Creating Adjusting Entries in Compliance With Different GAAPs in One Ledger

This section discusses automatic generation of prior period adjusting entries in the context of self-balancing subsets of one ledger that have different applicable GAAPs but use common accounts. Common accounts record common transactions but require special adjusting entries when multiple GAAPs vary in recognition dates and recording principles for these transactions.

For example, different accounting governing bodies for the corporate and local offices of an organization have mandated different accounting deadlines. The corporate deadline for recording prior period activity is no later than the fifth day of the current month. The local deadline for the related division is the fifteenth day of the current month. At the local office on the tenth day of the current month, a transaction is determined to be applicable to the prior month.

For this example, the following book code and ledger code structure has been adopted:

A complete set of regulatory financial statements can be produced by retrieving the Local Only and Both account balances.

Complete corporate financial statements can be produced at headquarters by combining the Corporate Only with the Both account balances.

The following is an example of a simplified tree that could be used for reporting in PeopleSoft n/Vision:

HQ Node (Headquarters or Corporate Balances)

|___B Book Code

|___C Book Code

REG Node (Regulatory or Local Balances)

|___B Book Code

|___L Book Code

Most accounts are in the B category and it is with these accounts that the necessity for this special type of prior period adjustments arises. This is because there are different recording rules for the corporate and local offices that are applicable to the common B accounts. The accounts in the C and L categories are specific to either corporate or local rules and are not directly involved in the adjustment and can be ignored for the purposes of the example.

May is the prior period and June is the current period in this example.

When you choose to update open periods by ledger code rather than by Ledger Group, you must specify an adjustment type value for the ledger code that has the earlier close date:

The following illustrates the progression of entries to properly record a sample transaction for HQ and Reg for May and June of 2004 in their common accounts:

During the processing of the original journal entry for a transaction that involves a prior period adjustment and common B accounts an adjustment journal entry is created by the Journal Post process if a ledger code period is closed while another is still open.

The adjustment journal entry created in the Journal Post process for the closed ledger code period is identical to the original journal entry recording the transaction except for the following:

• The debit and credit (sign) of the amounts as in the original journal entry are reversed.

• An adjustment type ChartField value, specified for the ledger code on the Update Open Periods by Ledger Code page, is appended to the journal lines.

• The adjustment journal entry is automatically set by the system to generate a reversing entry at the beginning of the next period.

Financial statements include the original entry amounts and the adjustment entry amounts having the adjustment type value HQAJ to arrive at correct totals for corporate B account in May. When combined with the May C accounts, they correctly reflect the financial position according to accounting principles applicable to the corporate books.

Local financial statements include in their totals only the original entry B amounts and ignore the corporate amounts having the HQAJ adjustment type. When combined with the L accounts, correct regulatory or local financial statements are produced.

For June, a reversing journal entry is generated by the system for the corporate books having the adjustment type HQAJ. The June totals can then be compiled for corporate as dictated by its applicable accounting principles as well as for the correct June totals for the local books.

Overall Year to date balances are also correctly calculated.

Use the Journal Source - Journal Option page (SOURCE2) to enable the system to change journal date to correspond to an open period and to post a journal that is otherwise valid.

Navigation:

Set Up Financials/Supply Chain > Common Definitions > Journals > Source > Journal Options

If a transaction journal date is outside the open periods for all applicable GAAPs, it fails in the Journal Edit process unless you elect to have Journal Edit automatically change the journal date to an open period.

Use the Journal Entry - Header page (JOURNAL_ENTRY1) to select the Adjustment Type applicable for the adjustment journal entry.

Navigation:

General Ledger > Journals > Journal Entry > Create/Update Journal Entries > Header