Example: Reversing Joint Venture Invoices and Redistributing the Transactions

Consider an active ownership definition named VENTUREOD1 that has the following information.

Ownership Definition Name Effective Dates Stakeholders Ownership Percentages
VENTUREOD1 1/01/2019 - 12/31/2019 S1, S2 2 stakeholders, 50% each

Transactions T1 and T2 were distributed using this ownership definition.

Transaction Transaction Date Distributions
T1 2/01/2019 T1D1
2/01/2019 T1D2
T2 6/01/2019 T2D1
6/01/2019 T2D2

There’s a change in the joint operating agreement. A new stakeholder is added to the joint venture and ownership percentages are renegotiated, effective from 6/01/2019 to 12/31/2019. Now, the distributions that have the transaction dates on or within this new effective date range need to be reversed and redistributed using the revised ownership percentages.

The joint venture accountant changes the ownership definition effective end date to 5/31/2019. This change triggers the reversal process, which includes the automatic identification of distributions that need to be deleted, reversed, and rebilled as required. The first row in the following table shows the original ownership definition and the second row, the changed ownership definition.

Ownership Definition Name Effective Dates Stakeholders Ownership Percentages
VENTUREOD1 1/01/2019 - 12/31/2019 S1, S2 2 stakeholders, 50% each
VENTUREOD1 1/01/2019 - 5/31/2019 S1, S2 2 stakeholders, 50% each

The distributions associated with transaction T2 are no longer valid because the transaction date, 6/01/2019, is after the new effective end date, 5/31/2019. If the distributions were invoiced, the system enables you to automatically reverse them in Joint Venture Management and create credit memos to back out the amounts in the invoices. If they were not processed, the system will delete them from the Joint Venture Distributions work area during the reversal process. There is no impact on distributions T1D1 and T1D2 because the associated transaction date is within the effective date range.

As part of the reversal process, the system cancels the original distributions and creates reversed distributions as illustrated in the following table:

Transaction Transaction Date Distributions Stakeholders Ownership Percentages Distribution Line Type
T2 6/01/2019 T2D1 S1 50% Canceled (original distribution line)
T2D1RV S1 50% Reversed
T2D2 S2 50% Canceled (original distribution line)
T2D2RV S2 50% Reversed

If the percent of ownership for a stakeholder has changed, Joint Venture Management automatically sends the reversed distributions to Receivables to create a credit memo for each distribution. After the Import AutoInvoice process creates credit memos, the system automatically retrieves the credit memo details from Receivables and updates the details to the reversed distributions. In this example, because the stakeholders are also on the revised ownership definition, the system will automatically redistribute transaction T2 using the new ownership percentages as shown in the following table. The system enables you to automatically redistribute even before the credit memo creation is complete.

Ownership Definition Name Effective Dates Stakeholders Ownership Percentages
VENTUREOD1 6/01/2019 - 12/31/2019 S1, S2, S3 3 stakeholders, 25%, 25%, and 50%

During redistribution, the system creates a redistributed entry for each stakeholder included in the ownership definition. This is illustrated in the following table.

Transaction Transaction Date Distributions Stakeholders Ownership Percentages Distribution Line Type
T2 6/01/2019 T2D1 S1 50% Canceled (original distribution line)
T2D1RV S1 50% Reversed
T2D1RD S1 25% Redistributed
T2D2 S2 50% Canceled (original distribution line)
T2D2RV S2 50% Reversed
T2D2RD S2 25% Redistributed
T2D3RD S3 50% Redistributed

You can review the redistributed entries before you create invoices or assign them to partner contributions, if applicable.

The Process Joint Venture Adjustments process enables you to automatically:

  • Reverse joint venture distributions.

  • Redistribute associated transactions.

  • Send the reversed distributions to create credit memos in Receivables.

  • Update the credit memo information back into Joint Venture Management.

You must be a user with the Joint Venture Accountant role to run this process and complete these tasks.

If Data Security for Joint Venture Management is enabled, you can run the process only for the joint ventures that are associated with the business units you are authorized to manage.

This process has three modes that you must run in the order illustrated in the following graphic:

This image shows the recommended order of running the processes to reverse joint venture distributions and create credit memos. The recommended order is: 1) Process Joint Venture Adjustments process in the default mode "Create Joint Venture Distribution Reversals 2) Send Distribution Reversals for Credit Memo mode 3) Receivables Import AutoInvoice process 4) Update Credit Memo Information in Distribution Reversals mode.

After you complete the processes illustrated in the above graphic, an Accounts Receivable Manager must run the standard processes to create accounting entries in Receivables and post the credit memos to General Ledger. To ensure consistent accounting across all systems that integrate with Joint Venture Management, the joint venture accountant then runs the Update GL Reference in Joint Venture Distributions mode of the Create Joint Venture Invoices and Journal Entries process. This mode updates the partner offset account from General Ledger to the reversed distributions. Only accounted credit memos are available for reporting or subsequent processing, for example, to create reverse cost adjustments in Project Costing.