Introduction to Joint Venture Management
Oracle Joint Venture Management Cloud enables a managing partner of a single joint venture or thousands of joint ventures to manage the distribution of costs and revenue among joint venture partners. It enables you to manage amounts to invoice to partners, both external partners to the managing partner’s organization and any internal partners that operate as a separate business entity within the organization. It also supports posting journals with the managing partner’s share to the managing partner’s ledger.
After the initial setup, Joint Venture Management automatically:
Identifies joint venture transactions in Oracle Financials.
Splits transactions based on each partner's percentage of ownership in the joint venture.
Generates distribution records that contain each partner's share in the transaction.
Creates accounts receivable invoices for each partner using the distribution records that are associated with costs.
Joint Venture Management gives you the flexibility to adjust for changes in a joint operating agreement (JOA) during the life cycle of a joint venture. You can add or remove partners and adjust for changes in their ownership percentages. Joint Venture Management also supports direct billing, which gives you the option to apply a full transaction amount to an individual partner.
For auditing and tracking purposes, Joint Venture Management retains important information about processed transactions to help you resolve any partner disputes over distributed amounts. It enables you to readily access important details, such as:
Original transaction information including the transaction date, amount, and the account in which the transaction was initially recorded.
Partner information including all partners with distributions and each partner’s percentage of ownership.
The date the split was calculated and distribution amounts were generated.
Invoice information including the invoice transaction number and date that was assigned to the joint venture invoice when it was created.
Joint Venture Management also provides:
Visual indicators to alert users if the setup of a joint venture isn't complete.
The ability to set up partners once in the system and add them to multiple joint ventures.
Rounding support to handle the distribution of costs or revenue that remain to ensure the total of the split calculations equals the original transaction amount.
Minimum amount threshold for creating invoices to ensure that a partner is invoiced only when the accumulated distribution amount is substantial to be billed.
How Joint Venture Management Works
Joint Venture Management processes transactions from Oracle Financials Cloud. It also supports processing transactions from third-party financial systems, as long as those transactions are first imported into Oracle Financials through Oracle Accounting Hub.
This illustration and the details that follow describe each part of the process to identify and distribute joint venture transactions in Joint Venture Management:
Create Joint Venture Definitions
A joint venture accountant or accounting manager sets up a joint venture definition for each joint venture. A joint venture definition contains the information Joint Venture Management uses to identify joint venture expenses and revenue in Oracle Financials. It also includes an ownership definition for identifying the partners in a joint venture and each partner's percentage of ownership. Joint Venture Management uses the information in the ownership definition to calculate the split of transactions and create distributions with each partner's share of the transaction.
Automatically Identify Joint Venture Transactions
The Identify Joint Venture Transactions process in the Enterprise Scheduler Service (ESS) is a scheduled process that uses the details in a joint venture definition to identify transactions for processing. You can schedule this process to identify transactions for one or all of your active joint ventures. This ESS process ensures transactions previously identified and processed by Joint Venture Management aren't processed again.
The Joint Venture Transactions work area enables you to review transactions identified by the Identify Joint Venture Transactions process. You can review transaction details, such as the default ownership definition that will be applied to transactions to calculate the split. The Transactions work area gives you the option to associate a different ownership definition to a transaction. Or you can associate a direct billed partner to a transaction to distribute an entire transaction amount to a single partner.
Automatically Calculate Splits and Create Distributions
The Create Joint Venture Distributions ESS process is a scheduled process that calculates the split of transactions and generates distribution records. This ESS process uses details in the joint venture definition, specifically stakeholder ownership percentages in the ownership definition, to calculate the split and create distributions.
An ownership definition has two requirements: the ownership percentages of all stakeholders must total 100 percent and it must have an effective date range. The effective date range enables you to set up multiple ownership definitions with successive date ranges to account for any changes in the joint operating agreement over the life cycle of a joint venture. When processing transactions, the Create Joint Venture Distributions ESS process compares the transaction date in each transaction against the effective dates in the ownership definitions to determine which ownership definition to use to calculate the split.
The Joint Venture Distributions work area displays distribution records generated from the Create Joint Venture Distributions ESS process. Each record contains a partner's share of costs or revenue to be invoiced. Distribution records also include partner information, the original transaction amount, and the transaction date that represents the date of service for which the transaction was originally created. It also includes other important details to help you troubleshoot any issues or resolve any disputes over distribution amounts.
Automatically Create Invoices of the Distributed Costs
The Create Joint Venture Invoices ESS process is a scheduled process that creates accounts receivable invoices for each stakeholder's share of costs in the joint venture. It uses the distributions associated with costs and which belong to the transactions in the primary ledger. The costs can be operating expenses or capital expenditures.
The invoices include information from the joint venture, such as the business unit, joint venture name, invoicing partner name, customer information associated with the invoicing partner, distribution amount, currency, and account type for the distribution. These details enable you to identify the distribution for an invoice in the Accounts Receivable system.
The Joint Venture Distributions work area also includes invoice information for the distribution records that have been invoiced by the Create Joint Venture Invoices ESS process. This includes the invoice transaction number and invoice transaction date. You use this information to review the associated invoice in the Accounts Receivable system.