close is to close P/L accounts, it is required that the Account ChartField, be included in the ChartField value set (CVS).

   Specifically, you create ChartField value sets for the ChartFields that are closed to retained earnings. (ChartField value sets are defined on the ChartField Value Set page.)

   To enhance performance, use fewer ChartFields in the ChartField value set (CVS) whenever possible. Also, use fewer ChartField combinations. For example, if all other things are equal, it takes less time to close from five CVSs, all with ACCOUNT, DEPTID, and PRODUCT, than to close from three CVS with ACCOUNT, DEPTID, and PRODUCT and two CVSs with ACCOUNT, DEPTID, and OPERATING UNIT.

2. Define closing rules.

   Define the rules for the interim close. You define closing rules using the Closing Rules component (CLOSE_DEFN).

   Specifically, you must identify:

   • Which time frame to close (for example, beginning of year to current date).

   • Which P/L accounts to close to the various retained earnings accounts.

   • Which currency to use as the target currency.

   • Which adjustment periods to close (or whether to exclude them at all).

   • Which book codes and balance sheet indicators to close (or whether to close to an account that can be overridden and retain book codes).

   • Whether to edit, budget-check, and post journals.

   • Whether to create offset accounts.

3. Run a closing request.

   You run interim close using the Close Request page. When you request that the interim close be processed, you identify:

   • Which ledger group or ledger (or both) to close.

   • Which closing rule to use.

   • Which date to use as the as of date for the closing.

   • Which business units to close.

You can undo a close, if necessary, by using the procedures described later in the following topics:

See Processing an Undo Close.

Interim closing sums all transactions that affect the selected P/L accounts and closes them to retained earnings. The system creates journal entries to update ledgers.

The system also creates offsetting entries. You can create offsets with alternative ChartFields. If you offset to an account other than the source transaction, the audit trail remains intact. If the offset account is the same as the source account, you close the account and no audit trail exists for the closed accounts.