Scenario: Reversal and Redistribution for Stakeholders with No Change in Ownership Percentages
This example discusses the reversal and redistribution process when the new ownership definition doesn’t state any change in the ownership percentages for some stakeholders.
Consider the ownership definition illustrated in the following table.
| Ownership Definition Name | Effective Dates | Stakeholders | Ownership Percentages |
|---|---|---|---|
| VENTUREOD1 | 1/01/2019 - 12/31/2019 | S1, S2, S3, S4 | 4 stakeholders, 25% each |
Cost transaction T1 was distributed using this ownership definition. Distributions T1D1, T1D2, and T1D3 were invoiced.
| Transactions | Transaction Date | Distributions | Stakeholders | Percentages of Ownership | Invoice Number |
|---|---|---|---|---|---|
| T1 | 6/30/2019 | T1D1 | S1 | 25% | T1D1inv |
| T1D2 | S2 | 25% | T1D2inv | ||
| T1D3 | S3 | 25% | T1D3inv | ||
| T1D4 | S4 | 25% | NA |
Stakeholder S1 repeatedly fails to make payment for invoices by the due date. The managing partner, S2, decides to absorb a portion of this stakeholder’s percentage of ownership, effective 6/01/2019. There is no change in the ownership percentages for stakeholders S3 and S4.
To trigger the reversal process, you change the effective end date of the ownership definition to 5/31/2019 as illustrated in the following table.
| Ownership Definition Name | Effective Dates | Stakeholders | Ownership Percentages |
|---|---|---|---|
| VENTUREOD1 | 1/01/2019 - 5/31/2019 | S1, S2, S3, S4 | 4 stakeholders, 25% each |
The following table illustrates the new ownership definition with the revised ownership percentages that the process will use to redistribute.
| Ownership Definition Name | Effective Dates | Stakeholders | Ownership Percentages |
|---|---|---|---|
| VENTUREOD1 | 6/01/2019 - 12/31/2019 | S1, S2, S3, S4 | 4 stakeholders, 10% , 40%, 25%, 25% respectively |
You activate the option to immediately redistribute the transaction after reversing the distributions.
The reversal process cancels the original distributions T1D1 and T1D2, and creates corresponding reversed distributions. Because you opted to automatically redistribute after reversing, the process creates redistributed records for stakeholders S1 and S2 using the new ownership percentages.
| Distributions | Stakeholders | Ownership Percentages | Ownership Definition Effective Dates | Distribution Line Type |
|---|---|---|---|---|
| T1D1 | S1 | 25% | 1/01/2019 - 12/31/2019 | Canceled (original distribution line) |
| T1D1RV | S1 | 25% | 1/01/2019 - 12/31/2019 | Reversed |
| T1D1RD | S1 | 10% | 6/01/2019 - 12/31/2019 | Redistributed |
| T1D2 | S2 | 25% | 1/01/2019 - 12/31/2019 | Canceled (original distribution line) |
| T1D2RV | S2 | 25% | 1/01/2019 - 12/31/2019 | Reversed |
| T1D2RD | S2 | 40% | 6/01/2019 - 12/31/2019 | Redistributed |
| T1D3 | S3 | 25% | 6/01/2019 - 12/31/2019 | Redistributed (original/canceled distribution line) |
| T1D4 | S4 | 25% | 6/01/2019 - 12/31/2019 | Redistributed |
Distribution T1D3 isn’t reversed because stakeholder S3 was already billed for this distribution and the invoice amount is still valid as there’s no change in the ownership percentage. In this case, the system changes the line type of the original distribution to Redistributed. However, if you ran only the reversal process without activating the redistribute option, a reversed distribution would have been created, which will eventually be deleted by the Create Joint Venture Distributions process.
Distribution T1D4 would have been deleted if you ran only the reversal process because this distribution is yet to be invoiced. Because you activated the option to redistribute immediately after reversing, the system changes the distribution line type of the original distribution to “Redistributed”. This is because it’s an unprocessed distribution that needs to be billed to the stakeholder.