Other Considerations for Balance Initialization

How Encumbrance Balances Are Initialized

Encumbrance balances in your reporting currencies or secondary ledgers are initialized similarly to actual account balances.

The difference arises from the nature of encumbrances in Oracle Applications. When you enter encumbrances in your ledger, you can only enter the encumbrance amount in the ledger currency. The resulting entered and accounted amounts are the same.

When you run the Create Opening Balance Journals in Reporting Currency or Secondary Ledger process, the accounted encumbrance amount is converted to the reporting currency or secondary ledger. Both the entered and accounted amount for the encumbrance in the reporting currency or secondary ledger will be the same as the converted amount.

How Balance Initialization Affects Retained Earnings

The Create Opening Balance Journals in Reporting Currency or Secondary Ledger process balances the initializing journals against the retained earnings account in the target ledger.

This is necessary to account for the cumulative conversion adjustments that arise when you convert your ledger balances to your reporting currencies or secondary ledgers using different conversion rates.

The process adjusts the imbalances to the retained earnings account, however there can still be imbalances due to conversion in journal import because the balance initialization process only populates entered amounts. Imbalances can also arise when you select flexfield filters before submitting the process.

How Backdated Transactions Affect Balance Initialization

Where there are backdated transactions before the initialization period in the target ledger, the balance initialization process considers them and creates only delta balances.

Backdated transactions that are entered and posted in the source ledger after the initialization process and before the posting of the initialization journals, won’t be considered by the initialization process. These journals will be automatically replicated to the target ledger.

Transactions entered and posted in the source ledger to a period before the balance initialization period, where the period doesn't exist for the target ledger, will result in an error.

How Balance Initialization Works with Subledgers

Consider these points when using the following subledgers and initializing balances.

Fixed Assets: It’s recommended that you avoid enabling a new subledger-level reporting currency if fixed asset exists in any asset book of the primary ledger. If you still enable the new reporting currency, then you need to inactivate the existing asset books and create asset books with the current period as the first open period.
Lease Accounting: If you add a new reporting currency to an existing primary ledger that already has Lease Accounting balances such as leases, amortization expenses, balances for Right of Use or Lease Liability, and so on, those balances are initialized in the reporting currency as per this feature. Similarly, if you add a secondary ledger, the Lease Accounting balances will be initialized to the secondary ledger.
Cost Management: The account balances for the target ledger will be based on the costing policies defined for the source ledger, if the source ledger is enabled for the Valuation Method. If the target ledger is enabled for the Valuation Method, then ensure that the cost book start date is after the conversion date. This ensures that the historical transactions aren’t processed in this new ledger when you associate the target ledger to a new cost book. If the target ledger is intended to be used for the valuation method-enabled Accounting Hub subledger, then the business user must make manual adjustments for some accounts based on the valuation method of the subledgers.
Budgetary Control: Journals generated to initialize opening balances are excluded from budgetary control validation. When new ledgers are enabled on the Edit Budgetary Control and Encumbrance Accounting page, the Initial Balances journal source defaults as an exception in the Budgetary Control Journal Exceptions tab of the Additional Ledger Options region.

How Balance Initialization Works with Controlled Replication

Here are considerations when using balance initialization along with controlled replication from primary ledgers.

The balance initialization process always initializes the balances from the primary to the secondary ledger for all the balancing segments, irrespective of the fact that the secondary ledger is set up for partial legal entity replication.
Re-initialization of balances isn't supported for any specific primary balancing segment value or values.